AB 257, dubbed the “FAST Recovery Act” was signed into law by Gov Gavin Newsom on Monday. The problem? The Democrat-controlled state may have just sliced the throat of their fast food restaurant industry, an industry that was thriving in the state until now. The bill was opposed by Newson’s own Department of Finance, and supported by less than one-third of Californians. It will raise the price of fast food by 20%, and may also raise the minimum wage for FF workers to $22 per hour.
It singles out fast food restaurants by creating an unelected board to govern labor law (wages, working conditions, etc) at firms with more than 100 locations nationwide (even if there is only one in California)…
It was signed into law Monday by Gov. Gavin Newsom despite his own Department of Finance opposing the bill due to “significant ongoing costs” and less than one third of Californians supporting the price increases that the bill would cause. The International Franchise Association (IFA) rightly denounced this boneheaded move…
IFA estimates, via a study by UC Riverside, that costs will increase 20% for California consumers with this legislation. Franchised locations are small businesses with independent owner operators — including many mom-and-pop operators — who will be forced to pay the price for this bill, ultimately having no choice but to pass along the cost to consumers. Daily Caller
The biggest hit will be to franchise owners. If the cost of a McDonald’s burger or a noodle bowl at Panda Express goes 20% higher, people may skip sitting in the drive thru line. Imagine small business owners having to close their businesses because some unelected commission (the Fast Food Sector Council) says their wages are too low. California already has high wages at anywhere around $16 or higher, primarily because their workforce for fast food is not as high as it once was (thanks to the pandemic’s free money). Businesses may have to cut more workers…or close their doors.
If you own a franchise, your costs will likely go through the roof as the special council makes demands on the industry, and you will have no choice but to pass those along to your customers. Even the Employment Policies Institute found huge opposition to AB 257. They wrote:
- The majority think the FAST Recovery Act will have a negative impact on fast-food restaurants: The cost of operating a franchise will increase (93%).
- Fewer restaurant chains will be willing to operate in California and other states with similar laws (84%).
- Prices will be raised for consumers as business owners pass on higher costs created by council mandates (84%). The law would undermine the current franchise business model by creating joint legal liability for independently-owned franchisees and the franchisor (75%).
- Franchisees will close restaurants (73%).
- The law would lead to additional legal liability for small business owners (63%).
By chasing out small franchise owners, California will continue to bleed revenue. They’ve already lost at least 300 corporations that have moved to less bureaucratic states. Crushing the Fast Food industry is apparently just another blip on Newsom’s radar in his race for the White House.
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