McDonald's has expressed concerns that the upcoming minimum wage increase in California may adversely impact its franchisees in the state and potentially result in higher prices for customers.
Recently, California Governor Gavin Newsom enacted a law raising the minimum wage for fast food employees at establishments with a minimum of 60 outlets across the country. However, there's an exemption for eateries that produce their own bread. The adjusted wage of $20 per hour for eligible fast-food employees is set to commence on April 1, 2024.
During an earnings discussion on Monday, McDonald’s CEO Chris Kempczinski mentioned that the legislation would result in "a wage impact for our California franchisees." He further noted, "I don’t think at this point, we can’t say exactly how much of that is going to work its way through pricing."
"Certainly, there’s going to be some element of that that does need to be worked through with higher pricing," he explained. "There’s also going to be things that I know the franchisees and our teams there are going to be looking at around productivity. How all of that plays out, there will certainly be a hit in the short-term to franchisee cash flow in California, tough to know exactly what that hit will be because of some of the mitigation efforts."
Kempczinski continued, "Longer term, what we’ve been talking about with our franchisees is this is an opportunity for us to gain share because this is an impact that’s going to hit all of our competitors… We believe we’re in a better position than our competitors to weather this."
Currently, California boasts the highest minimum wage in the country at $15.50 an hour. This rate is scheduled to increase to $16 an hour for all positions in the state come January.
"This is a big deal," remarked Newsom during an event in Los Angeles when he enacted the fast food minimum wage bill in late September.
Furthermore, Newsom countered the perception that fast food roles are solely for teenagers starting their professional journey and seeking experience.
"That’s a romanticized version of a world that doesn’t exist," Newsom said during the event. "We have the opportunity to reward that contribution, reward that sacrifice and stabilize an industry."
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