Former McDonald’s CEO Jim Skinner analyzes the state of the fast-food industry as the US economy slows in ‘The Clams Countdown’.
The National Owners Association, in a memo distributed to its members, described California’s recently passed AB 1228 as “draconian” and costly to franchisees.
“The new ‘AB 1228’ legislation has been voted into law and will result in a devastating financial blow to California McDonald’s franchisees at an estimated annual cost of $250,000 per McDonald’s restaurant,” the advocacy group representing nearly 1,000 McDonald’s franchisees said in the memo obtained. It will take.” By Fox Business.
“These costs cannot be easily borne by the current business model.”
CNBC previously reported on the NOA memo.
California Government. Newsom signs historic fast-food workers bill despite concerns over rising costs
Key components of the Bill:
- It would raise the minimum wage for fast-food workers to $20 an hour.
- This will apply to restaurants with at least 60 locations across the country, except those that make and sell their own bread.
- It would also create a 10-person council to regulate fast-food chains and set guidelines for working conditions and wages.
When signing the original version of the legislation, California Governor Gavin Newsom said, “California is committed to ensuring that the men and women who have helped build our world-class economy are able to share in the state’s prosperity.” are capable. Today’s action puts those who work hard forward faster.” -Food workers have a strong voice and a seat at the table to set fair wages and critical health and safety standards across the industry.”
California Governor Gavin Newsom speaks during the United Nations Climate Action: Race to Zero and Resilience Forum in New York on September 21, 2022. (Michael Nagel/Bloomberg via Getty Images/Getty Images)
The state Senate passed AB 1228 on Thursday.
NOA said franchisees, suppliers and McDonald’s should “engage to support our California McFamilies” and identified steps it said each of them should take, including 501(c)4 entities and state political action. An organization should be formed together with the ideas of the franchisees setting up committees (PACs). Official branch to lobby the government.
Suppliers requested cost reductions in operations that could lead to cost savings for the fast-food restaurants they work with.
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NOA asked McDonald’s to direct “rent and service fees collected from sales” to efforts such as “overhauling” the operating platform and conducting more labor-related research and development to help franchisees avoid potential price increases in response to the bill. called upon.
In its memorandum, NOA also alleged “a small coalition of franchisors” that “negotiated an agreement with the Service Employees International Union without franchisee participation” that led to the legislative outcome now being certain. It mentioned McDonald’s, the National Restaurant Association and the International Franchise Association.
McDonald’s logo at a restaurant in Streator on October 15, 2022. (Jakub Porzycki/Nurfoto via Getty Images/Getty Images)
IFA CEO Matthew Haller told Fox Business that he participated in the talks with the goal of ensuring that franchises had participation and representation. Some franchisees spoke directly to the governor’s office, he said.
Fox Business also contacted the National Restaurant Association for comment.
“Over the past year, I have worked with company leaders, a task force of fellow franchisees, and our own independent advisors as part of a coalition of brands working to defend our business models against the all-out assault on restaurant owner/operators. “We have worked together,” California McDonald’s franchisee Roger Delph said in a statement to Fox Business.
“Anyone suggesting that this was not a collaborative and successful effort to protect the franchised business model in California, or that franchisee participation was absent, is either not involved or distorting the facts. doing.”
NOA suggested that the passage of AB 1228 could lead to similar efforts by legislative bodies elsewhere in the country, saying, “We need to stay united so this doesn’t gain a foothold elsewhere.”
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In a recent internal message obtained by Fox Business, McDonald’s described the terms of its restaurant system as AB 1228 is “completely different” than the previous version of the bill, which it described as “harmful to our system.”
It said that AB 1228 created a “significantly limited fast food council”, overruled AB 257, prevented joint liability from applying to franchisors and franchisees, and, among other things, “restricted clear, predictable wages through 2029.” Created the program.
McDonald’s has joined the “California Owner/Operator Task Force” and others in the state to “protect the ability of owner/operators to make decisions for their businesses at the local level and protect their restaurants and their crews,” the company said in the message. Tried tirelessly to protect”. ,
Californians put fast-food law on 2024 ballot
Those included building a “coalition of brands to refer AB 257 to California voters in November 2024” and “significantly” increasing “their political involvement in the state,” according to the message.
A sign is posted in front of a McDonald’s restaurant in San Leandro, California on April 28, 2022. (Justin Sullivan/Getty Images/Getty Images)
The company said it established a cross-function, fast-action team of McDonald’s employees as well as owner/operators from California, New York and Illinois to co-invest and work collaboratively on an action plan Is.
According to the internal message, it will “pilot innovative short- and long-term solutions” for California using best practices adapted from other places that have experienced similar legislation.
Jay Caruso contributed to this report.