Franchisees fear AB 257 could hike their fast-food prices – Daily News


Jesse Lara know all about rising costs.

His family-owned franchise owns 34 El Pollo Loco restaurants throughout Southern California, and in recent months they’ve all been hammered by inflationary price hikes. But now he has something new to worry about — Assembly Bill 257.

The legislation would create a state-run council to negotiate wages, hours and working conditions for California’s fast-food workers. But a new report suggests those changes could push higher prices onto consumers by as much as 20%.

The analysis — compiled by the UC Riverside Business Center for Economic Forecasting and Development and paid for by the International Franchise Association — comes as nearly 100 fast-food franchisees traveled Wednesday, Aug. 17 to Sacramento to speak out against the impacts of the bill, also known as the FAST Recovery Act.

The legislation — supported locally by community allies and labor leaders — is designed to address wage theft, harassment, discrimination and unsafe work conditions fast-food workers say they face on the job. Similar bills have been passed in California to protect garment and contract construction workers.

Jesse Lara’s family-owned franchise owns 34 El Pollo Loco restaurants throughout Southern California. He’s concerned that Assembly Bill 257 will create addition costs for his operation. (File photo courtesy of El Pollo Loco)

Lara’s biggest concern is having an unelected body dictate what his restaurants can and can’t do. He employs more than 1,000 workers, and AB 257 leaves lots of unanswered questions.

“Would we still be able to hire and employ as many people as we do?” Laura asked. “Would we be able to offer as many hours, and would we have to raise costs to stay afloat? We’re already paying 80% more for boneless chicken breasts.”

Christopher Thornberg, the Riverside center’s director, said the bill would hit low-income consumers the hardest.

“If the FAST Act passes, we can expect a very sharp increase in food costs from the affected restaurants, and that could push these families to the breaking point, given the financial pressures working families already feel from rising rents, gas and other necessities,” he said.

The center’s analysis says AB 257 would effectively create a new food tax at a time when inflation is reaching record highs and could boost fast-food prices by as much as 20%.

Thornberg cited two factors that would conspire to boost fast-food prices: One is the likelihood that AB 257’s state-run council would increase pay at the various fast-food outlets and the other is increased liability for fast-food companies.

Under AB 257, liabilities that would ordinarily fall of the shoulders of franchisees would instead be passed along to the fast-food corporations. So the fast-food chains would be held responsible when workers claim minimum wage violations or unpaid overtime at a franchise location.

AB 257 would also allow franchisees to sue their parent corporation if their franchise contracts contain strict terms that leave them no choice but to violate labor law.

The bill would require standards for minimum wages, maximum hours of work and other working conditions fixed by the state-run council, absent a valid collective bargaining agreement, and they would be enforced by the California Division of Labor Standards Enforcement.

The council would conduct a full review of those factors every three years and would be required to hold public hearings every six months where it could coordinate with various local agencies.

The bill additionally authorizes cities with a population of more than 200,000 to establish a food-sector council that could provide recommendations to the state-run panel.

Gov. Gavin Newsom has yet to take a position on the bill, but his Department of Finance opposes it, saying it would create “ongoing costs” and worsen delays in the state’s labor enforcement system.

This Burger King at 2122 SE Bristol belongs to restaurant king John Gantes who is going through a bankruptcy.///ADDITIONAL INFO: gantes.0503a - 4/22/09 - ROD VEAL, THE ORANGE COUNTY REGISTER
Harsh Ghai’s franchise includes 200 Burger King, Taco Bell, and Popeye’s restaurants, 180 of which are in California. He says increased costs associated with AB 257 would be hard to absorb. (File photo, Rod Veal, Orange County Register)

Harsh Ghai isn’t a fan of AB 257, either. His franchise includes 200 Burger King, Taco Bell, and Popeye’s restaurants — 180 of which are in California.

Ghai said wages at his restaurants vary depending on the demand for work in each market. They all pay above minimum wage, he said, but increased costs associated with AB 257 would be hard to absorb.

“Grocery stores can pass along higher costs to customers, but we can’t pass along that much because our guests rely heavily on strong value propositions,” he said.

Ghai and other franchisees met Wednesday with several state lawmakers in Sacramento. Some communicated online. But others — including Sen. Anna M. Caballero, D-Merced, and Assemblyman Tim Grayson, D-Concord — met with the business owners in person.

Caballero and Grayson were receptive to the franchisees’ concerns, Ghai said.

A representative from Caballero’s office said she’s reviewing amendments to AB 257 from both parties and will make her determination once the updates are finalized.

Barely scraping by

The starting pay for cashiers at Lara’s 34 El Pollo Loco locations is $16 an hour. That’s $1 over minimum wage, but many of California’s more than 700,000 fast-food employees say that’s not enough.

Laura Pozos said she’s making $16 an hour working at a McDonald’s in Los Angeles and is barely scraping by.

“They’ve cut our hours,” the 59-year-old East Los Angeles resident said recently. “I work 33 to 34 hours a week and it’s not enough to pay my bills. My light bill alone is $200 a month. These are miserable wages.”

California fast-food workers have held rallies locally and statewide over the past two months in support of AB 257.

The Service Employees International Union is pushing for passage of the bill as part of its “Fight for $15 and a Union” campaign. California’s minimum wage for businesses with 26 or more employees hit $15 an hour on Jan. 1, 2022, and that will rise to $15.50 an hour on Jan. 1, 2023.

Unionization in the fast-food industry, however, remains elusive.



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