The implementation of a new $20 minimum wage has sent shockwaves through California’s fast-food industry, sparking concerns and uncertainties among franchise owners. Scott Rodrick, a McDonald’s franchisee who owns and operates 18 restaurants in the northern part of the state, shared his perspective on the profound implications of this wage hike during an interview at The Check Up 2024.

Rodrick minced no words in describing the challenges for small business proprietors operating under the franchise model. “The days have now dawned upon us where countless operators in California face a $20 minimum wage,” he stated. “It will be the most serious challenge for entrepreneurs that do business on the franchising platform.”

As Rodrick emphasized, the impact of this wage mandate extends far beyond the corporate level, affecting predominantly family-owned and operated establishments like his own. “The vast majority of these restaurants are run by small business proprietors who operate on the franchising platform,” he explained. “Whether you own one or ten doughnut shops in California, if you’re part of a franchise brand with 60 or more locations, the new wage mandate will apply to you.”

Indeed, the unprecedented nature of this wage increase, a staggering 25% overnight, has left many franchise owners scrambling to adapt. Rodrick highlighted the significant repercussions this wage hike could have, particularly on employment levels within the industry. “Historically, many cities have implemented living wages with an annual CPI bump,” he noted. “But this sudden and substantial increase specifically targeting fast-food restaurants is unprecedented.”

Addressing how franchise owners navigate these challenges, Rodrick outlined a multifaceted approach focused on maximizing efficiency and exploring alternative revenue streams. “One of the most critical levers I can use as a business owner is price,” he explained. “But I can’t charge $20 for a Happy Meal.”

Rodrick underscored his commitment to preserving jobs and supporting his workforce in the face of these challenges. “People in my company are my greatest single asset,” he asserted. “The last thing I want to do is impact the folks that run my Golden Arches.”

However, Rodrick’s concerns are not unfounded, as recent developments in the industry have already demonstrated the potential for significant job losses. “Leading up to today, Pizza Hut and Round Table Pizza laid off 1,500 drivers up and down the state,” he revealed. “And at the end of January, 18 Subway sandwich shops closed overnight.”

As California’s fast-food industry grapples with the far-reaching implications of this wage mandate, franchise owners like Rodrick are left to navigate an uncertain future, balancing the imperative to remain competitive with their commitment to their employees and communities.

As the debate over minimum wage continues, California’s fast-food industry’s resilience and adaptability will be tested, with implications that extend far beyond the confines of individual franchises.