Fast food workers are getting a taste of what higher minimum wages REALLY mean - and it's not good
Fast food restaurants in California are warning that they are having to cut jobs - to pay for the bumped-up $20-an-hour minimum wage.
Staff who work at Wendy’s, Pizza Hut, Del Taco and Jersey Mike’s in the state are all getting fewer hours or days.
Franchisees who run the outlets echo that - saying they have had to cut staff hours or cut the total number of staff on the books, or both. One has cut staff by 20.
The report by the Associated Press comes a month after a trade group said nearly 10,000 fast food jobs have been cut in California since the law came into effect on April 1. Unions disputed the figures.
For Enif Somilleda, a general manager at a Del Taco in Orange County, the raise has been a mixed bag. She used to have four people working per shift. She now only has two.
Lawrence Cheng, whose family owns seven Wendy's locations south of Los Angeles, works in the kitchen at his Wendy's restaurant in Fountain Valley, Calif., June 20
'Financially it has helped me,' she said. 'But I have less people so I have to do a lot more work.'
Lawrence Cheng, whose family owns seven Wendy's locations south of Los Angeles, told AP he used to have nearly a dozen employees on the afternoon shift at his Fountain Valley location in Orange County.
Now he only schedules seven for each shift as he scrambles to absorb a dramatic jump in labor costs after the hourly wage for fast food workers rose from $16.
'We kind of just cut where we can,' he said. 'I schedule one less person, and then I come in for that time that I didn´t schedule and I work that hour.'
Experts say it's still too early to tell the long-term impact of the wage hike on fast food restaurants and whether there will be widespread layoffs and closures.
Past wage increases have not necessarily led to job losses.
When California and New York nearly doubled their minimum wage previously to $15 compared to the federal level of $7.25 per hour, job growth continued, according to a University of California, Berkeley study.
The two opposing sides - the unions that pushed for the raise and the restaurants - fought over the increase and are now doing the same over its impact.
Joseph Bryant, executive vice president of the Service Employees International Union, which pushed for the raise, said the industry has not only added jobs under the new law but 'multiple franchisees have also noted that the higher wage is already attracting better job candidates, thus reducing turnover.'
But many major fast food chain operators say they are cutting hours and raising prices to stay in business.
And a trade group for the state The California Business and Industrial Alliance (CABIA) says almost 10,000 positions across chains from Pizza Hut to Burger King have been cut since the law came into effect on April 1.
On top of that, chains have been shuttering restaurants - including Mexican chain Rubio's Coastal Grill, which this week filed for Chapter 11 bankruptcy and closed 48 locations in the state.
'I've been in the business for 25 years and two different brands and I never had to increase the amount of pricing that I did this past time in April,' Juancarlos Chacon, an owner of nine Jersey Mike´s in Los Angeles, said.
A turkey sub for under $10? It's now $11.15. While customers are still coming in, he´s seeing them cut back - no drinks, no chips, no dessert.
Since their core business is lunch, Chacon has been reducing staffing in the mornings and evenings. He's also cut a few part-time employees, going from 165 total to about 145.
It wasn't only entry-level workers that got a pay raise. Shift leaders, assistant managers, and everyone else up the ladder had to get raises too, and labor represents about 35 percent of his costs.
'I'm very nervous,' Chacon said.
Aaron Allen, founder and CEO of a global restaurant consulting firm, said he´s gotten panicked calls from California restaurant operators and suppliers that are still recovering from the COVID-19 lockdown.
He predicts a growing divide between corporations like McDonald's that have money to invest in automation and reduce costs through 'menu reconfiguration, versus smaller, more regional chains that might go under or face a major reduction in stores.'
Cheng said he has no plans to lay off any of his 250 Wendy's workers and instead has turned to cutting overtime and reducing the amount of workers on each shift. He also raised menu prices about 8 percent in January in anticipation of the law.
Still he said his books show that he was $20,000 over budget for a two-week pay period.
Jot Condie, president and CEO of the California Restaurant Association, which opposed the minimum wage bill, said businesses are simultaneously feeling the squeeze from rising rents and food costs.
'When labor costs jump more than 25 percent overnight, any restaurant business with already-thin margins will be forced to reduce expenses elsewhere,' Condie said.
'They don´t have a lot of options beyond increasing prices, reducing hours of operation, or scaling back the size of their workforce.'
Julieta Garcia, who's been at a Pizza Hut in Los Angeles for a little over a year, said she's now working five days instead of six.
But that's not a bad thing, she said, since she can spend more time with her four-year-old son.
Cheng used to have nearly a dozen employees at the location during the day. Now, he only schedules seven for each shift as he scrambles to absorb a dramatic jump in labor costs
Lawrence Cheng, left, whose family owns seven Wendy's locations south of Los Angeles, works with part-time employee Adriana Ruiz at his Wendy's restaurant in Fountain Valley, Calif., June 20
Lawrence Cheng hands an order to a customer at his Wendy's restaurant in Fountain Valley, Calif., June 20, 2024
The extra money means she can pay her cellphone bill on time, instead of having to turn off service, and take her son to get his tonsils checked out, she said.
Gov. Gavin Newsom said the hike was necessary to give the state's more than half a million fast food workers a living wage.
Howard Lewis, a 63-year-old retiree who works at a Wendy's in Sacramento, said he has been investing his extra money.
'Today was payday and I bought $500 worth of stock,' said Lewis.
He's also helping his ex-wife fix the brakes on her car.
