Fast food managers and owners fear AB 257 will lead to job loss and higher costs

Following the passage of AB 257 earlier this week by the California Legislature, many local fast food managers and store owners quickly began looking for every possible way to stay open.

Although a Fast Food Council within the Department of Industrial Relations and statewide minimum standards for wages, hours of work and other areas seem beneficial on paper, on one level closer, they can do a lot of damage. The Globe spoke Friday with numerous owners and managers across the state about what the bill would mean, and the results weren’t pretty.

“Everyone is talking to employees about how wonderful it would be to get paid up to $22 an hour,” McDonalds of Northern California manager Mike told The Globe on Friday. “But let’s break it down. The best fast food restaurants can have a profit margin of over 20%. That’s great, but you have to consider the costs. McDonalds gets 4% of gross sales upfront. Then there are a ton of other costs eating away at that profit. Ballpark you land in single digits for many places. Other places, like Burger King or Wendy’s, may be worse. And that’s not even getting into troubling factors now, like labor shortages that are already naturally raising wages and recovering from COVID shutdowns and loss of customers.

“You add all these higher salaries and other possible things like benefits, and suddenly we’re screwed beyond belief. It’s not that we don’t want to pay employees more, it’s that the economics behind it just won’t work the way all of these places are set up.

Some owners have anticipated this for years and instead tried to get rid of as many workers as possible to avoid higher wages.

“Many restaurants these days have touchscreens, much more automated functionality, and even outsourcing drive-thru workers to a remote location,” said Sanjay Singth, owner of multiple franchises in LA County. , at the Globe. “We continue to put more and more in stores to reduce labor costs. We can’t afford to pay employees what this AB 257 asks us to do, and we’ve known for some time that people demanding higher salaries would bring us to the breaking point, so we’re evolving around that. You don’t need to pay people more when there’s no one there in the first place.

Higher future costs to consumers if adopted

Higher costs are another expected result.

“What’s going to happen is the costs to consumers are going to go up,” added Gail Stewart, Stockton-area fast food manager. “We’re going to get rid of anyone we don’t need or reduce the number of open lines, but that won’t be enough. We will see prices increase accordingly. And I’m sure you can see the problem here. We remain the inexpensive breakfast, lunch and dinner option for tens of millions of Americans every day. For less than $20 you can get a complete meal on the go.

“If we raise prices, it hurts people on a budget. Many poor families have parents who work and cannot cook dinner every night, so they need a cheap alternative. So there’s McDonald’s, Taco Bell, KFC, Panda Express, In-N-Out and many more cheap options. These prices are rising, they may no longer be able to afford the cheap option.

“And it all comes back to the employees. Fast food jobs now occupy more people for longer periods of time. A generation or two ago, fast food was mostly staffed by teenagers working part-time or people in need of short-term employment. But events like the Great Recession brought in a new type of permanent worker. I became a manager in 2008, just as this big transition was happening. Teenagers have been driven out of jobs by older Americans and need work anywhere. And we’ve had those adult workers as a bigger chunk ever since. »

“If it becomes law, many places won’t be able to handle it.”

All the owners and managers are adamant: the AB 257 will hurt a lot of people.

“A lot of people are going to be hurt financially because of this. The people behind this bill just don’t care about the little guy, the consumer, in all of this,” Mike added.

AB 257 is currently under review by Governor Gavin Newsom.

About Walter Bartholomew

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