California minimum wage hikes spell doom for more fast food spots as they lose 'value' factor

The Mexican restaurant Salute Tacos in San Diego, CA just permanently closing its doors, joining the list of businesses in the Golden State that have struggled since the state hiked its minimum wage to 20 bucks. Other major chains, including McDonald's, Subway, Burger King have been forced to close locations, layoff workers and raise their prices just to keep their bottom lines afloat. Jonathan Mays is the editor in chief for Restaurant Business Magazine, and he joins me now. Jonathan, if this $20 minimum wage is ultimately supposed to help workers, but 10,000 fast food workers are basically out of a job because of it, then how is that helping workers? Well, it's not, not really, no. You know, I mean, look, I mean, it's, it's a tough thing to do. You got two issues, really. You have the fact that it was done almost overnight. You have the fact that it was a 25% increase in the wage rate. Both of those things happening simultaneously is, is a really hard thing for restaurants, bottom line. And you know you're seeing the effects of it. In the survey conducted by LendingTree, 78% view fast food now is a luxury. That is shocking me, but I get it. 68% say fast food is too expensive. Growing up, I think you and I both remember this. You get a Big Mac meal, what was it, 4 or $5 if that came with a Coke and fries. Now we're talking 1213 dollars. And no, that's not just in California. I've spent a lot of money for my Big Mac meal in Connecticut. And so you look at these numbers and you have to ask yourself, do these minimum wage laws, which is the reason these prices are increasing, in addition to inflation, basically, are they going to price fast food out of existence if this keeps going this way? Yeah. I mean, I mean, look, I mean, this has been a challenging environment. And if you looked at what McDonald's had reported just a couple of weeks ago, their prices are up 40% since 2019. Their costs are up since 2019. You had right after the pandemic, you had a dramatic increase in food costs. You had a dramatic increase in labor costs. Insurance costs are up. Lending rates are up. Everything costs a lot more. Construction costs are up and that requires companies to increase prices. And the result of all of this is that fast food is largely lost. Its its reputation as a as a value player. And that's, that's what's been going on. And, and the result of this is consumers are dining out less often. They're not going to, you know, McDonald's or other places as often as they had been. Yeah. These places were designed as a cheap and convenient way for a family to feed a family of four, let's say. Right. We are so far beyond that. This is now a meal out that you need to budget for. And that wasn't the way this was intended. Jonathan Mays, thank you for your insight on this. We appreciate it.