California is forcing fast food chains to get creative to afford the state's new $20 minimum wage.
One McDonald's franchise owner, Scott Rodrick, is considering higher menu prices and reduced hours, saying that layoffs are the "last thing" he is considering.
"The last 12 days since this unprecedented law impacted franchisees in California has literally been a whirlwind. Frankly, it feels like an eternity," Rodrick said during an appearance on "Varney & Co."
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"I realize that my customers' appetite for higher prices is not unlimited. So, when I take price to relieve margin pressure, it has to be done thoughtfully and with a plan. Charging $10 for an Egg McMuffin or $20 for a Big Mac, for me, is a nonstarter," he continued.
In anticipation of the new law, Rodrick lifted his prices 5% to 7% between January and March. However, he says that more economic efforts are necessary.
Rodrick, who owns 18 McDonald's franchises in California, warned that the new law is likely to have an "unprecedented impact" on California's franchise business model.
"Price is a lever that an independent business owner like myself can look at to relieve this extraordinary, unprecedented impact on the franchise business model in California. But there are other things, too. I have to somehow grow revenue and reduce costs in my PNL to survive," he said Friday.
"This is my family's 50th year in the McDonald's business, and I plan on fighting and surviving for another 50 years, so it'll be a combination of price. It will be a combination of looking at capital expenditures, being judicious about labor efficiencies, and trying to grow my market share," Rodrick continued.
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Despite the law, the McDonald's franchisee owner stressed that laying off employees is the "very last thing" he is considering.
"There's a lot of discussion on that subject on restaurants, closing restaurants, laying people off. Frankly, in my organization, that's the very last thing I'm looking at. I have 800 people, 800 human beings that run my restaurants. That's the last lever that I'm looking at," he explained to FOX Business' Stuart Varney.
A drastic way fast food franchises have combated the state's new minimum wage law is by moving their business elsewhere, something that has admittedly crossed Rodrick's mind a "few times."
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"Right now the focus is survival. And a third-generation daughter has just joined the business. So, the question I have to ask her is whether she believes her next 50 years should be in a place like California and grinding it out, or is operating a franchise elsewhere something that would be smarter for her to do?" he concluded.
