by Tyler Durden
This result shouldn’t surprise anyone. Inflation has driven up operational costs for businesses across the US and shrunk profit margins for major food chains in the past few years. This has led to higher menu prices (like the “$18 Big Mac”) and slowing sales for every major fast food company. Another anchor dragging on the restaurant business in many regions was at least two years of covid stimulus coupled with rent moratoriums, creating aggressive labor shortages and raising wages in upwards of $16 per hour for brand new no-skill employees.
Small chains and mom-and-pop businesses simply can’t compete. Larger chains raised prices but have also been forced to reduce employees and labor costs through automation, but the layoffs are just getting started.
Enter California’s “FAST Recovery Act” passed into law in 2022 and going into effect in April of this year – The legislation requires a particular set of food chains dealing in certain kinds of products outlined in the law to raise their minimum wages (already at $16 an hour on average) to $20 an hour. The income increase is limited to chains that have 60 or more locations in the state of California (meaning, the combined number of locations regardless of who owns them must be higher than 60) Keep in mind that while many of these chains are associated with international corporations, they are owned and run by franchisees; they are still family run businesses.
Mass layoffs are now a guarantee with many restaurants already firing thousands of workers as well as some chains closing multiple locations because the cost of operation will be higher than the benefits.
“Restaurants are struggling to stay above water, and Democrats just threw them an anvil,” California Assembly Republican leader James Gallagher told FOX Business. “We warned Democrats this new mandate would cost jobs. They ignored us, and here we are with the highest unemployment rate in the country poised to get even worse.”
The “digital options” that many fast food franchises are referring to are automated ordering systems as well as robot workers which are slowly but surely becoming more cost effective than human laborers. At least one fast food location in California is testing a fully robotic restaurant with no human workers.
Layoffs will accelerate along with the normalization of the technology, and the high wages that are crushing profit margins are making the decision easy for business owners. Some chains have reported that they will be forced to cut working crews in half; meaning, those working will be paid $4 an hour more, but they’ll have to work twice as hard per shift. The most probable end result in the next 5 years will be the majority of chain restaurants operating with a tiny crew of humans working alongside increasing automation.
The political left is already accusing the fast food industry in California of “retaliation” for the wage increase which was negotiated in part with restaurant workers unions involved. This is what they asked for, and now it’s happening; for every action there is an equal and opposite reaction.
The problem that is typical among leftists is a lack of understanding when it comes to the basics of business operations. Profit margins can be thin and money can still be made due to sheer scale, but revenues at that level are often calculated in cents or fractions of a cent per sale.
This kind of business model is beyond the comprehension of the average socialist.
Democrats LOVE poor people, they make so many of them. They have made it all but impossible for a kid to get any work experience in this state.
There will be a double standard when it comes to cultural foods in CA.
Mexicans will still be able to wheel hand carts down residential streets shouting, “Tamales!” “Palatas!” “Elotes!”
Asians will still be able to drive down streets in open-sided trucks full of woks that have various foods for sale.
Neither set of sellers bothers with health codes or minimum wage law.
It’s just the black and white youths who will be priced out of employment in the food market.
No FICA tax or health benefits for robot workers…
Could not be happening to a more deserving state…
How will they make up for the tax loss, um those robots we will need to have a carbon tax on those they use electricity.
Raise the tax on the purchase of a happy meal. Corporations always pass along taxes t the consumer.
These leftists have no idea how a business operates. They are used to just taxing more money out of citizens or printing whatever they need. Or, just going permanently into massive debt and being long gone when the bills come due. If raising the wages of a $5 an hour job to $20 an hour doesn’t adversely affect revenues and profits, why not raise them to $50 an hour? Or $100?
This will be a boon for AI; everyone else, as usual with Democrat “help”, gets screwed.