A California McDonald’s franchisee says fast food would be ‘unaffordable’ if she raised prices enough to cover the new $20 minimum wage

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  • A McDonald’s franchisee says food would be too pricey if she raised prices to offset $20 wages.
  • “You can’t raise prices enough,” the Los Angeles franchisee told KTLA 5 News.
  • From April, California’s minimum wage for fast-food workers will be 25% higher than the general one.

A McDonald’s franchisee in Los Angeles says that if she wanted to raise her prices to fully offset California’s incoming $20 minimum wage for fast-food workers, her burgers and fries would be unaffordable.

Kerri Harper-Howie, who owns 21 McDonald’s restaurants in California with her sister, told KTLA 5 News that she’d be taking a profit hit from the new legislation.

Putting up menu prices is “not the only thing that we’re doing because the truth of the matter is, you can’t raise prices enough,” she said, adding: “It would be unaffordable.”

“There are cost savings that we can do behind the scenes, and other ways to be more efficient … but this means less profitability for us, and we will absorb that,” Harper-Howie said. “We will take less.”

The minimum wage for fast-food workers in California is going up to $20 an hour starting April 1 — 25% more than the state’s general minimum wage. The state’s Fast Food Council can raise it by up to 3.5% each year, depending on inflation.

The legislation — especially in its original form, which would have allowed for a 2023 minimum wage of up to $22 — has faced backlash from fast-food giants who say it would force them to raise prices or face a profit hit.

A Fatburger franchisee in California previously told Business Insider that he was cutting workers’ hours, scrapping employee vacation, and raising menu prices by about 8% to 10% at his four restaurants to offset the impacts of the legislation.

Analysts say the price hikes could put some diners off fast food. But they add that it’s expected to drive up wages for staff in other hourly occupations, such as retail workers — which, in turn, would give them more disposable income to spend on fast food.

Both company-owned restaurants and franchisees have to raise wages

The new legislation applies to limited-service restaurant chains with at least 60 restaurants nationally.

Fast-food chains often stress the nature of their franchisees as small-business owners, but the new minimum wage will apply to both corporate-owned restaurants and franchisees, regardless of how many restaurants they individually own.

Harper-Howie told KTLA 5 News that her parents became McDonald’s franchisees in the 1980s when they cashed in their retirement savings to buy a restaurant in Inglewood, California.

After starting her career as an employment lawyer in Los Angeles, Harper-Howie ended up taking over the family business with her sister after having her first son, the local news station reported.

The restaurants owned by Harper-Howie and her sister employ more than 1,000 workers, the outlet said. Many of their restaurants are in lower-income cities in Los Angeles County, such as Inglewood and Compton, it added.

Harper-Howie questioned why the new minimum wage applied only to the fast-food industry if the current rate “is not adequate for people to live.”

“Who, then, are the customers that are going to be able to afford to pay for the food?” she asked.

Correction: March 21, 2024 — An earlier version of this story incorrectly described two places in Los Angeles County. Inglewood and Compton are cities, not neighborhoods in Los Angeles.

Are you a fast-food worker who’ll soon be getting the new minimum wage? Or a franchisee worried about how it will affect your business? Email this reporter at [email protected].

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