Rising wages for fast food workers will lead to a series of price increases for fast food starting next year. This will make eating out more expensive for consumers.
Two fast-food companies, McDonald’s and Chipotle, said in their last quarterly earnings calls that they plan to increase the price of food sold in the California next year in response to rising wages for fast food workers, according to a report by CNBC on October 30.
McDonald’s has not decided how much it will hike prices in California as workers’ wages rise to $20 an hour, CEO Chris Kempczinski said on October 30.
Chipotle expects it will raise prices by a “mid-to-high single-digit” percentage in the state, but has not made a “final decision,” its Chief Financial Officer Jack Hartung told analysts on the company’s conference call.
McDonald’s has 10 percent of its franchises in California, while Chipotle operates about 15 percent of its direct management stores in California.
This is due to a law passed in September 2023 that will raise the minimum wage for fast food workers in California to at least $20 per hour, effective next April. This is significantly higher than the current minimum wage of $15.50 per hour for workers in California.
The National Owners Association, an independent advocacy group of more than 1,000 McDonald’s U.S. franchisees, projected the bill will cost each restaurant in the state $250,000 annually, according to a September memo viewed by CNBC.
Experts point out that it’s consumers who are often the hardest hit by price hikes, especially on fast food. Low-income people, who often frequent cheaper options like franchises, will be hit the hardest, they said. Some worried that if McDonald’s and Chipotle raise prices, other fast food companies will follow suit, which could lead to a ripple effect across the entire restaurant industry, making it more expensive for consumers to eat out.
McDonald’s also released statistics on the day, revealing a recent decline in visits from customers earning less than $45,000 a year.
Meanwhile, according to the Bureau of Labor Statistics, food prices rose 6 percent in September from a year earlier, outpacing the increase in the Consumer Price Index (CPI), one of the main measures of inflation.
BY HOONSIK WOO, JUNHAN PARK [woo.hoonsik@koreadaily.com]
