Starbucks, Chipotle, McDonald's: Who's raising prices as California fast-food law starts today
For the record:
2:49 p.m. March 28, 2024: An earlier version of this article said Excalibur Pizza is the owner of Round Table Pizza. The owner of the franchise is FAT Brands.
Your next burrito bowl might cost you more than $12 thanks to a California law that's significantly increasing fast-food workers' pay, a cost increase that big chains such as Chipotle say they could pass along to consumers.
The new law takes effect today.
During an earnings call in February, Chipotle's chief financial and administrative officer, Jack Hartung, warned, "To cover the cost of the wage increase, we would need to take a mid-single-digit price increase in California."
The law, Assembly Bill 1228, was signed by Gov. Gavin Newsom in September and takes effect Monday. It requires restaurants — corporate- and franchise-owned — with 60 establishments nationwide to bump their California-based workers' pay to $20 an hour, $4 higher than the overall state minimum wage of $16 an hour.
Though Chipotle has not yet announced a final decision on new pricing, many other chains, such as McDonald's, Starbucks and Jack in the Box, say they are also planning to push that increase onto consumers or change their operations. The law also called for the creation of a restaurant industry council to set future pay raises and advise on working conditions.
Here are the fast-food favorites that are hiking their prices or changing how they operate.
McDonald's
There won't be a uniform price change in the McDonald's menu items because corporate-owned and franchise locations will be making different modifications to their menus.
A spokesperson for McDonald's told The Times the company was exploring several ways to counterbalance the increase in labor costs and has yet to decide how much it will raise the price of the menu items at its corporate-owned stores.
At franchise locations, which account for 95% of the brand’s U.S. portfolio, McDonald’s provides “informed pricing recommendations,” but final pricing is at the discretion of franchisees, the spokesperson said.
Starbucks
Coffee aficionados can expect an uptick in their caffeine drink costs, but Starbucks hasn't disclosed when or how much it will increase its prices.
The company elected to increase wages for all employees regardless of their level of experience, a spokesperson told The Times.
Pizza Hut
Pizza prices won't increase, but two Pizza Hut operators in the state eliminated in-house delivery, forcing their local customers to rely on third-party apps.
The operators laid off more than 1,200 drivers to reduce staff ahead of the implementation of Assembly Bill 1228, Business Insider reported.
"Where select California franchisees have elected to make changes to their staffing approach, access to delivery service will continue to be available via Pizza Hut’s mobile app, website and phone ordering and the customer ordering experience will remain consistent," Chelsea Mack, spokesperson for the company, said in an email to The Times.
Round Table Pizza
One of Round Table Pizza's franchisees, Excalibur Pizza, said in a Worker Adjustment and Retraining notification, a 60-day written notice of forthcoming layoffs, that it planned to eliminate 73 driver positions by mid-April. The most recent state WARN report shows the company served 71 layoff notices.
The change will shift Round Table delivery options to third-party service providers. Round Table Pizza told The Times that it saw the layoffs as a "transfer of jobs," as workers will be needed for the third-party delivery services, where they are typically employed as contractors without many worker protections or benefits.
"That said, delivery service fees may increase, and the customer will most likely see even higher prices as a result of this ongoing shift," said Erin Mandzik, a spokesperson for FAT Brands, owner of Round Table Pizza. "Operators are doing their best to retain staff and keep doors open, that is what it really comes down to."
In regard to any price changes, that's up to the franchisee, but FAT Brands is helping its operators maintain its margins.
"Whether that is devising a value-drive limited time offers, providing strategic guidance on menu pricing, or providing costs of goods savings with our significant purchasing power, we are in the thick of it with our operators," Mandzik said.
Auntie Anne's and Cinnabon
Alexander Johnson is a franchisee of several locations of Auntie Anne's and Cinnabon in California. Johnson operates five locations of each business in the Bay Area and said the wage increase is making him consider layoffs and closing some locations, ABC 7 reported.
Among the drawbacks, Johnson said, it would also mean he would have to raise prices.
It's unclear whether the pretzel or cinnamon pastry locations under Johnson's purview will definitively increase their prices and when.
Jack in the Box
Jack in the Box menu items could see a hike as well. During recent earnings calls, CEO Darin Harris stated the company would depend on upward price adjustments, expecting menu prices to increase from 6% to 8%, Nasdaq reported.
The company is confident it will navigate these shifts as it works with its franchisee counterparts and will "lean into their decades of experience operating within the state," a spokesperson for the brand said.
"Raising menu prices slightly will allow us to support our franchisees, many of whom are former employees themselves who began their careers as restaurant workers, in delivering a better customer experience," the spokesperson said,
"We will continue to take a thoughtful approach to pricing strategies in order to meet our customers where they are and provide the best possible Jack in the Box experience."
Times staff writers Andrea Chang and Don Lee contributed to this report.
This story originally appeared in Los Angeles Times.
