Fast-food franchisees across the state are expressing concerns about potential customer migration to fast-casual dining options such as Chili’s and Applebee’s. This apprehension arises as California’s newly implemented minimum-wage law compels basic burger joints to raise menu prices to counteract escalating labor expenses.
The revised wage regulations, effective since April 1, solely target workers at limited-service restaurant chains—establishments with a minimum of 60 outlets nationwide where patrons pay before dining and where table service is either absent or limited. Notably, higher-priced chains like Chili’s and Applebee’s are exempt from these wage mandates.
The days of the dollar menu are long gone. According to a report by Business Insider, the price gap between fast-food and casual-dining establishments could narrow, particularly following the adjustment of menu prices by California-based eateries to accommodate the new $20 hourly wage—a figure exceeding the state’s general minimum pay by 25%.
Winners: Despite some instances of workforce reduction, the primary beneficiaries of the minimum-wage law are fast-food employees who have retained their positions post-implementation. Although layoffs have occurred, a considerable number of workers are now enjoying augmented wages, thereby enhancing their quality of life. But there is another group of winners from the minimum wage hike, namely the sit down diners that now have the advantage of lower wage costs. The ‘winning” chains most likely to benefit from being exempt from the new law and take market share away from the fast food chains are:
Denny’s: Known for its fast served breakfast, lunch, and dinner menus has 363 locations in California.
Applebee’s: This casual dining chain, famous for its ribs and burgers has106 locations in California.
Chili’s: With its Tex-Mex style cuisine operates more than 40 locations in California
Buffalo Wild Wings: This sports bar franchise, known for its Buffalo wings has 96 locations in California.
Olive Garden: : Famous for its Italian-American cuisine has 79 locations in California.
Red Lobster: Specializing in seafood, including lobster, of course has 38 locations in California.
Yard House: Known for its extensive beer selection has 24 locations in California.
The Cheesecake Factory: Famous for its extensive menu and cheesecakes operates 38 locations in California.
How much market share these restaurants take from their fast food competitors remains to be seen, but certainly something to keep an eye on as prices continue to rise at fast food establishments across the state.
