Proposed law has state fast-food restaurants up in arms

 

AB 25 is a threat to fast-food workers because it will raise prices and eliminate jobs. That would not make for good law at a time when California is battling a severe labor shortage, according to the bill’s critics.

 

 

A bill that passed the state Assembly in January has some fast-food restaurant franchisees and other restaurant and small-business owners ready to march on Sacramento, and not in a friendly way.

AB 257, formally known as the FAST Act (Fast Food Accountability and Standards Recovery), would create a 13-member council responsible for establishing wages, working hours and health and safety conditions, according to the bill’s text.

The council, which would be part of the Department of Industrial Relations, will be appointed by the governor, assembly speaker and the senate rules committee.

The bill, which was approved by the Senate Appropriations Committee earlier this month, must still be approved by the full senate and signed by Gov. Gavin Newsom to become law. It was introduced by Assemblyman Chris Holden, D-Los Angeles.

Supporters say the FAST Act should be made law in order to improve wages for fast-food workers and reduce workplace health and safety violations. Opponents maintain that the bill, if passed, would cut entry-level jobs, increase food prices and overturn the state’s traditional arrangement between business owners and their franchisees.

AB 257 would put the state’s fast-food industry in the hands of “unelected officials” with unlimited power, while holding fast food corporations, and not just franchisees, responsible for the cost of running a business, said Chris Thornberg, director of the UC Riverside School of Business Center for Economic Forecasting and Development.

The business center recently completed a study on FAST Act with the International Franchise Association, a non-profit in Washington, D.C., a 14-page analysis that largely condemns the proposed law.

Should the union-backed FAST Act pass, food costs at restaurants will rise, which would add to the financial burdens of working families already burdened by inflation, higher rents and high gas prices, according to Thornberg.

He noted that fast-food restaurant jobs are an ideal “first job” where people, especially young people, can get work experience, but they aren’t necessarily supposed to pay a livable wage.

“They want to create a group that will oversee the entire fast-food industry, a group that would set its own standards without having to go though the legislative process,” Thornberg said. “The unions want a higher minimum wage, which is fine, but this is not the way to do it.”

The report addresses “limited-service” employees, meaning workers who take and process over the counter but who do not provide table service.

As of May 2021, the fast-food industry in California employed an estimated 360,980 workers who earned an average of $15.61 cents an hour, for an annual fixed wage of $32,460, according to the U.S. Bureau of Labor Statistics.

Cost increases in worker compensation, inevitably lead to higher food prices, because the increase must be passed on to the consumer. That means fewer restaurants and not as many workers in this “highly competitive” industry, which has had relatively stable prices despite the recent wave of inflation, the business center report states.

“Franchising is one of the best ways to create jobs, but this an anti-franchise bill,” Thornberg said of AB 257. “I don’t understand it.”

Should the bill pass, what is now one of California’s biggest economic problems – not enough people to fill available jobs – will probably get worse.

“It’s a very strange piece of legislation that will only add to the labor shortage,” Thornberg said. “It’s monstrous overkill.”

The U.S. Chamber of Commerce also criticized the proposed law, saying it will overturn the franchise business model that has worked successfully for more than 150 years, among other possible pitfalls.

“In a state that already burdens businesses with countless regulations, adding another layer would simply increase costs that ultimately would be borne by consumers,” said Glenn Spencer, senior vice president of the chamber’s employment policy division.

“The FAST Recovery Act would create a council of unelected political appointees—regardless of whether they have any business experience whatsoever—to run California’s entire fast food restaurant industry from Sacramento,” Spencer wrote in an Aug. 23 letter to the state Senate. “Even the California Finance Department opposes the bill, saying it would create a “fragmented regulatory and legal environment for employers and raise long-term costs.”

By raising food prices, AB 257 would drive some fast-food restaurant chains either out of California or out of business, said Anthony Jordan, founder of the 130-member Inland Empire Restaurant Association in Murrieta.

“There’s no question it would raise food prices, but it would force some restaurants to leave the state,” said Jordan, who founded the for-profit organization two years ago to help Inland restaurants survive the pandemic. “Businesses are already leaving California. Why would we want to add to that?”

Some association members say they’re concerned about how the Fast Food Council will operate, concerns Jordan says he shares.

“I’m not sure how accountable it will be or who it will be accountable to,” Jordan said. “I’m just glad the California Restaurant Association is opposing the bill, because that’s what they should be doing. They’re more of a political organization, and they’re in a better position than we are to have an impact. We’re mostly a support group.”