April 2024: California's $20 Minimum Wage Law Forcing More Layoffs Than Good

California state introduced a new law raising the minimum wage for fast-food workers to $20-per-hour, a move that particularly shakes the foundation of franchise operations across the state. Many restaurants are already laying off staff, reducing hours, and looking for ways to automate. This law does not affect smaller chains, mom-and-pop restaurants, and upscale dining establishments. Leaving franchises squarely in the crosshairs of this wage hike, facing the reality of increased operational costs. California's fast-food industry stands on the brink of a significant transformation with Assembly Bill No. 1228 now in full swing.

Key Elements of AB 1228:

• Defined Scope: The law applies to restaurant chains with more than 60 locations nationally. These are defined as providing limited service where food and beverages are intended for immediate consumption without table service. There are exclusions for certain operations, such as bakeries and restaurants within grocery establishments, under specific conditions.
• Minimum Wage Specification: The legislation sets a minimum wage of $20 per hour for fast-food workers, starting April 1, 2024. The Council has the authority to make annual wage adjustments based on specified criteria.
• Bakery Exemption Detailing: There is an exemption for establishments with on-premises bakeries that produce and sell bread as a standalone product. This exemption does not apply to operations where dough is mixed at one location and baked at another.
• Fast Food Council Creation: AB 1228 establishes the Fast Food Council within the Department of Industrial Relations. This council is tasked with developing minimum labor standards for fast-food workers, including wages, working hours, and other working conditions, effective through January 1, 2029.
• Statewide Wage Consistency: AB 1228 grants the Fast Food Council exclusive authority to set wages for fast-food workers across California, ensuring uniform wage standards until the legislation expires on January 1, 2029.

Clarifying the Bakery Exemption and Panera's Status

Initially, there was speculation that Panera Bread might benefit from the bakery exemption due to their on-premises bread baking. This exemption allows establishments that produce and sell bread as a standalone item on their premises a potential pathway to navigate the new $20 minimum wage. However, Governor Newsom’s administration clarified to Politicothat Panera does not qualify for the exemption. This is because Panera's operational model involves mixing dough at one location and then baking it at stores, which does not align with the exemption criteria.

Jack in the Box Tests Out Fippy

Franchises in particular are feeling the pressure. To cope with escalated labor costs, many have begun laying off staff, cutting back on operational hours, and increasingly turning to technological solutions such as automation to sustain their business models. Jack in the Box, for example, is integrating Miso Robotics Flippy, a kitchen robot that handles frying tasks, to cut down on labor needs. These adjustments, while possibly improving operational efficiency, highlight the industry's move towards automation as a direct response to rising wages, bringing about layoffs and sparking discussions on the future of employment in the fast food industry.

The Health and Wellness Opportunity

Considering the headaches associated with navigating the fast-food sector's new legislative changes and the significant investments involved, it's worth exploring other trending areas. The health and wellness industry emerges as an attractive alternative for franchisees looking for strategic advantages in the face of wage increases. This sector connects with the growing consumer preference for healthier lifestyles and offers a chance to enter a market less affected by wage regulations. It presents a pathway to innovation and growth, away from the challenges facing the fast-food industry.

A standout in this domain is beem Light Sauna, a franchise that merges innovation with a strong commitment to well-being, presenting a lucrative opportunity for prospective franchisees. Here’s why considering beem could be a wise choice:

• Pre-Opening Support: The beem team prioritizes support from the outset, it begins before your doors even open. After securing your territory and joining the beem family, assistance is provided to locate your physical location, tailor it to the beem brand, and start generating buzz for your grand opening.

• Innovative Health Solution: beem Light Sauna provides a full-spectrum light therapy experience, encompassing Infrared Light Therapy, Red Light Therapy, and Chromotherapy. These therapies highlight the cultural shift towards holistic healing approaches, reflecting a growing consumer preference for natural and comprehensive wellness solutions.
• High Revenue Potential with Recurring Revenue: beem's business model is designed for high revenue potential, facilitated by its diverse offerings that extend beyond sauna sessions to include branded apparel, nutritional supplements, and beauty products.
• Low Start-Up Costs & Minimal Staffing: The franchise is designed with low start-up costs in mind, allowing for a straightforward operational approach with a focus on efficiency and effectiveness.
• Unparalleled Support and Training: beem offers continuous training and development, ensuring franchisees are always equipped with the latest strategies for success. This includes everything from digital marketing to operational best practices.

At BizFranHub, we understand the allure of joining a promising franchise like beem. However, it's important to consider a range of options to find the perfect fit for your strengths, preferences, and lifestyle. Our free to you expertise lies in helping explore franchising opportunities to discover the one that aligns best with your unique vision. Send us a DM with your local zip code and we will check for available territory.

Jonathan Pace