Allen J. Schaben/Los Angeles Times via Getty Images
- A McDonald's franchisee who's raised prices because of California's $20 minimum wage is worried about scaring off diners.
- "I can't charge $20 for a Happy Meal," the franchisee told CNN.
- Restaurant owners have been looking at ways to offset the bigger pay checks.
A McDonald's franchisee says that he's raised menu prices in response to California's new $20 minimum wage for fast-food workers but warned that there's a limit to how much customers will pay.
"We have looked at price, although I can't charge $20 for a Happy Meal," Scott Rodrick, the owner of 18 McDonald's restaurants in northern California, told CNN. "My customers' appetite to absorb menu board prices is not unlimited."
The cost of a Happy Meal varies at different locations around the US. According to prices for a McDonald's restaurant in Sacramento on Uber Eats, Happy Meals range from $6.99 for a Hamburger Happy Meal to $8.59 for the six Chicken McNuggets option.
Franchisees are largely able to set their own prices. Rodrick's restaurants have already raised prices by 5% and 7% in the last three months to prepare for the new legislation, he said.
A McDonald's franchisee in Los Angeles County told KTLA 5 News recently that if she raised her prices enough to offset the wage increase, her food would be "unaffordable."
California put its minimum wage for fast-food workers up to $20 an hour on Monday, a 25% increase on the state's general minimum wage. The legislation, AB 1228, affects limited-service chains with at least 60 locations nationwide.
The state's fast food council can raise the minimum wage by up to 3.5% yearly, depending on inflation.
Restaurant owners have been evaluating various measures to offset the bigger paychecks. Many, like Rodrick, say they plan to make diners pay for at least some of the wage increase.
Some restaurants are slashing labor, too, by reducing how many hours their staff work or even laying some off. But Rodrick told CNN that rather than cutting back on labor, he would expand his delivery operations and postpone major investments, like updating dining rooms and buying new grills.
"I've got to look at every option for business survivability," Rodrick told Fox News. "I've gotta be aggressive in seeking labor-efficient growth, I'm gonna have to explore more digital and delivery avenues, I'm going to obviously have to make, like any smaller business owner, harder choices around big capital expenditures."
In his interview with Fox News, Rodrick emphasized the nature of franchisees as small business owners. "Franchisees are not large, global corporations," he said.
Fast-food workers and their unions have been pushing for higher wages in the industry for years.
"We are in this fight because workers are worth more, and our families deserve better than poverty wages," Angelica Hernandez, a cook trainer at McDonald's who sits on the Fast Food Council, said at a press conference on Monday. Her comments were translated from Spanish.
"Even though we are the engine of a billion-dollar industry, too many of us struggle to keep up with rent our bills and the rising cost of living," Hernandez said.
Are you a fast-food worker excited about the new minimum wage? Or a franchisee or restaurant manager worried about how it will affect your business? Email this reporter at gdean@insider.com.