Franchisee Claims Fast Food Is Becoming a ‘Luxury’ in California

The minimum wage rise in California for fast-food workers has led to a shake-up in the industry, with restaurants increasing prices to offset the cost of the rise. However, this has caused some customers to think fast food is becoming a “luxury,” according to a franchisee in the state.

The owner of two branches of the smoothie and Acai bowl chain Vitality Bowls in San Jose, Brian Hom, said that the price increases could be putting off customers. He said, “I’ve had some customers say: ‘the cost of going out is so high now, I’m looking to buy my own ingredients and make my own food at home because going out to a fast food has become a luxury’ versus ‘hey, I want to go get something to eat now.’”

He added, “They have to think twice: ‘Am I going to be able to afford it or not?’”

As wages for fast-food workers in California increase, prices for fast food nationwide have also risen. This wage hike, coupled with inflation in food prices during the pandemic, has prompted changes in consumer behavior as affordability becomes a concern.

According to Hom, his two locations have already shifted their prices two times this year. He raised them by around 5% in January, when San Jose’s minimum wage went up from $17 to $17.55 per hour, and then again by between 5% and 10% on April 1, when the recent rise took effect in California.

Other fast-food franchisees have also worried that increasing prices to offset California’s new minimum wage could push customers’ willingness to pay to the limits.

Scott Rodrick, a franchisee with 18 McDonald’s restaurants in northern California, has previously remarked, “The appetite that my customers have for price increases is not unlimited.”

There is growing concern amongst franchisees that certain diners will shift to choosing casual-dining chains, such as Chilli’s and Applebee’s. Some of these chains may sell sit-down meals for just a slightly higher cost than fast-food restaurants. Certain analysts and franchisees also anticipate that people will purchase more groceries, too.

In March, Tony Nix, a 55-year-old cybersecurity consultant in California who says he usually eats out around three times a week, told Business Insider, “Fast food is generally supposed to be a less expensive alternative than going out … to a sit-down restaurant.”

He added, “But it’s not becoming that at all. It’s becoming as expensive, if not more.”