The new $20 minimum wage in California for fast food Workers have already caused restaurant prices to rise and foot traffic to drop since it took effect April 1, data shows.
A recent study published by Placer.ai found that as a result of the new law that affects restaurants with 60 or more locations, most fast food chains have increased menu prices in the state by an amount ranging from mid-single digits to mid-teens, percentage-wise, and price increases are hurting business.
The analysis found that in February and March of this year, attendance at California’s major restaurant chains was actually up year over year and above the national average, but that abruptly changed after the entry into force of the wage increase.
From April to May, foot traffic to fast-food restaurants in California was below the national average for seven out of eight weeks, Placer.ai said. The analytics company said fast-food hamburger chains have been hit hardest.
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McDonald’s, for example, saw about the same year-over-year foot traffic at its California locations as it did at the rest of its restaurants nationwide during the February-March period. But after the minimum wage law took effect, McDonald’s California locations — which make up about 9% of the company’s U.S. restaurants — began underperforming by nearly 250 basis points.
The study showed that visits to California locations in April and May were also lower than the national average for Burger King, Wendy’s, Jack in the Box, In-N-Out Burger and Chipotle, which raised their prices by 6 to 7% in the state to compensate for salary increases.
Placer.ai’s analysis also highlighted broader impacts on restaurant industry in the state following minimum wage increases.
“It’s early, but we’re starting to see the ripple effect of the minimum wage increase throughout the restaurant industry,” said RJ Hottovy, head of analytics research at Placer.ai. “First, we started to see some operators close locations in the state, particularly chains that were already facing financial difficulties.”
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The study noted that the new law led several restaurant chains to close their locations in California, including Rubio’s Coastal Grill, which cited minimum wage increases as one of the reasons it was passed. filed for bankruptcy last week.
At the same time, the study says casual dining chains, which typically already pay their employees above the $20 minimum, appear to benefit from rising menu prices at fast-food restaurants.
Data showed that Olive Garden and Chili’s restaurants in California actually outperformed the chains’ respective national averages for foot traffic year-over-year in April.
Original article source: California’s $20 minimum wage led to higher fast food prices and lower customer traffic, study finds
