IFA Warns of Impact on Small Business Owners
California’s minimum wage for fast-food workers will jump to $20 an hour on April 1, a 29% increase from the current $15.50. When it takes effect, fast food workers in California will have the highest guaranteed base salary in the industry, AP News reports.
This change comes as Governor Gavin Newsom signed Assembly Bill (AB) 1228 Thursday, establishing the Fast Food Council. This council, consisting of four worker representatives, four from the industry, and an impartial member, will have the authority to increase the minimum wage by 3.5% annually or the Consumer Price Index change, with workers having a strong voice in the process, according to Restaurant Business.
Impact on Franchisees
In an interview with Fox Business, International Franchise Association (IFA) President and CEO Matthew Haller said this increase could have a devastating impact on franchise small business owners. “This could be the straw that breaks the camel’s back. The labor unions want to stick it to big business and the Golden Arches, but that’s not who will pick up the tab. The costs will get passed on to the consumer and the small business franchisee.” He points out that many restaurant franchise owners are immigrants and minorities who already struggle with extremely tight profit margins.
Haller said the decision to raise the minimum wage was “not made on facts or sound policy; this is a gift for special interests and something we need to stop from spreading across the country. This is about much broader efforts to renegotiate everything in the franchise model, which the SEIU [Service Employees International Union] has been working on for many years,” he said. “The franchise business model delivers greater value to workers than any other business model out there.” He cited pay rates, tuition reimbursement, paid leave, and other benefits. “That’s one of the great things about the franchise business model, and that’s what we’re trying to protect.”
Fast-Food Wage Regulation
AB 1228’s unique approach to fast-food wage regulation is the first of its kind in the United States. It emerged from a complex compromise between the SEIU, National Restaurant Association, International Franchise Association, and related groups. Labor advocates dropped a joint-employer standard in exchange for the Council’s creation. While the Council can recommend changes, they are non-binding.
The SEIU first proposed changing fast-food wage setting in 2019, leading to this legislation. The state legislature will continue to set wages for other hourly workers and for quick-service brands with fewer than 60 units nationwide. In celebrating Newsom’s signing of the California bill, AB 1228, union leaders indicated that they will seek to duplicate the Fast Food Council elsewhere. “This isn’t the end, this is the beginning,” said Mary Kay Henry, international president of the Service Employees International Union (SEIU) in a Restaurant News article.
The next step is appointing members to the Fast Food Council, though a timeline for this process remains undisclosed.