As California gears up to increase the minimum wage to $20 per hour for fast food workers starting April 1, some major restaurant chains are planning to eliminate jobs and cancel delivery services across the state.
Pizza Hut franchisees that oversee stores in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties told ABC News station KABC they intend to lay off approximately 1,200 workers. Another 800 employees at Pizza Hut restaurants in Sacramento, Central California, Southern Oregon and Reno-Tahoe could also lose their jobs.
The mass layoffs would force the Pizza Hut franchisees to stop offering delivery to customers in those areas. Instead, customers would need to rely on third-party services like Uber Eats or DoorDash for deliveries.
In a statement, Pizza Hut said, “Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations, while continuing to provide quality service and food to our customers via carryout and delivery.”
Pizza Hut’s parent company, Yum! Brands, did not indicate if other brands like KFC and Taco Bell might also cut jobs and eliminate delivery. The chains did not immediately respond to requests for comment.
The wage hikes stem from a new California law, AB 1228, which Gov. Gavin Newsom signed in September 2023. It raises the minimum wage to $20 per hour for all fast food workers, a $4 increase over the state’s minimum wage rising to $16 on January 1, 2024. The law is an effort to improve pay and working conditions in the fast food industry.
Some restaurant operators argue the abrupt wage jump makes running profitable stores difficult, especially alongside higher food costs and other inflationary pressures. As a result, eliminating jobs and services is one way to cut costs.
Pizza Hut says its mobile app, website, and call-in ordering will still offer delivery through third parties like Uber Eats in affected regions. But losing the chain’s own drivers could inconvenience customers now reliant on outside services.
The state-mandated pay raise for fast food workers will also impact chains like McDonald’s and Chipotle. On an earnings call in November 2023, Chipotle’s CEO Jack Hartung said menu prices would likely increase to cover the new labor costs.
“We are definitely going to pass this on,” Hartung told analysts. “We just haven’t made a final decision as to what level yet.”
So far, most major fast food brands have not revealed plans for job cuts or service reductions comparable to Pizza Hut. But some operators argue the $20 minimum wage leaves them little choice, as it represents over a 50% pay hike for entry-level staff in less than 3 months.
Activists counter that fast food wages have been stagnant for years and workers deserve better pay. The typical fast food employee in California currently earns between $14 and $18 per hour, according to industry data.
Supporters of the new law say chains like McDonald’s and Pizza Hut are highly profitable and can afford modest menu price increases to cover the higher wages rather than laying off staff.
As the April 1 deadline nears, other restaurant brands operating in California will likely announce changes to jobs, prices, and services as they adjust to the mandate. Workers and customers will feel the impact as the state pushes for better treatment of fast food employees.
