Six years ago, McDonald's offered a $1 cheeseburger, forcing
its competitors to offer similar deals. Those days are over,
especially in California where a new law will provide
McDonald's and its competitors the opportunity to super-size
employee wages to a minimum of $20 per hour. Cal. Lab. Code §
1475(d)(2)(A). To no one's surprise, fast food prices are on
the rise.
This new law applies only to national fast food chains, defined as
"a set of limited-service restaurants consisting of more than
60 establishments nationally that share a common brand, or that are
characterized by standardized options for decor, marketing,
packaging, products, and services, and which are primarily engaged
in providing food and beverages for immediate consumption on or off
premises where patrons generally order or select items and pay
before consuming, with limited or no table service." Cal. Lab.
Code § 1474(a). As it pertains to size, the law applies to
large chains such as the aforementioned McDonald's, along with
Wendy's, Burger King, Jack in the Box, Taco Bell and many
others. The law also applies to chains with a small presence in
California such as Steak 'n Shake, which has only two
California locations but operates over 400 locations nationally.
Similar chains such as Jollibee (31 locations in California, 73
U.S. locations) and Pollo Campero (24 locations in California, 77
U.S. locations) are also affected. The law also establishes a
"Fast Food Council" that will be able to implement
further wage increases.
While the new law could stifle openings of new pre-existing
national food chain restaurants or reduce the likelihood that the
California market will be infiltrated by Whataburger, Bojangles, or
White Castle, it provides opportunity for the development of
popular California chains such as Ameci's (40 locations), Umami
Burger (25 locations), Zankou Chicken (13 locations) and Original
Tommy's (32 locations). As long as those restaurants intend to
limit their growth to 59 restaurants of course.
The law further defines "limited-service restaurant" to
include "but is not limited to, an establishment with the
North American Industry Classification System Code 722513."
Cal. Lab. Code § 1474(a). While defining "limited-service
restaurant" in a manner similar to the new California law,
North American Industry Classification System Code 722513 also
provides illustrative examples of restaurants subject to the law,
including (1) Delicatessen restaurants; (2) Pizza delivery shops;
(3) Family restaurants, limited-service; (4) Takeout eating places;
(5) Fast-food restaurants; (6) Fast casual restaurants; (7) Takeout
sandwich shops; and (8) Limited-service pizza parlors. Restaurants
like Culver's and Zaxby's [both with no California
presence] or Boston Market would likely fit under the fast casual
restaurant definition because their patrons order and pay for their
food before "dining." In short, the new California law
does not appear to include restaurants with waiters and/or
waitresses who serve customers who pay after they eat.
Does that mean there is Waffle House in California's future?
Will dine-in chains obtain a pricing advantage to better compete
with fast food chains for take-out? Will a new restaurant concept
develop outside the law such a limited waiter/waitress seating
[perhaps a 50s-style diner counter] plus take-out option? Time will
tell.
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