Local Businesses Suffer Franchisees Complain Over New Minimum Wage Laws In California Gavin Newsom

Announcement. Shout out to Rita C. I’m definitely gonna be reading that super chat shortly. Give me a second, baby. All business owners are asking, can they even compete? CB’s thirteen’s Madison Kevy live for us with insight from a citrus Heights business owner and getting answers. Madison, listen, we know you’ve likely heard a lot about this story over the last few months and weeks, but tonight, a new angle.

A local business owner. California Burgers is up against a lot as a small business. And now adding $20 minimum wage to that list. Fresh out of the fryer over on the grill, this is California burgers. This citrus Heights staple has been cooking up fresh food for 30 years. We’re just trying to make do, essentially, you know, just to get past this, you know, this tough year. Things got tougher.

Monday, new in California. A pay bump for fast food workers at restaurants with 60 or more locations. We already have a problem retaining employees as it is for this line of work. And now it’s going to be even more difficult when someone can go to, like, a McDonald’s and get paid $20 an hour. Fast food workers at chains will now make at least $20 an hour. The same job at a family owned restaurant.

Dollar 16 an hour. You know, they never had to put the official minimum wage for California at $20 an hour, which a 25%, 20% to 25% pay bump is crazy. 20% to 25% pay bump is crazy. But they never had to put the minimum wage up to that for every business because they’re going to give you a white lie. A white lie is a little bit of truth mixed into it or not the full truth told.

And so it’s a white lie. It’s like playing poker, right? And then somebody says, you got it. You got the best hand. And I’m trying to get them to fold. So I got my poker face on, and then they say, you got it. And I say, hey, man, I got you beat. And then they say, wait a minute, you got. You got a full house. You got aces full, don’t you? And you be like.

And then they fold. And they show you their hand, and then you didn’t have it, but you had a hand that was slightly better than theirs. But then you continue on with the lie because you want them to believe that, that they guessed it correctly, even though technically they just said that you have it, you had it, but you didn’t have the hand that they think that you had.

So what happens is, it’s called a white lie. It’s like you telling a piece of the truth, but you’re not telling the full truth. And that’s what’s happening with minimum wage. What they’re doing is in order to get it passed, the only thing that they had to do was assign it to fast food workers. Why? Because very few people actually, fast food doesn’t ring beautifully in people’s ears.

And so if I say, okay, well, I’m gonna raise the minimum wage up to a minimum of $20 an hour, and it’s gonna continue to accelerate over the period of time, then I don’t have to raise the minimum wage for everybody because now I’m forcing you to compete when they could just go over to McDonald’s. And so by default, you have to raise your minimum wage up to a certain amount to compete to keep the same type of workers.

Why? Because the market is going to dictate how much you pay for people based off of what the minimum expectation is at these other places and these easier barriers to entry. It’s like if you got a. A plant job over here and they paying $21 an hour starting, and you can go to McDonald’s and you can just chill on the fries. Why would you go over there and break your back for $21 when you can go over to McDonald’s and make $20 an hour? See what I’m saying? So then you’re artificially, artificially dictating what the market is doing instead of letting capitalization and the market dictate itself.

The free market is not really a free market when you have legislators manipulating how much people are getting paid. And then that’s what then caused the chaos with the business owners, the workers, and then accelerated innovation, which then caused the workers to eventually get laid off because you don’t need any people anymore. Why would McDonald’s want to continue to pay you $20 an hour? Because they have to.

When they could just get kiosk, they can implement AI. They’d rather spend the money trying to figure out how to get rid of you than spending the money investing in you. That’s minimum wage in Sacramento county. Absolutely. It’s going to impact us. The concerns at one business echoed by an expert. Real world impacts are already being seen. Businesses are potentially looking at reducing hours, laying off employees. Our customers impacted California.

Oh, poker has everything to do with lying. Poker has everything to do with lying. Absolutely, 100%. And poker, you’re not even playing the cards. You’re playing the people. Burger’s co owner, Theodore Linardos, explains, our margins are already pretty tight. And it’s not like we can just raise prices because everyone always seems like they’re tight on funds, which we understand can’t really do that because it just, you’re pricing people out.

What feels like a lose lose for leonardos is another reason he hopes locals will stop here over the big guys. Nope, he’s wrong. So if not money, then what? The owners here at California Burgers tell me that they can offer flexible schedules in a way that the big corporations, the McDonald’s, just simply can’t. All right, Madison, thank you. And there was a lot of controversy over which chains were exempt from this law.

Like places that bake their own bread when allegations arose that Panera, the franchise owner, also donated to the Newsom campaign. The law says fast food restaurants and airports, hotels, event centers, theme parks, museums, and other locations, they are all exempt. So are restaurants in certain grocery stores. And that’s how you get around that, is that you grease a couple palms and then they gonna create some laws with some slight modifications to it that allow for you to be exempt because you friends and you telling me that businesses is just competing how when you can grieve a palm and get the law kind of modified to make sure that you, you don’t want that benefit from it, that’s not competing.

That’s not a free market. When you can manipulate the market based off of what’s best for you and your friends or based off of what you want to do in order to get voted back into office because you got a bunch of liberals that live inside of your state, that’s not a free market. That’s not businesses competing. That’s you manipulating the market and then forcing businesses to meet your expectations.

That’s a difference. That’s not a free market. That’s a manipulated market. It’s much different. All right, here’s another take on MSNBC or CNBC about this fast food hike. And I believe that this is coming straight from a McDonald’s California franchisee that owns multiple different stores. Now joining us with an on the ground take on the new fast food minimum wage in California is Scott Roderick a. McDonald’s franchisees in California.

