California Fast Food Bill Sparks Concerns Among McDonald’s Owners

Following the passing of California’s landmark fast food bill, a group of independent McDonald’s owners is pushing back against what they believe will be a significant financial blow to franchisees in the state. The new legislation, known as AB 1228, sets a wage floor of $20 per hour for fast-food workers in California with at least 60 nationwide locations, starting from April 1. While many workers will benefit from a significant raise, some owners are worried about the impact on their operations in a challenging labor market and a period of high inflation.

Concerns over Financial Impact

The National Owners Association (NOA), which represents over 1,000 McDonald’s owners, projects that the bill will cost each restaurant in the state $250,000 annually. According to the NOA, these costs cannot be absorbed by the current business model, and they anticipate similar legislation to follow in other states. The organization also claims that a small coalition of franchisors, including McDonald’s, the National Restaurant Association, and the International Franchise Association, negotiated a deal with the Service Employees International Union, leading to the certain legislative outcome.

McDonald’s Response

McDonald’s sent a letter to its restaurant system expressing its response to the bill. The company stated that it has worked tirelessly to fight against these policies and protect the ability of owner/operators to make decisions for their businesses. They formed a coalition of brands to refer an earlier version of the bill to California voters in 2024 and increased their political engagement in the state. However, McDonald’s declined to comment further on the NOA’s letter or position.

Changes in the Final Version of the Bill

In its systemwide letter, McDonald’s outlined changes made to the final version of the bill that are considered better for owners than the initial proposed legislation. The threat of joint franchisor-franchisee liability was eliminated, which McDonald’s argued would have destroyed the franchise model in California. The bill also unwinds the reconstitution of the Industrial Welfare Commission, which would have had significant power over wage and workplace decisions for restaurants.

Positive Outlook from Other Groups

The International Franchise Association and the National Restaurant Association expressed a more positive outlook on the compromise. They believe the bill creates the best possible outcome for workers and local restaurant owners while protecting the franchise business model. Both organizations were involved in the negotiations and emphasized that the interests of franchisees were a priority.

Support for California Restaurant Owners

Despite concerns from critics who believe the costs will fall solely on small business owners, the NOA outlined ways for members, suppliers, and McDonald’s corporate office to support owners in California. They suggested that anticipated menu price hikes should result in a significant revenue windfall for the company. The NOA asked for the projected $80 million rent and service fees collected from these price hikes to be reinvested in California restaurants. They also requested that any financial support requests made by owners be considered.

Continued Advocacy for Workers

Worker advocates, although not achieving the wage hikes they initially sought, see this as just the beginning of their fight. The SEIU President stated that California’s Fast Food Council will bring together all stakeholders in the industry, including franchisees, to shape improved standards and make fast-food jobs safer and more sustainable for everyone.