Fast food minimum wage | KRG Hospitality

FAST Act Fallout far from Finished

by David Klemt

A frustrated cartoon slice of pizza carrying a suitcase and leaving the state of California

Have you ever seen a more frustrated slice of pizza in your life? I doubt it.

The battle over the implementation of California’s FAST Act appears to be heating up further, with multiple parties attempting to land blows on one another.

Depending on the source, the Golden State’s fast-food minimum-wage hike to $20 per hour is either killing jobs or adding them. One side says that limited-service and quick-service restaurants have shed nearly 10,000 jobs since Governor Gavin Newsom signed the FAST Act into law.

On the other side, proponents are pointing to data the Bureau of Labor Statistics (BLS) released recently to paint the situation in a better light. According to this data, LSRs in California added 4,500 jobs between September of last year and April of this year.

However, those unhappy with the FAST Act have downplayed this net gain in fast-food jobs. According to reports, that increase in jobs represents a recurring seasonal trend. Further, some sources claim that the data showing a gain in jobs includes restaurants other than LSRs, so the information is being spun to look positive.

One group is so unhappy with Gov. Newsom’s implementation of the FAST Act, they released an obituary-style ad to make their grievance known.

“In Memoriam”

Below, a social media post displaying the “in memoriam” ad from the California Business and Industrial Alliance (CABIA).

📢 Today, we called out @GavinNewsom in a full-page ad in USA Today for the harmful impact of California’s recent minimum wage hike on fast-food restaurants. Nearly 10,000 jobs lost since AB 1228 was signed into law. CA deserves better policies that support growth and stability.… pic.twitter.com/CCpAk3L2j0

— @cabia (@cabia_speakup) June 6, 2024

The full-page ad is available for viewing here.

Jonathan Maze, editor-in-chief of Restaurant Business, also spoke out against California’s $20 minimum wage for fast-food workers.

During an appearance on FOX & Friends First, Maze addressed how the state handled the pay hike.

“You’ve got two issues, really. You have the fact that it was done almost overnight,” said Maze. “You have the fact that it was a 25-percent increase in the wage rate. Both of those things happening simultaneously, is a really hard thing for restaurants’ bottom line, and you’re seeing the effects of it.”

Brand Relocation

In a development that won’t assuage Gov. Newsom’s critics, a California-born fast-food brand has announced it’s leaving the state.

Blaze Pizza, which opened its first location in Irvine, California, in 2012, has announced the relocation of its headquarters to Atlanta, Georgia. Currently, the brand’s headquarters is located in Pasadena. The move will take place later this year, and it’s not expected to impact the company’s roughly 7,500 employees.

It will, however, impact Blaze Pizza’s taxes. Moving to Atlanta will reduce the QSR’s corporate tax rate by at least a third.

This begs a couple questions: Is this simply a business-savvy move that will reduce Blaze’s taxes and allow it to allocate more resources to further the brand’s growth? Or did the brand analyze the FAST Act’s impact on its bottom line and decide to flee the state for greener pastures?

One can argue the situation is closer to the former than the latter, as Blaze has stated that store-level employees won’t be impacted by the reorganization.

But on the other side of the coin, one can argue the move to Atlanta is a direct response to FAST. Cutting taxes by a third (if not more) may help Blaze avoid restaurant-level job cuts or store closures.

Messy

One thing is mostly clear regarding California and the FAST Act: the situation, so far, is messy.

The tendency is usually to say that as things play out, data will tell the tale. Unfortunately, as this situation is showing us, that’s not always the case. Data is being spun to support agendas.

One thing I’ll say is that I’m happy some fast-food workers’ lives are improving. Or, at least their wages have gotten better. But, of course, if their employers are cutting hours or eventually closing stores, is that improvement sustainable?

And then there are the guests. Reports appear to indicate that more and more Americans now perceive fast food to be a luxury. That doesn’t bode well for LSRs and QSRs in California in particular, nor for fast-food operators across the US.

