An Update to California’s Minimum Wage Increase: What’s Happening at Restaurants

May 07, 2024

In California, prices at fast-food chains like Chipotle, McDonald’s, and Chick-fil-A have risen following a minimum wage increase. Chipotle noted a 6% to 7% price hike in its California restaurants compared to last year, attributing it to the new legislation. Chick-fil-A also saw notable increases, with prices for items like spicy chicken sandwiches rising by as much as 13%. California’s minimum wage for fast-food workers is now $20 an hour, impacting chains with over 60 locations. Other companies like Domino’s and Burger King have also raised prices. Despite the challenges, companies like McDonald’s emphasized their commitment to providing value, though prices vary by location.


Customers’ Reactions

Customers in Southern California are feeling the impact of rising prices. A Chipotle customer, Owen Peralta, noted a significant increase from $10 to $13 in his usual order, prompting concerns about continued price hikes. Other customers, like Cindy Tran and Mike Larson, expressed intentions to eat out less frequently due to the rising costs, indicating a potential shift in fast-food consumption habits.

A TikTok video showcasing a $25 deal at a California McDonald’s has sparked criticism of the state’s recent minimum wage increase. While some blame the new law for soaring menu prices, McDonald’s asserts that prices vary by location and franchisee discretion.


Owners’ Reactions

Harshraj Ghai, who manages 180 fast-food restaurants in California, responded swiftly to the state’s new $20 minimum wage by capping worker hours, adjusting operating hours, and implementing technology like self-service kiosks and AI-driven drive-through systems. The increase in labor costs prompted many in the industry to raise menu prices, but Ghai focused on automation to offset expenses. Despite challenges like language barriers for AI systems, Ghai and others see automation as essential for staying competitive. While AI-driven drive-thru’s are still in development, they promise to improve efficiency and reduce labor costs in the long term. Ghai believes AI can enhance customer service while reducing the need for human intervention, ultimately leading to fewer required staff hours. However, he emphasizes that the goal isn’t to replace people but to enhance operations and customer experience.


Restaurant operators like Briana Valdez of HomeState in Southern California express concerns about the immediate challenges. Valdez emphasizes the need for restaurants to remain competitive in attracting talent, which may require raising wages beyond the mandated minimum. Michaela Mendelsohn, CEO of Pollo West Corporation, highlights the financial strain on businesses, leading to reduced hours, simplified menus, and the exploration of automation technologies. Both Valdez and Mendelsohn stress the need for a broader approach to wage increases and express concerns about the long-term viability of their businesses.