California recently increased the minimum wage for fast-food workers to $20 an hour, affecting restaurants part of a chain with at least 60 establishments nationwide. The intention behind this move is to alleviate the cost of living for approximately half a million workers in the state.
However, for Scott Rodrick, a McDonald’s franchise owner with 18 locations in California, this change has posed significant challenges. In a recent interview with Fox Business, Rodrick expressed his concerns about the new minimum wage law, describing the past few weeks as a tumultuous period for franchisees in California.
Rodrick highlighted the difficulty of managing higher labor costs without alienating customers with steep price hikes. While some restaurants and companies have raised menu prices in response to the wage increase, Rodrick emphasized the importance of thoughtful pricing strategies that maintain affordability for customers.
The issue of fast food affordability is not unique to California. Even before the minimum wage hike, there have been instances of surging prices in the fast food industry across the country. For example, a McDonald’s menu at a Connecticut rest stop listed a Big Mac meal at $17.59, prompting questions about the sustainability of such prices.
McDonald’s CEO Chris Kempczinski acknowledged the importance of affordability during the company’s recent earnings conference call. He suggested that pricing decisions will be guided by consumer preferences and emphasized the role of franchisees in setting prices at their respective restaurants.
In response to the challenges posed by the wage increase, Rodrick outlined several strategies to navigate the impact on the franchise business model. These include adjusting prices thoughtfully, evaluating capital expenditures, optimizing labor efficiencies, and seeking opportunities to expand market share.
While some small businesses have expressed concerns about their ability to survive under these conditions, economic experts at UC Berkeley and the University of Victoria argue that raising fast-food workers’ pay can lead to higher living standards and a more equitable economy.
As restaurant owners weigh their options, Rodrick emphasized that layoffs would be a last resort in his organization, emphasizing the importance of supporting the 800 individuals who work in his restaurants.
Despite the challenges, some restaurant owners have considered investing in other states due to the wage hike. However, Rodrick remains committed to navigating the situation in California and focusing on strategies for survival in the current business landscape.