He owns and operates 18 restaurants in the northern part of the state. And Scott, why don’t you just tell us what it’s meant from your perspective? Well, good morning, Becky. Thank you for having me. The day is now dawned upon us where countless operators in California face this $20 wage. It impacts 15,000 restaurants up and down the state of California. It’s going to be the most serious challenge for entrepreneurs that do business on the franchising platform.

The vast majority of these restaurants run by small business proprietors who do business on the franchising platform and the vast majority being family owned and operated, just like my restaurants. I want to underscore the words family owned because franchisees are not large global corporations. The restaurant brands that we franchise might be national in name, but franchisees are local business operators. And that’s the thing that people don’t understand.

Legislators and casual observers that don’t understand how money works or don’t understand business, they don’t really understand. They don’t get it. They don’t understand how this works. They’re saying, well, McDonald’s is the ones, the large corporations. No, that’s not how McDonald’s make their money. People don’t understand how McDonald’s itself makes their money. A franchise, er, or franchisee, is the person that then has to spend the money in order to be able to hire the people and then serve the community, whatever the product is that they’re selling.

And so when you talk about a small business owner, a small business owner may have to put up everything and invest all of a capital into making sure that they can open up the business. And then they just basically, they basically paying licensing fees and they buying a products from whatever the franchise that they look, you know, that they’re franchising from the store that they’re franchising from. And so people don’t understand that these are local operators.

These are people that sometimes, often at times live in the very communities that they’re serving. They’re business owners. They created a job for themselves and then they created jobs for other people and they’re serving their community. And a lot of you don’t understand the fact that small businesses is the backbone of America. Small businesses often turn into large businesses. Small businesses often turn into initial public offerings and they go public.

Right. This is the way that America was able to really grow and outpace everybody else. Once you got into the modern age of people being able to choose for themselves of what it is that they wanted to do. Right. And that’s why capitalism, although not perfect, has been a way that the american society has largely pulled itself above everybody else and being much more profitable. And we have less poverty here than we do in any other part of the world.

These are local owners and operators of these businesses. And then we’re tying it to a national chain that then says, well, the national chain itself has over 60 locations, but the franchisee doesn’t. The franchisee is not a part of the national chain. They’re just basically license a name, licensing the name, the business acumen and the products, because in order to invest in it themselves, so that they don’t have to create another brand and market it on an individual level.

Right? So it’s not as clean cut as all man. Starbucks, McDonald’s, Burger king. It’s not that simple. It’s an important fact that somehow seems to get lost in the legislation that was crafted. And as you stated earlier regarding it is absolutely the intended consequences. And for many, what makes this legislation unprecedented, let alone extraordinary, is that it only benefits employees who work in franchise restaurants. Whether you own one single doughnut shop or ten donut shops in California, if you’re part of a franchise brand with 60 or more locations, the new wage mandate is going to apply to you.

And as you just stated, this is an extraordinary wage jump, 25% overnight. It’s a serious concern for two reasons. First, it targets only fast food restaurants, and second, the sheer scale of the impact is just breathtaking. Historically, as you said about steps, step laddered approach, many cities have studied and put forth living wages with annual CPI bumps. Certainly the city that I opened my first McDonald’s in, San Francisco, is one great example of that.

They chose a fair living wage. They set an annual CPI cap, and it allows us to plan for that as small business owners. It’s fair to the employees and it’s fair to people who create the jobs. We’ve already heard that some pizza delivery stores, for instance, have laid off or gotten rid of 1000 jobs or more ahead of this, that they’re just not going to do that anymore.

They’ll use the Uber and Lyft apps to go ahead and have deliveries done. That way. Uber and Lyft don’t have to abide by that because their employees are not employees, which we don’t get into that in a minute. What are you doing in preparation? Are you going to lay people off or are you going to find other ways to make up and make good for that 25% increase in wages? Well, obviously, my team is focusing on every possible action to survive and maybe even thrive in the tulmit that’s going to start today.

Obviously, one of the most critical levers that you, you know, I can use as a business owner is price, but I certainly can’t charge $20 for a happy meal. So I have got to be aggressive in seeking labor efficiencies to drive the top line. I’ve got it. What does that mean to seek labor efficiencies? It means that whereas you had two, three, four people, hopefully one person can do the job before while getting a 25% pay increase.

That’s what it, that’s what it means. That’s what it means. It means you gonna have less people doing more work because they want to get paid more money. And then on top of that, it also means that we’re looking to figure out how we can implement technology to where we won’t need more people and we can minimize the impact of what’s going on. That’s what it means. That’s what it means.

And then hopefully we can minimize the amount of money that we have to pass over into the consumer spending in order to keep these people because our margins were already thin. Accelerate the digital channels even more. I’ve got to promote more off premise delivery. Families are going to have to make very hard choices around capital x expenditures. For example, can I postpone updating a restaurant dining room? Can I put off investing in a new rooftop h vac? And even the bigger question, should I open a new restaurant in California? Against these extraordinary legislative headwinds, the topic of the day seems to focus on the obvious move to cut labor or reduce staff size.

But frankly, at least in my organization, that’s the last thing I want to do. The real thing that we should be paying attention to is a how many business are going to be closing? Because then that arose the tax base, both from a corporate level and on an individual level. That’s number one, because California is already operating at a deficit. And then the second thing that we need to be asking ourselves is, will that not only stifle, but cause a retraction in the amount of businesses that would open in California? Because why go do business in California when you can go and invest somewhere else where the labor laws is not as egregious?.

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