Fast-Food Price Spike Is Coming To CA And Here Is Why

TEMECULA, CA — Fatburger became the latest fast food chain this week to signal a spike in prices ahead of the minimum wage increase affecting CA fast food workers.

Starting in April, you may want to hold more than the pickle at your favorite fast-food chain restaurant. The fast food industry's employee minimum wage will climb to $20 per hour on April 1 under a new California law affecting restaurants with at least 60 locations nationwide. Several major chains have said the law is forcing them to raise menu prices. McDonald's and Chipotle will both raise menu prices because of the new law, they announced last year.

The anticipated minimum wage hike is not only affecting fast-food menu prices but changing the way franchise owners are operating, from how many people they can employ to what benefits they might receive, according to a recent Business Insider interview with Los Angeles Fatburger franchise owner Marcus Walburg.

The new law affects Walburg along with about 30,000 fast-food restaurants in California. Though 557,000 workers will benefit from the raises, they may also see a drop in other areas of their work-life balance, such as removing the paid time off program. Walberg has ceased the PTO he once offered to compensate for higher earnings, he told the Business Insider, saying that things are "more strained now than any time I can remember."

Have You Checked Your Fast-Food Receipts Lately?

There is a trickle-down effect for customers as rising menu prices hit their wallets. Some are driving past the drive-thru, opting to eat at home more. Still, starting in April, there may be more "disposable" income to spread around, according to a recent KTLA report.

News of the impending price increases came as McDonald's and Chipotle saw income growth in the fall. McDonald's brought in $6.69 billion in revenue for the three-month period ending Sept. 30 (up 14 percent from last year). Chipotle reported $2.5 billion in revenue last quarter (up 11.3 percent), Patch has previously reported.

Chipotle's prices have risen as much as 9 percent at the 450 stores across the Golden State, Patch reported in October.

At a Southern California McDonald's, the Happy Meal prices on the app showed $5.99 for hamburgers and cheeseburgers and upwards of $6.49 for 4-piece chicken McNugget meals. Squishy stuffed animals aside, that's tough on the pocketbook for many families.

The price of a burger has also gone up exponentially in California, with many popular fast food chains hiking prices up by nearly 20 percent or more in recent years, according to a previous Patch report.

With higher menu prices, restaurants are also seeing higher profits, according to KTLA. Specific fast-food chains that implemented early price hikes, like Burger King, saw the most significant early price increase, with earnings rising 21 percent or more since 2o22. Meanwhile, Wendy's saw an 18.9 percent early increase, Jack in the Box saw a 15.6 percent rise, and Five Guys saw a 13.5 percent increase. McDonald's had the lowest increase, 11.3 percent that year.

The Price Of Good Management:

After initiating a hiring freeze at his four Fatburger restaurants, Walberg is "taking care of his managers to keep them around," he told Business Insider. He also regularly checks with competing restaurants to ensure prices are "in line" and high enough to help cover increased pay for his employees, he said. Still, both the "restaurants and customers are feeling the strain of higher prices across the board."

KTLA consumer reporter David Lazarus said that the minimum wage hike is overdue and shouldn't affect menu prices over time.

"In recent years, the (fast-food) industry has seen an influx of older workers who can't find employment elsewhere," Lazarus said. "They're seeking a living wage. That's what the California law is meant to address."

If what Walberg says holds true at other fast-food chain restaurants, fewer workers will run the counters after April 1. Prepare to pack your patience while waiting for your orders.

Related:

McDonald's, Chipotle To Spike Prices In CA, Blaming Minimum Wage Hike

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CA Minimum Wage Increases In 2024: These Cities Have The Highest Pay