Get ready to shell out extra bucks for your BigMac and burrito, as Chiptole and McDonald’s both recently shared that they expect prices to rise following the passing of a minimum wage bill in California.
California Gov. Gavin Newsom signed a bill into law this month that will raise the minimum wage for fast-food and other workers to $20 an hour.
In response, McDonald’s CEO Chris Kempczinski said on Monday that his company will be forced to raise menu prices, but he is not sure by how much yet, CNBC reported.
The CEO also said that he expects revenue at California stores to take a hit when the minimum wage is increased early next year.
“There will certainly be a hit in the short term to franchisee cash flow in California,” Kempczinski said on the company’s conference call.
Price hikes at the Gold Arches aren’t anything new for the fast-food chain, which cited the “strategic menu price increases” for its recent revenue increase of 14% in the latest quarter.
“We believe we’re in a better position than our competitors to weather this, so let’s use this as an opportunity to actually accelerate our growth in California,” Kempczinski said.
As for the fast-casual burrito joint, Chipotle’s chief financial officer, Jack Hartung, shared with analysts on a recent earnings call last week that the California bill would likely result in prices rising by a “mid-to-high single-digit” percentage, The New York Post reported.
“I think the Chipotle value, when we haven’t raised prices in over a year until this latest action, is coming through, and people are choosing to dine at Chipotle because we are very affordable,” Hartung said during the call last week.
But the jump in prices isn’t anything new, as inflation has caused prices across the board to rise, with the Bureau of Labor Statistics reporting that food away from home rose by 6% in September compared to 2022.
The jump in minimum wage won’t happen until April 2024, when the state’s estimated half-a-million fast food workers will see their pay jump from $16.21 to $20 per hour.