Multiple Pizza Hut operators throughout California announced on Tuesday that they would be laying off hundreds of drivers before the new state minimum fast food wage of $20/an hour comes into effect on April 1st.
The new law, Assembly Bill 1228, has been one of the most contentious of the year. Originally, the bill would have raised the minimum to $22 an hour and hold franchise corporations accountable for labor law violations at individual locations. In addition, thanks to a new Fast Food Council created from a new law signed last year (AB 257), benefits like paid leave and predictive scheduling would be introduced. Fast food companies swiftly took action, to hold a referendum on the minimum wage, as well as more electronic kiosks going up to replace cashiers.
After months of back and forth, it was agreed earlier this year that AB 1228 would be altered to have minimum wage for fast food workers bumped only to $20 an hour rather than $22, with local governments prohibited from raising it even further, in exchange for dropping the referendum as well as other smaller provisions.
Following passage in October, fast food companies and groups have been warning of dire consequences. This has included more automation, higher prices, reliance on third party companies, and numerous layoffs to help stay profitable.
“The law is going to have a wage impact for our California franchisees,” said McDonalds CEO Chris Kempczinski during an earnings call in late October. “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. 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.”
Many other franchises have, in the past several months, reduced seating and installed more automated kiosks in stores to reduce labor in preparation for the higher wage. Others, like McDonalds and Chipotle, have announced higher prices. This led to the announcement by multiple Pizza Hut franchises on Tuesday that they would be eliminating all drivers as a cost saving measure. In total, over 1,200 drivers have been laid off so far, with restaurants being affected in Los Angeles, Orange, Riverside, Sacramento, Ventura and San Bernardino counties.
Hal Turner Opinion:
Anyone who thinks you can just magically force companies to pay a wage they can't afford is a fool.
