Last month, the California State governor, Gavin Newsom, signed a bill affecting restaurants. This law affects restaurants not only in California but also in several locations across the entire country.
This article investigates the content of the new legislation and what people are affected and unaffected.
The Content of the New Legislation
On the 28th of September, 2023, Governor Gavin Newsom, California state governor, signed legislation that affects the restaurant industry in California. The new law posits raising the minimum wage for fast-food, quick-service restaurant workers to $20 per hour. For more information on the topic, speak to Attorney Jason W. Power of Franchise.Law.
The law is expected to take effect in April 2024 and will affect all employees in at least 60 restaurant locations nationwide. Furthermore, the law authorizes a nine-member council to make recommendations on decisions within restaurants, including working hours, conditions, and wages.
What Brought About the Law
The governor signed this legislation months after restaurant industry advocates and politicians passed a law known as the Fast Act. The purpose of the Fast Act was to increase the wage to $22 per year, which is a 3.5 percent increase.
Following the introduction of the Fast Act bill, the National Restaurant Association and the International Franchise Association opposed its provisions, pushing both organizations to engage in negotiations with union representatives. The goal of these talks was to create a compromise that would satisfy all parties involved, balancing the interests of both the associations and labor groups.
What Does the Restaurant Industry Think?
Most business owners in the larger restaurant industry had representation when the bill was signed into law. However, not everyone supports the move. In a webinar conducted by Greenberg Traurig, Fat Sal’s CEO and Founder, Joshua Stone, fears the law’s repercussions on the industry.
In his statement, he expressed that he is strongly against the move as it helps neither the operators nor the workers. The move only helps the people and the state in that there will be increased payroll taxes due to the price increase. Furthermore, this increase helps the politicians close gaps in their budget – all at the customer’s expense.
Jefferies’ managing director, Andy Barish, agrees with Stone’s view that the consumer will ultimately face the consequences of rising wages in the fast-food industry. Barish notes that the impact will extend beyond fast-food chains, creating a ripple effect across the full-service restaurant sector as well, potentially increasing costs and altering pricing strategies across the industry.
Smaller restaurant operators may struggle to expand at a normal pace due to increased wage demands, lacking the resources to adapt easily. In contrast, larger chains and well-established owners, equipped with sufficient human and financial capital, are better positioned to absorb these challenges. Their access to robust support systems allows them to navigate and mitigate the operational impact effectively.
The National Restaurant Association’s Point of View
The National Restaurant Association believes the new legislation is right based on Sean Kennedy’s Public Affairs Executive Vice President report. Kennedy said the governor’s law would end a years-long, expensive fight over California’s quick service industry regulation. He expresses his gratitude to the governor for reconciling both sides and showing his support by signing the bill into law.
Nevertheless, he acknowledges that restaurants will experience significant challenges that they must navigate. However, says Kennedy, stable and predictable regulation, which is unavailable under the Fast Act, will be available to help them navigate those challenges.
Conclusion
The Fast Act and IWC were the first two laws proposed regarding the increase in wages of restaurant workers. The California Legislature was still considering the bill when the new deal was reached. The IFA president and CEO Matt Haller also signed the backing, explaining that the law preserves the franchise business model. The new legislation seeks to strike a balance, offering potential benefits for both franchisors and franchisees in California’s restaurant industry.
