How Fast Food Wage Hikes Are Affecting LA's Economy? — NBC Los Angeles

For fast food workers across California, April 1st is a good day to clock in.

California's new law has gone into effect raising the minimum wage for fast-food workers employed by chains of 60 restaurants and more from $16 to $20 an hour.

„I'm excited for the first big paycheck,” Lizette Aguilar, who has worked at McDonald's for 14 years, said in Spanish.

But for franchise owners, the dramatic rise in labor costs, including payroll taxes and workers' compensation insurance, is a nightmare.

„My average store does $180,000 a year,” explained Michaela Mendelshon, who owns six El Pollo Loco franchises in LA and Ventura counties. “As of today, I am in the red. We're losing money, so we need to stop the boat from leaking by making changes.

Like other franchise owners across the state, Mendelshon said prices on menu items should increase.

The business owner hoped the automated kiosks he introduced last week would provide some relief.

„I think AI will take root in the drive-thru next year,” Mendelssohn said. „You never know if you're talking to a robot or a person.”

Another problem is that the new law creates confusion about which restaurants are covered, especially when it comes to small franchises.

Gabriella Campbell, who owns a Handel's Ice Cream franchise in LA, asked the bill's author, Assemblyman Chris Holden of Pasadena, if his store is included in the mandatory minimum wage increase.

In response, Campbell said the assemblyman told him to speak with the Service Employees International Union (SEIU.), the group that wrote the law.

„After further contact with SEIU, they decided that their scope was too narrow and most likely would not exempt us,” Campbell said. „So we're going to have to write our own bill.”

While the law targets fast-food workers, it will affect wages in all sectors of the economy that require low-skilled help.

„As the labor market becomes more competitive, companies have a hard time finding employees. If fast-food companies pay $20 an hour, other restaurants must at least match that to retain employees,” explained economist Alan Zinn. „And then people outside the restaurant industry have to raise their wages.”

In response to an interview request from NBC Los Angeles, Assmlymeber Holden said that although she is the author of the minimum wage increase bill, she was not involved in negotiations to exempt businesses.

KCRA, NBC in Sacramento. reported All parties involved in the final negotiations of the legislation signed non-disclosure agreements, keeping the details legally confidential.