Over 1,000 workers in California are set to lose their jobs as one of the nation’s largest pizza companies feels the effects of new “woke” laws.
Recently, the federal government of the Golden State announced it would be raising the minimum wage to $20. Unfortunately, this has forced Pizza Hut to lay off the majority of its delivery drivers in the state.
California Hikes Minimum Wage
A few months ago, California governor Gavin Newsom signed AB 1228, which set a new minimum wage of $20 per hour for those working in the fast food industry.
According to reports, the new minimum wage will be in full effect across the state by April 1, 2024. But the law won’t have a positive effect on everyone in the fast food sector.
Details of the New Law
According to the San Francisco Chronicle, the recently enacted AB1228 law mandates that around 557,000 fast-food employees across 30,000 Californian restaurants will experience a wage increase to $20 starting April.
Additionally, it allows for potential annual wage hikes of up to 3.5% until 2029.
Establishment of a Fast Food Council
Yahoo Finance reports that in addition to the minimum wage increase, another vital part of the legislation is the creation of the nine-person fast food council, composed of two fast food industry representatives, two franchisee or restaurant owner representatives, two employee representatives, two employee advocacy group representatives, and one public member.
From 2025 to 2029, this council has exclusive authority to annually adjust fast food workers’ minimum wage, by either 3.5% or the annual change in consumer price index, whichever is lower. This provision expires in 2029.
Setting a New Standard for Industry Focused Laws
The California Employment Law Report, published by Zaller Law Group, predicts that the AB 1228 law has set a legislative trend towards industry-specific laws.
Explaining this prediction, Anthony Zaller states “because the law does not apply to every employer across the state, the opposition to such legislation is much less. And, of course, once the law is passed and has gained traction in one industry, it is easier for the legislature to expand the law to other industries.”
Pizza Hut Forced to Lay Off Employees
KABC-TV was the first to report that Pizza Hut restaurants across California will begin to lay off their delivery drivers before the law comes into action.
“PacPizza, LLC, operating as Pizza Hut, has made a business decision to eliminate first-party delivery services and, as a result, the elimination of all delivery driver positions,” the company wrote in a filed notice.
Layoff to Affect Major California Towns and Cities
The removal of delivery drivers will leave 1,200 workers at Pizza Hut without employment. The areas hardest hit include the Los Angeles, Orange, San Bernardino, and Riverside counties, according to KABC.
The two Pizza Hut franchisees behind the layoffs are PacPizza, LLC, and Southern California Pizza Co., Business Insider reports.
A Driver Speaks Out
A driver, preferring to stay anonymous, informed Business Insider that he was promised a $400 severance if he remained until his layoff on February 5.
With nine years of driving experience, he expressed dissatisfaction with the severance offer, saying “The money they are giving us as severance pay is a slap on the face,” he continued “It comes to $3 a month for nine-plus years of service.”
One’s Loss Is Another’s Gain
Those who desire a food delivery from Pizza Hut in the future will now be required to order through a third-party delivery app such as DoorDash or Uber Eats.
Due to the rise in minimum wage, Pizza Hut argues it can no longer afford its own delivery drivers.
Further Food Industry Changes
CBS News has reported that on the opposite coast, DoorDash announced modifications for New York City: the removal of tipping prompts and an increased service fee on all transactions.
However, customers can still add gratuity after the delivery is completed, the delivery app confirmed. These changes reflect a nationwide shift in the wage practices of the fast-food word.
Minimum Wage In New York City
According to CBS, these tipping changes come as a reaction to the minimum wage being increased for app-based food delivery workers in New York City.
The New York Times reports that as of July 2023, New York City set a precedent as the first U.S. city to mandate a minimum wage for app-based food delivery workers, nearly $18 per hour. By July 12, delivery apps were required to pay at least $17.96 per hour plus tips, increasing to $19.96 by 2025 and subsequently adjusting for inflation.
