In April, California raised the minimum wage for restaurant employees to $20 an hour. That’s 276% of the federally mandated minimum wage used by many other states. In what seems like a predictable outcome, California’s fast-food franchisees are closing locations.
California franchise owners and consumers are feeling the brunt of higher costs.
After 30 years in business, McDonald’s franchisee and Rodrick Foods CEO Scott Rodrick had to make the difficult decision to not renew his lease at one of his McDonald’s (MCD) locations at a mall in San Francisco.
“The unprecedented changes to the economic landscape of California, coupled with a host of ill-timed legislative mandates, greatly narrowed the restaurant’s path to extending its tenure into a new term,” Rodrick told Yahoo Finance. He added that an “unbending landlord set on rent per square foot,” high property taxes, and mall charges were additional reasons that “made the decision difficult, but clear.”
A copy of the letter that Scott Rodrick posted to the restaurant’s front door, telling Yahoo Finance, “What an awful feeling that was.” (Courtesy: Scott Rodrick/obtained by Yahoo Finance)
Rodrick still owns 17 other McDonald’s locations but is bracing for further changes in the industry. His father was among the first to franchise a McDonald’s location in the 1960s — a far different time for franchisees compared to now.
“An explosion has gone off in California,” Rodrick said, referring to a series of closures of other longstanding franchises, including an In-N-Out location in Oakland and an Arby’s restaurant in Hollywood that had stood for 55 years. “We are going to be watching the shock waves pass through slowly over time.”
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