Price Hike Incoming After Newsom Raises Minimum Wage

The restaurant chains Chipotle Mexican Grill and McDonald’s both announced in quarterly earnings reports that they will raise their menu prices at restaurants in California next year to offset the state’s fast-food workers’ minimum wage hike, CNBC reported.

McDonald’s CEO Chris Kempczisnki said on Monday that the restaurant chain has not determined how much it will raise prices in California when fast-food workers begin making $20 an hour.

While Chipotle hasn’t made a “final decision” on the price increase, the restaurant chain’s CFO Jack Hartung said it will likely be a “mid-to-high single-digit” percentage increase.

Restaurants nationwide have been increasing menu prices for over two years due to the rising cost of ingredients and increased labor costs. Prices for dining out were up 6 percent in September compared to the previous year, according to the Bureau of Labor Statistics.

In September, the restaurant industry in California compromised with labor groups to establish a 9-person council with the power to set a minimum pay scale for fast-food workers in the state through 2029.

Restaurant chains with a minimum of 60 nationwide locations must pay workers at least $20 an hour beginning April 1, 2024. From 2025 until 2029, the council will have the power to raise the minimum wage annually by 3.5 percent or the annual change in the consumer price index, whichever is lower.

For Chipotle, the new minimum wage means its workers will receive a roughly 18 percent pay hike since the average wage for Chipotle workers in California is currently $17 an hour.

About 15 percent of Chipotle restaurants are located in California, so too is the company’s headquarters. Since June 2021, the restaurant chain already raised menu prices four times, including a 3 percent increase last month.