Customers Disappointed With Pizza Hut’s Decision
KTVU spoke with numerous long-term customers of the popular pizza franchise. Many claim they’re unhappy with Pizza Hut’s decision to cut the drivers. Hao Ngo of San Jose said, “I think it was a horrible decision.”
He continued, “We should definitely put money in the community so everybody can survive. Everybody out here is having a hard time right now, and firing people isn’t the solution.”
Layoffs Caused by Tech
The Washington Examiner explained that to get around rising labor costs, many franchises are adopting technologies to replace cashiers with computer kiosks.
This shift will lead to higher wages for employees who retain their jobs, but it will also contribute to a greater overall job loss.
Thousands of More Jobs at Risk
With the signing of the new minimum wage bill by Gavin Newsom, it’s likely that over 30,000 fast-food restaurants across the Golden State will be forced to cut employees.
Southern California Pizza Co., the other large franchise in the region, also announced they would be forced to cut over 800 employees from the payroll.
Companies Forced to Raise Prices
Other fast-food restaurants in California have been forced to devise a plan to cope with the drastic increase in employee wages.
Chipotle and McDonald’s have both announced they’ll be raising the prices of various items on their menus to cope with the new regulations.
McDonald’s Price Hike
Fox Business revealed that in an earnings call, McDonald’s CEO Chris Kempczinski, stated he believed that prices were going to increase as a direct result of the minimum wage hike.
Speaking in the call, he said “Certainly, there’s going to be some element of that that does need to be worked through with higher pricing,”
The Soaring Cost of a Big Mac
Not only are prices increasing due to the minimum wage hike, but inflation is also playing a part.
McDonald’s revealed that “strategic menu price increases” have contributed to a 14% increase in revenue but have also already raised prices nationwide due to rampant inflation. This includes an $18 Big Mac meal in Connecticut, as per the New York Post.
Chipotle Price Rises
The Daily Mail has reported that during a company earnings call, Chipotle’s CFO, Jack Hartung, informed analysts of a probable price hike at the chain.
He anticipates an increase in the “mid-to-high single-digit” percentage range, citing the change in law as the primary reason for this adjustment.
Customers Will Suffer the Most
During his interview with KTVU, Hao Ngo also spoke about the impact the increase in minimum wage will have on customers.
“As for the people, if they’re going to raise the price, I’m still going to have to get it. So, we’re actually really suffering on the back end,” he said.
Consumers Priced Out of Restaurants
The New York Post explains that customers have cut down on the amount they are spending on fast food, as a result of the rising costs.
They report that McDonald’s executives revealed that a fewer number of Americans earning $45,000 or less visited McDonald’s branches in the last quarter of 2023.
Ramifications for the Industry
The fast-food sector will no doubt be gearing up for the ramifications of the change in wages. It will undoubtedly affect aspects of business, from in-house operations to customer service and, of course, workforce numbers.
Yet major players in the industry, including Taco Bell and KFC, have both refrained from commenting on the announcement of Newsom’s new legislation.
Pizza Hut Representative Speaks Out
A Yum Brands representative, speaking for Pizza Hut’s parent company, sat down with Business Insider to discuss how the change in minimum wage will affect the franchise across the state.
He began by claiming they are “aware of the recent changes to delivery services at certain franchise restaurants in California.”
Gavin Newsom’s View
Time disclosed that the governor of California, Gavin Newsom, was quoted as saying “This is a big deal,” at an event in Los Angeles, where he signed the AB 1228 bill.
Speaking at the event, Newsom also challenged the notion that fast-food jobs are merely for teenagers starting their careers, describing it as a “romanticized version of a world that doesn’t exist,” he continued, saying “We have the opportunity to reward that contribution, reward that sacrifice and stabilize an industry.”
Quality Service and Food Will Continue
The representative explained the company has no doubts they’ll continue to supply customers with quality food and service even if the deliveries are taken over by third-party apps.
The rep said, “Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations while continuing to provide quality service and food to our customers via carryout and delivery.”
