California’s new $20 minimum wage for fast-food workers has already led to a rise in restaurant prices and a drop in foot traffic since it went into effect on April 1.
A recent study published by Placer.ai found that as a result of the new law affecting restaurants with 60 or more locations – most quick-service chains have increased menu prices in the state by anywhere from the single digits to the mid-teens. , percentage-wise, and the price increases are hurting business.
The analysis found that in February and March of this year, foot traffic at major restaurant chains in California actually increased year over year and was higher than the national average, but that changed abruptly after the wage hike took effect.
From April through May, traffic to fast-food restaurants in California was below the national average for seven out of eight weeks, according to Placer.ai. The analytics firm said quick-service burger chains were the hardest hit.
BUSINESSES ‘ADD’ MINIMUM FREE INCREASE IN CALIFORNIA AS PRICES RISE AND THOUSANDS ARE FORCED FROM WORK
McDonald’s, for example, saw about the same foot traffic at its California locations during the February-March period as the rest of its restaurants nationwide. But after the minimum wage law went into effect, McDonald’s California locations—which make up about 9% of the company’s U.S. restaurants—began to underperform by nearly 250 basis points.
READ ON THE FOX BUSINESS APP
The study found that visits to California locations in April and May also underperformed the national average of Burger King, Wendy’s, Jack in the Box, In-N-Out Burger and Chipotle, which dropped their prices in the state by 6% had increased to 7%. compensate for wage increases.
Placer.ai’s analysis also pointed to broader impacts on the state’s restaurant industry as a result of the minimum wage increases.
“It’s still early, but we’re starting to see the ripple effect of the minimum wage increase across the broader restaurant industry,” said RJ Hottovy, head of analytics at Placer.ai. “First, we are seeing some operators closing locations across the state, especially chains that were already experiencing financial difficulties.”
THESE ARE THE MOST AFFORDABLE US CITIES TO EAT OUT AND THE MOST EXPENSIVE
The study found that the new law has caused several restaurant chains to close in California, including Rubio’s Coastal Grill, which cited minimum wage increases as one of the reasons the company filed for bankruptcy last week.
Meanwhile, the survey shows that casual restaurant chains, which typically already paid workers more than the $20 minimum, appear to be benefiting from menu price increases at fast-food restaurants.
The data showed that California’s Olive Garden and Chili restaurants actually outperformed the chains’ respective national averages in terms of attendance in April.
Original article source: California’s $20 minimum wage led to fast food price increases and reduced customer traffic, research shows
