Fast Food Giants Raise Prices As Minimum Wage Hits $20 in California

California’s minimum wage for fast food employees is set to jump 25% to $20 per hour starting April 1st. The big chains know this will significantly increase their labor costs. Chipotle’s CFO estimates costs will rise by a mid-to-high single digit percentage. To offset this, most fast food giants have confirmed they will raise menu prices, ensuring customers ultimately pay the price for the higher minimum wage.

McDonald’s, Starbucks, and others are still deciding how much prices will rise. Franchise owners are especially worried about absorbing the extra wage costs, as labor is about a third of their expenses already. Some Pizza Hut franchises have already laid off over 1000 drivers, likely in preparation. With inflation already high, consumers will see fast food as an even less affordable option soon.

How Will Independent Restaurants Handle the Rising Minimum Wage?

While some fast food locations are exempt, independent restaurants not covered by the law still face pressure. Owners say they will have to match wage hikes to retain staff. One sandwich shop owner said every labor market bump raises costs for all. After West Hollywood rapidly raised its minimum wage, the owner of a new upscale restaurant was forced to close after just months, unable to cut any more costs.

For workers, the higher minimum wage will mean significant pay increases. But some wonder if hours may be reduced in response. With a tight job market, fast food workers could have more leverage going forward to push for better conditions. However, the higher costs are likely to impact lower-income customers the most. Only time will tell how businesses, workers, and consumers adapt to California’s bold minimum wage increase.