‘A devastating financial blow’: McDonald’s franchisee group criticizes California’s ‘draconian’ fast food law – here’s why they say it will cost small business owners $250,000 a year

The National Owners Association (NOA), a group representing more than 1,000 McDonald’s franchise owners, has sharply criticized California’s landmark fast food law for its “draconian” rules.

The new AB 1228 legislation, or the Fast Food Franchisor Responsibility Act, passed the California Senate on Thursday, September 14th.

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The bill would establish new standards for wages, hours of work, and other conditions related to the health, safety, and welfare of workers at fast food restaurants.

However, the NOA says the law would impose costs that “simply cannot be absorbed by the current business model.” The group claims that 95% of the 1,300 McDonald’s (MCD) restaurants in California are locally owned and operated by small business owners who may struggle to comply with the new requirements.

“The new AB 1228 legislation has been signed into law and will result in a devastating financial blow to California’s McDonald’s franchisees with an expected annual cost of $250,000 per McDonald’s restaurant,” NOA said in a memo obtained by FOX Business.

What’s in the invoice?

AB 1228 applies to fast food chains with at least 60 locations nationwide – excluding those that make and sell their own bread. The bill’s landmark change is an increase in the minimum wage to $20 starting April 1, 2024, nearly $5 more than the Golden State’s minimum wage of $15.50.

It would also create a 10-member council to run fast-food chains and set guidelines for wages and working conditions. In a recent internal memo to its restaurant system, also obtained by FOX Business, McDonald’s reportedly described this advice as “significantly limited.”

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Another big change for McDonald’s restaurant owners is that AB 1228 would make them legally liable for local employment decisions – which critics say could lead to “frivolous lawsuits against franchisees” that would then force the larger corporate headquarters to take more control to operate local businesses.

“These lawsuits would result in higher food costs for consumers and unsustainably higher operating costs, resulting in local restaurant closures and local job losses,” the NOA wrote when the bill was proposed in July.

“AB 1228 would effectively relegate franchisees to middle managers working for the company rather than the independent business owners they are today. In the long term, they could expect their licenses not to be renewed.”

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What’s next for AB 1228?

California Gov. Gavin Newsom has until Oct. 14 to sign or veto the bill — but his previous comments suggest he may be in favor of the bill.

When Newsom signed this bill’s predecessor – AB 257, the Fast Recovery Act – he said: “California is committed to ensuring that the men and women who have helped build our world-class economy can share in the state’s prosperity. “Today’s action gives hard-working fast food workers a stronger voice and a seat at the table to set fair wages and critical health and safety standards across the industry.”

Even if Newsom decides to veto the bill, the NOA has expressed concerns that its passage through the Senate could lead to similar efforts from legislatures across the country – efforts that would undermine franchisees’ ability to make local business decisions , could endanger.

California McDonald’s franchisee Roger Delph expressed his disappointment with the bill in a statement to FOX Business, saying, “Anyone who claims that this was not a concerted and successful effort to protect the franchise business model in California or that there is no involvement of the franchisee is either not involved in the opinion or is distorting the facts.

“We need to stay united so this doesn’t take root anywhere else.”

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This article is for informational purposes only and should not be construed as advice. The provision is made without any guarantee.

Source : finance.yahoo.com

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