McDonalds, Chipotle To Increase Prices Due To Newsome’s Minimum Wage Increase

In September, California Governor Gavin Newsome signed into law a measure that would give wage earners a $20-an-hour minimum starting in 2024.

When it takes effect on April 1, fast food workers in California will have the highest guaranteed base salary in the industry.

California Gov Gavin Newsome Signs Law to Raise Minimum Wage for Fast Food Workers to $20 Per Hour

The raise takes effect on April 1, 2024 and applies to workers at restaurants that have at least 60 locations nationwide — with an exception for restaurants that make and sell… pic.twitter.com/y32AndaO2t

— UltraMJTruth (@MJTruthUltra) September 28, 2023

While minimum wage workers and labor leaders cheered the news, they will soon feel the repercussions.

This week, the CEO of McDonalds and CFO of Chipotle announced that they will raise menu prices in California to pay for the minimum wage hikes the Golden State recently passed into law.

California residents to pay the price for Newsom’s $20 fast food minimum wage: McDonald’s and Chipotle confirm they will HIKE menu costs in the Golden State to off-set Governor’s new labor bill https://t.co/cvgFmmhx8I #US #bill

— WhatsNew2Day (@whatsn2day) November 1, 2023

From Fox Business:

McDonald’s CEO Chris Kempczinski said on an earnings call Monday that the law is going to have “a wage impact for our California franchisees.” He hinted at menu price hikes to follow in the Golden State.

“Certainly, there’s going to be some element of that that does need to be worked through with higher pricing,” Kempczinski said.

“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.”

California is not the only place where McDonald’s could raise prices to meet inflationary pressures, and statewide averages do not always give a full picture of what some customers are already paying.

In July, one branch in Darien, Connecticut was charging $18 for a Big Mac meal, with other meals costing more than that, the New York Post reported at the time.

McDonald’s states that the national average cost for a Big Mac meal is $8.64.

From CNN:

Chipotle, which just announced price hikes, said it will likely charge even more at its California restaurants, blaming a new law that raises minimum wages for fast food (and fast casual) workers in the state.

“We haven’t made a decision on exactly what level of pricing we’re going to take,” said John Hartung, Chipotle’s chief financial officer, during an analyst call discussing the company’s third quarter results Thursday, adding that “we’ve been studying” the situation.

“But to take care of the dollar cost of that and/or the margin part of that … it’s going to be a mid- to high single-digit price increase,” he said. “We are definitely going to pass this on.”

If the chain does raise prices as a result of the new legislation in California, it might not make much of a difference to customers already willing to pay Chipotle’s prices.

But workers have said that the higher minimum wage will make a meaningful difference in their lives.