Dave Fansler, the owner of Pismo’s Coastal Grill and other restaurants in Fresno, said state officials did not consider the costs of living in different parts of the state in their decision to hike the minimum wage for fast food workers. Pismo's Facebook photo

When news came down of Gov. Gavin Newsom signing AB 1228 into law earlier this month, many employees in the fast-food industry rejoiced at the nearly $5 increase in pay over the previous minimum wage.

There’s also potential for even higher wages that could be decided by a nine-person fast food council.

But what about the impact to eateries and other businesses that aren’t subject to the mandatory wage hike?

The new law already has several fundamental exemptions to the wage increase — including bakeries that sell bread as a stand-alone item that would exclude restaurants like Panera Bread from being covered under the new law.

The new law, which also enacted the nine-person “Fast Food Council” to dictate future mandates, has many fearing potential ripple effects across the entire retail industry.

“When you have that as a starting rate in an industry like QSR (quick service restaurants) that has close to 100% turnover and 500,000 people in that industry, there are always openings. That means anyone who’s making less than $20 will very well want those jobs,” said Littler Mendelson law firm shareholder Michael Lotito in a recent article posted to restaurantbusinessonline.com. “So, I think restaurants that are below the $20 [per hour wage] are going to find they have a huge problem on their hands in keeping and attracting people.”

Local restaurateur Dave Fansler expressed his concern about the new bill, pointing out that the state will raise the minimum wage to $16 per hour as of Jan. 1, 2024.

“It’s such an inflationary move,” Fansler said. “There’s no concept for the cost of living in a particular area of the state.”

He pointed out the inequities of minimum wage increases in a state that sees such a disparity in cost of living, comparing the costs in regions in the Valley to Bay Area cities.

Fansler said that he anticipates sweeping minimum wage hikes throughout all sectors to be expedited thanks largely to the signing of AB 1228.

“This isn’t going to take years; it’s going to take months,” he said. “We just had a minimum wage increase in January and we’re going to have another one this January because of cost of living.”

Fellow Fresno restaurateur Lewis Everk echoes those concerns, seeing the signing of the bill as a “slippery slope” towards more minimum wage hikes.

“I think what it’s going to do to the economy and overall how people view the minimum wage as it sits now at $15.50 — I think that’s what’s going to cause the most problems,” he said

The passing of AB 1228 also opens the fast food industry to continued hikes of up to 3.5% through 2029. The increases alone have the potential to bump the minimum wage to $20.70 by 2024, and more than $24.50 per hour by 2029.

Everk fears that wage increase will actually have an adverse effect on the fast food industry, with automation coming sooner rather than later due to the new law.

“Fast food is not a dumb entity. They understand how to make the dollars and cents pan out on their P&Ls,” Everk said. “Some of that’s going to be price increases.”

The result the new law will have on the fast food industry is yet to be determined. Local Deli Delicious franchisor Ali Nekumanesh said that the resolution between fast food industry representatives and legislators that resulted in the signing of AB 1228 prevented legislation that could potentially damage the fast food industry even more.

“I believe it is the best that under the circumstances could have been done to avert a situation that would have been detrimental to the existence of smaller businesses in general and franchising in particular,” Nekumanesh said.

Ultimately, the decisions made in order to get the bill signed forced lawmakers to concede much of the power that was originally laid out in the bill. The bill, introduced by California Rep. Chris Holden, originally included a joint-employer liability clause, making owners directly responsible for violations committed by their franchisees. It also gave the fast food council authority over law making.

Neither of those clauses were included in the final law.

Regardless of potential impact on fast food employees, franchisors, franchisees or customers, many in the industry fear that this is yet another instance of governmental overreach in a state that already boasts some of the highest tax rates and minimum wages in the nation.

“It’s a constant tax grab by California. It’s just never ending, because payroll taxes have to be paid on all this money and that’s what they want,” Fansler said. “They could care less about the actual person. They want the tax money.”