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McDonald’s and Chipotle said they will raise menu prices in California to pay for the minimum wage hikes the Golden State recently passed into law.
McDonald’s CEO Chris Kempczinski said Monday the fast-food giant will hike prices in California after Gov. Gavin Newsom recently signed into law a measure that would give wage earners a $20-an-hour minimum — although the company hasn’t yet decided by how much.
The Chicago-based burger chain — which cited “strategic menu price increases” as it revealed on Monday that its revenue surged 14% in the latest quarter — already has been hiking prices nationwide amid rampant inflation, including charging $18 for a Big Mac meal at a location in Connecticut.
Surging prices have forced consumers to pare back spending on fast food, according to McDonald’s executives.
Fewer Americans earning $45,000 or less have been frequenting McDonald’s locations this past quarter, according to the company.
The latest inflation figures released by the federal government show that the cost of food away from home rose 6% in September compared to the same period last year.
Meanwhile, Chipotle’s chief financial officer, Jack Hartung, told analysts on a company earnings call last week that the chain will likely raise prices by a “mid-to-high single-digit” percentage.
Beginning in April, California’s estimated 500,000 fast food workers will be paid a minimum of $20 per hour — up from the previous minimum wage of $16.21.
The legislation that was initially proposed called for a minimum wage of $22 per hour.
The $20 per hour minimum wage would be the highest in the nation for the fast food industry.
The second-highest is the $17-per-hour wage earned by fast food workers in Washington, DC.
The Golden Arches brought in a total of $6.69 billion in revenue for the three-month period ended Sept. 30 — beating expectations of $6.58 billion, according to Refinitiv analysts.
McDonald’s — which has 13,513 restaurants in the US and over 38,000 abroad — did not disclose how much the franchiser has increased its prices, which generally vary between locations.
Chipotle last week reported higher-than-expected quarterly earnings which were fueled by higher menu prices for its signature menu items including burritos and bowls.
“I think the Chipotle value, when we haven’t raised prices in over a year until this latest action, is coming through, and people are choosing to dine at Chipotle because we are very affordable,” Hartung told analysts during the company’s conference call last week.