#FASTAct | KRG Hospitality

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

June 14, 2024by David Klemt David Klemt No Comments

FAST Act Fallout far from Finished

FAST Act Fallout far from Finished

by David Klemt

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.

Tray with In N Out burgers and French fries

September 18, 2023by David Klemt David Klemt No Comments

FAST Act Fight Appears to be Over

FAST Act Fight Appears to be Over

by David Klemt

Well, that was fast: If recent reports are accurate—and it appears they are—the battle over the FAST Act has come to a close.

Rather than fight on the ballot, fast-food chain operators and labor groups have struck a deal. Per some reports, this puts a halt to a referendum battle that could have cost more than $100 million in campaign funds.

On its face, the deal is quite simple. AB 257, known as the Fast Food Accountability and Standards Recovery—or FAST Act—is dead. That is, dead save for one provision: the creation of the Fast Food Council will move forward.

The council will have a total of eleven members. Nine will have the power to vote, two will be non-voting members. The breakdown will be as follows:

two representatives of the fast-food restaurant industry (2);
two franchisees or restaurant owners (2);
two restaurant employees (2);
two advocates for fast-food restaurant employees (2);
member of the public who is not affiliated with either side (1, will serve as chair); and
members from the Department of Industrial Relations and the Governor’s Office of Business and Economic Development (2, non-voting)

Their first meeting is on the schedule for March 15.

In exchange, fast-food workers will see the minimum wage bump up to $20 per hour should they be in the employ of a fast-food chain with more than 60 locations throughout the US. That pay rise will come in April 2024.

When it comes to further pay rises, the council has two options:

An annual wage increase of 3.5 percent; or
An increase based on average changes to the consumer price index each year.

As one might expect, the rise will be whichever number is lower.

What was AB 257?

To summarize, FAST would’ve done 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.”
Allows the formation of a Local Fast Food Council by a county, or a city that has a population of more than 200,000.

Click here to review the bill’s text in its entirety.

Why is this Important?

It’s entirely possible that similar bills will pop up in other states in the coming years.

If this result is anything go by, such bills may be used by QSR operators and labor groups as negotiating tactics. The most recent news regarding the FAST Act should have the attention of both operators and hospitality workers. In California alone, the pay rise is expected to affect at least 500,000 workers.

However, there is one provision of the FAST Act that workers may find less than encouraging. The deal that has been struck kills a notable provision: fast-food operators, at least in California, won’t be held legally responsible for labor violations that occur in franchise locations.

Operators in other states should keep an eye out for similar bills, as should all hospitality professionals.

Image: Kenny Eliason on Unsplash

December 27, 2022by David Klemt David Klemt No Comments

FAST Act Dealt Knockdown Blow

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

October 21, 2022by David Klemt David Klemt No Comments

Cali Chains Move Quickly to Kill FAST

California Chains Move Quickly to Kill FAST

by David Klemt

If recent reporting is accurate, fast food chains with locations in California are fighting the Fast Food Accountability and Standards Recovery Act.

Several well-known restaurant chains have reportedly already dumped well over $10 million into a ballot drive effort. Among the chains lobbying to kill the bill are In N Out, McDonald’s, Wendy’s, and Chipotle.

In other words, the group of chains aiming to defeat AB-257 in California have very deep pockets. These heavy hitters are reaching deep to contribute millions of dollars to Save Local Restaurants, the coalition responsible for starting the ballot initiative.

And who are the Save Local Restaurants coalition members? The National Restaurant Association (NRA), US Chamber of Commerce (USCC), and International Franchise Association (IFA).

What is AB-257?

The Fast Food Accountability and Standards Recovery Act, also known as the FAST Act, is a California bill. Enacted on September 5 of this year, FAST amends a section of the state’s labor code that relates to food facilities and employment.

Click here to review the bill’s text in its entirety.

To summarize, 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.”
Allows the formation of a Local Fast Food Council by a county, or a city that has a population of more than 200,000.

It’s that third bullet point that likely stands out the most to chain operators. On January 1, 2023, California’s minimum wage increases to $15.50 an hour. If the Save Local Restaurants ballot initiative fails, the Fast Food Council could boost the minimum wage to $22 per hour right after we all yell, “Happy New Year!”

Proponents say the bill protects the health, safety, and welfare of fast-food workers. Opponents call it radical.

Fighting FAST

According to Save Local Restaurants, it’s not just chains that want to kill FAST:

“The FAST Act is opposed by small and family-owned businesses, minority-rights groups, workers, consumers, your favorite restaurants, taxpayers and community-based organizations,” reads their website.

Among their reasons for attempting to kill the bill are:

a resulting increase in the price of food;
the elimination of thousands of jobs in California;
an increase in the cost of living in the state; and
the millions of dollars the coalition claims the bill will cost California taxpayers annually.

Reportedly, full-service restaurant operators also oppose FAST. The reason is simple: If the Fast Food Council hikes fast-food worker minimum hourly wages significantly, FSRs will struggle to compete. FSR operators will have to hike menu item prices further, a situation that’s growing untenable as consumers balk at paying more at restaurants.

Then, there’s the fact that bills similar to FAST could pass in other states. So, chains are contributing millions to see that the Save Local Restaurants ballot initiative succeeds.

Should the effort be successful, FAST will be included on California’s 2024 ballot. That means it will be suspended until 2024 and be in the hands of the voters.

Image: Tima Miroshnichenko via Pexels