California’s fast-food workers got a big pay hike. Franchise owners say they’re struggling.
California’s fast-food workers got a big pay hike. Franchise owners say they’re struggling.
It’s almost lunchtime. At a McDonald’s restaurant south of Los Angeles’ Koreatown, owner Kerri Harper-Howie watches fries cook in hot oil and a conveyor belt carry a steady stream of wrapped sandwiches to a worker putting them in bags.
Harper-Howie and her sister own 21 McDonald’s franchises in LA County and employ around 1,500 people. They recently increased those workers’ pay from about $16 to $20 an hour. That’s the new state-mandated minimum wage for quick-service restaurants in California that are part of a chain with more than 60 locations nationwide.
When the pay raise went into effect on April 1, many workers praised the move, while some franchise owners warned it could devastate already struggling businesses.
“We’re happy, of course, always to comply with the law and do the things we have to do, but it definitely comes with its challenges,” said Harper-Howie.
When she ran her second-quarter numbers after the higher wage went into effect, profits were down 5% — with the first decline in sales and guest counts in over a decade.
“It is significant for any business, period,” said Harper-Howie, who pays McDonald’s a fee to represent the brand. “People don’t understand that it’s not billion-dollar-making corporate McDonald’s. This is our family business.”
Harper-Howie said her business was already making adjustments for the rising cost of supplies and insurance rates amid inflation.
Like many in the industry, she increased menu prices by a few percentage points in anticipation of the wage increase. A Big Mac combo at one of her McDonald’s now runs $10.49. Any more than that, Harper-Howie said, she would lose her low-income customers.
“We can’t raise prices that would allow us to pay for this minimum wage increase because our customers would literally not be able to afford the food.”
Still, many franchise owners like Harper-Howie are retaining employees and even hiring. Between January and June, California added 19,800 jobs in the fast food industry, according to the Bureau of Labor Statistics.
This is similar to what happened when California raised the minimum wage in 2022 to $15 an hour. Businesses adjusted, according to Brian Callaci, an economist at the Open Markets Institute. “We didn’t really see negative employment effects. California kept adding jobs.”
Some chains have announced closures since April. Rubio’s Coastal Grill shut down 48 locations in California, citing the wage hike among the factors that led to the decision. Meanwhile, other chains are taking the higher pay in stride. Fatburger is planning a 10-year expansion of 40 new locations in the state.
As for the workers, their better compensation makes it easier to pay the bills.
When Jaylene Loubet, a cashier at a McDonald’s in northeast LA (not one owned by Harper-Howie), received her first check with the new wage, she saw the difference. “It’s exciting,” she said.
Before the pay boost, Loubet made $17.25 an hour. With the high cost of living in LA, that’s not enough to support herself and her parents. They’re both out of work because of medical issues, and all live together in a one-bedroom apartment.
“I’m the main caretaker of my family,” Loubet said.
On doctor’s orders, her mom is supposed to eat more fresh fruit, vegetables and lean meat. That’s where the wage increase is going, Loubet said. “I definitely am happy with the $20, but I still feel like we have a long way to go.”
Sure enough, she said there are already talks at the California State Capitol about raising fast-food worker wages again next year.
“The cost of living in Los Angeles keeps going up,” Loubet said. “It’s only fair that our wages keep going up.”
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