This situation is complex, with many factors impacting California’s restaurant workers, operators, and guests. We likely won’t know the true impact of the FAST Act until the end of this year, at the earliest.

Other states looking at implementing similar measures should keep their eyes trained on California before moving forward. Legislators need to meet and actually listen to independent and chain operators, along with people representing the workers in good faith.

Image: Shutterstock. Disclaimer: This image was generated by an Artificial Intelligence (AI) system.

FAST Act Dealt Knockdown Blow

by David Klemt

A bill we think is one to watch, California’s Fast Food Accountability and Standards Recovery Act, may be on the ropes already.

Assembly Bill 257, known as the FAST Act, is “on hold” until 2024. So, while the Save Local Restaurants coalition and voters have yet to kill the bill, it may be out on its feet.

We reported two months ago that fast food chains were moving quickly to kill the FAST Act. It appears that the initial attack on AB-257 was successful.

That is, the chains and coalition got what they want: the ballot initiative vote has knocked down AB-257.

For those unfamiliar with the Save Local Restaurants Coalition, the following organizations are members: The National Restaurant Association (NRA), US Chamber of Commerce (USCC), and International Franchise Association (IFA). Further, fast-casual and QSR chain coalition members—including Starbucks, In N Out, McDonald’s, and Chipotle—threw nearly $13 million at the ballot measure that halted FAST.

What’s FAST?

To read AB-257, the FAST Act, in its entirety, click here.

In summary, FAST:

FAST does the following:

establishes the Fast Food Council, ten members appointed by the Governor, the Speaker of the Assembly, and the Senate Rules Committee. The council will operate until January 1, 2029;
defines “the characteristics of a fast food restaurant“;
gives the Fast Food Council the authority to set “minimum fast food restaurant employment standards, including standards on wages, working conditions, and training“;
provides the council the power to “issue, amend, and repeal any other rules and regulations, as necessary”; and
allows the formation of a Local Fast Food Council by a county, or a city that has a population of more than 200,000.

Voters effectively stopped California from implementing FAST until November 2024 at the earliest. (That is, if the California Secretary of State verifies that the referendum effort did indeed secure the required amount of signatures.)

Opposition

A statement from Save Local Restaurants reads, in part:

The quick-service restaurants targeted by the law – which include coffee shops, juice bars, pizzerias, delis, and salad shops – already operate on small, single-digit profit margins. These include more than 10,000 small businesses, including thousands of women- and minority-owned businesses.

If these restaurants are forced to absorb the costs, the result will be bad for workers and local communities. To survive, many restaurant owners will have no choice but to reduce worker hours or introduce automation. Some may choose to leave their communities entirely or go out of business.

As is often the case with overreaching California policies, this is likely only the beginning.

Additionally, the National Restaurant Association, a member of the coalition, has said the following:

The impacts of the FAST Act won’t be limited to quick service restaurants in California. The law allows the new regulating council to set a higher minimum wage for quick service restaurants. Independent restaurants will, however, be forced to increase their pay to match, so they can remain competitive when recruiting and retaining workforce.

Takeaway

We believe this bill is one to watch because similar efforts could spring up in other states. Also, just because the bill is on hold until 2024 in California doesn’t mean other states aren’t working on similar legislation right now.

Now, there are obviously two sides to consider. Opponents, as we see above, say FAST will raise prices, eliminate jobs, and hurt families.

Proponents believe FAST will protect the health, safety, and welfare of fast-food workers. Additionally, the Fast Food Council could increase the minimum wage for fast food workers above California’s $15.50 minimum (effective January 1, 2023).

We’ll keep an eye on FAST over the next couple of years. Perhaps the coalition can work with California on a bill that protects fast food workers and doesn’t hurt operators and the communities they serve.

At any rate, FAST is down but certainly not yet out.

Image: Johann Walter Bantz on Unsplash