CALIFORNIA’S LATEST MINIMUM WAGE INCREASE TIED TO DECREASED PATRONAGE TO RESTAURANTS

Compared to national averages, California is experiencing a downward trend in restaurant traffic within the state since the April 1, 2024 minimum wage increase to $20 according to data gathered from Placer.ai. In response to the latest minimum wage increase, several restaurant chains raised prices by 25% which has been a contributing factor to the lower number of patrons enjoying a meal out.

Quick service restaurants (QSR) were not immune to the decline in patrons. After the wage increase took effect in April, McDonalds underperformed by almost 250 basis points with the state. Overall, QSR burger chains have been impacted the most with patron numbers down as depicted below.

• Burger King -3.86%
• Wendy’s -3.24%
• Jack in the Box -.8%
• In-N-Out Burger -2.59%

McDonald’s Chief Executive Officer Chris Kempczinski expects that the effect of California’s wage increase will lead to a high national level single digit labor inflation. Chipotle and Domino executives also noted that prices at their establishments increased; Chipotle experienced price hikes between 6-7% and Domino’s by a high single digit increase.

Higher labor costs, input costs, and higher pricing are causing some restaurant chains to avoid expansion within the state. Rubio’s Coastal Grill closed 48 locations and filed for Chapter 11 bankruptcy. Other restaurant chains are looking at this as an opportunity to grow new restaurant brands or brands with high revenue projections.

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