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California’s business landscape is heating up, and some fast food chains are feeling the burn. With the recent increase in minimum wage for fast-food workers, coupled with the state’s already high operating costs, some chains are rethinking their presence, and considering an exodus from the Golden State.
One such chain, Blaze Pizza is following a trend of businesses departing California. The fast-casual pizza chain recently announced the relocation of its headquarters from Pasadena to Atlanta. This move echoes other companies citing factors like high taxes and a challenging business climate non-condusive to growth. Blaze Pizza expects the lower corporate tax rate in Georgia to fuel their next phase of expansion, joining a wave of businesses seeking greener pastures outside California.
And Rubio’s Coastal Grill, known for its fish tacos, made headlines by shuttering nearly a third of its California locations. The company cited the “rising cost of doing business” as the primary reason.
CABIA president Tom Manzo said to publication The Center Square: “You can only charge so much for a Big Mac. What business owners are doing is either they’re selling, they’re not expanding in California — they have expansion plans in different states — or they’re going out of business.“
Impact of the Minimum Wage Hike
California’s fast-food specific minimum wage hike, reaching $20 an hour, has sent shockwaves through the industry. Franchise owners are grappling with increased labor costs, forcing them to make tough decisions. Some are considering reducing staff hours or automating tasks, potentially impacting customer service.
The former CEO of Hardee’s/Carl’s Jr. recently discussed the state of the fast food industry nationwide and where it appears to be heading. His prediction is that some major chains will go under entirely while others strategize to cut costs and stay in business. One of the methods is to outsource order taking in the drive-thru to India.
While there have been closures and relocations, it’s not a complete exodus. California remains a massive market, and many established chains are likely to stay and adapt. However, the trend suggests a cautious approach to expansion within the state. New entrants might be wary of the high operating costs, potentially slowing down the growth of fast-food options for Californians.
The Future of Fast Food in California
The situation remains fluid right now. How fast food chains navigate California’s economic climate will be interesting and whether they can adapt to higher costs and at the same time, maintain affordability for consumers is a key.
