Both McDonald’s and Chipotle expect that they will be raising their menu prices in California in response to a minimum wage hike that will pay fast food workers $20 an hour.
Chipotle’s Chief Financial Officer Jack Hartung said in a conference call last week that the company has not made a final decision on raising prices, but that he "anticipates" the company "would need to increase prices mid to high single-digits, (i.e., mid is 4-5-6% and high is 7-8-9%), and that means prices will be that much higher as a percentage," a company spokesperson told FOX Business.
McDonald’s CEO Chris Kempczinski on Monday said that his company will also raise prices in California, although it hasn’t been determined by how much.
Kempczinski said on the call that the law is going to have "a wage impact for our California franchisees" and that "I don’t think at this point, we can’t say exactly how much of that is going to work its way through pricing."
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"Certainly, there’s going to be some element of that that does need to be worked through with higher pricing," he explained. "There’s also going to be things that I know the franchisees and our teams there are going to be looking at around productivity. How all of that plays out, there will certainly be a hit in the short-term to franchisee cash flow in California, tough to know exactly what that hit will be because of some of the mitigation efforts."
The new minimum wage, signed into law in September by California Gov. Gavin Newsom, takes effect on April 1, 2024, and applies to workers at restaurants that have at least 60 locations nationwide, except those that make and sell their own bread.
The minimum wage for workers in other industries across the state stands at $15.50, among the highest in the nation.
"This is a big deal," Newsom said during an event in Los Angeles where he signed the fast-food minimum wage bill, AB 1228, into law.
"Apologists for the minimum wage routinely claim that increasing it will help low-income workers and have no negative effects," E.J. Antoni, a research fellow in regional economics with the Heritage Foundation’s Center for Data Analysis, told FOX Business about raising the minimum wage.
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"They often cite corporate greed as the only reason for relatively low wages in places like the fast-food industry. In reality, raising the minimum wage reduces employment, and causes the higher cost of labor to be passed on to customers. Because low-income workers disproportionately buy fast food (like McDonald’s), they disproportionately bear the cost of not only the more expensive labor, but also the lower employment levels."
Antoni continued, "That fact exposes the reality that the true minimum wage is, and always has been, zero. For the worker that loses his or her job because of a higher minimum wage, they now have no income and higher food prices."
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The cost hike drew criticism on social media from conservatives who have previously warned that raising the minimum wage has unintended consequences.
"It can’t be so. Never would have seen that coming…," Rep. Chip Roy, R-Texas, posted on X.
"Bang up job, Gavin Newsom," Travis County, Texas, GOP Chairman Matt Mackowiak posted on X.
McDonald’s and Chipotle did not respond to a request for comment from FOX Business.
"Fast-food workers have been fighting for decades for the fairer wages, and safer and healthier working conditions that they deserve," a spokesperson for Gov. Gavin Newsom's office told Fox Business. "It’s clear that higher wages benefit both workers and employers – McDonald’s said they will use it as an opportunity to ‘accelerate our growth in California.'"
"Fast-food companies raised prices in 2022 by 13% and are now contemplating raising prices again – all before this new law goes into effect in April 2024."
Fox News Digital’s Louis Casiano and Eric Revell contributed to this report.
