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  • Writer's pictureRealFacts Editorial Team

Implications of California's Fast Food Minimum Wage Law

Fast food on a table

The implementation of a new minimum wage law for fast-food chains has brought about several impacts on California residents and workers, as well as investors in fast-food companies. Assembly Bill No. 1228, also known as the "Fast Act," took effect in California on April 1, 2024, mandating fast-food chains with over 60 locations nationwide to increase their minimum wage to $20 per hour within the state. While this law has undoubtedly enhanced the quality of life for some fast-food workers, it has also led to various consequences that have become evident in recent months. 

One of these impacts is many chains raising costs, essentially passing on the increased labor costs to their customers. During Bloomberg Markets: The Close, Christine Barone, the President and CEO of Dutch Bros, was asked about the effects these changes have had on her company. Dutch Bros Coffee is a drive-through coffee chain headquartered in Grants Pass, Oregon, with company-owned and franchise locations throughout the United States. Known for its creative flavor combinations, fast service, and devoted customer base, it started in 1992 and has expanded to twelve states with 538 stands. Many of these stands are found in California. While discussing the implications of the new minimum wage law, Barone stated, “We did take a small price increase in California, as many, many others did.” 

Some of the other franchises that followed the trend of price increases due to AB 1228 include Wendy’s, Chipotle, and Starbucks. Additionally, other franchises, such as Pizza Hut and Round Table Pizza, have commenced layoffs to offset the increased costs of labor. These actions have been undertaken to maintain the margins that investors typically look for when considering investments in various fast-food and restaurant businesses. Despite efforts to counterbalance the additional labor costs, the margins of some large fast-food chains will inevitably be affected. Investors should consider these developments as they evaluate where to allocate funds among the major fast-food brands operating in California.

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