The National Owners Association (NOA), a group that represents more than 1,000 McDonald’s franchise owners, has slammed California’s landmark fast food bill for its “draconian” rules.
The new AB 1228 legislation, or the Fast Food Franchisor Responsibility Act, was passed by the California Senate on Thursday, Sept. 14.
The bill would impose new standards for wages, working hours and other conditions related to the health, safety and welfare of fast food restaurant workers.
However, the NOA says the law would introduce 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 meet the new requirements.
“The new AB 1228 legislation has been voted into law and will result in a devastating financial blow to California McDonald’s franchisees at a projected annual cost of $250,000 per McDonald’s restaurant,” NOA said in a memo obtained by FOX Business.
What’s in the bill?
AB 1228 applies to fast-food chains with at least 60 locations nationwide — except for those that make and sell their own bread. The bill’s landmark change is a minimum wagehike to $20, starting April 1, 2024, almost $5 higher than the Golden State’s minimum wage of $15.50.
It would also see the establishment of a 10-person council to govern fast food chains and set guidelines for wages and working conditions. In a recent internal message to its restaurant system, also obtained by FOX Business, McDonald’s allegedly described this council as “significantly limited.”
Another big change for McDonald’s restaurant owners is that AB 1228 would make them legally liable for local employment decisions — which critics believe could lead to “frivolous lawsuits against franchisees” that would then force the larger corporate head offices to exert more control over local operations.
“These lawsuits would lead to higher food costs for consumers and unsustainably higher operating costs that would result in the shutdown of locally owned restaurants and the loss of local jobs,” the NOA wrote, when the bill was proposed in July.
“AB 1228 would effectively demote franchisees to middle managers working for the corporation instead of the independent business owners they are today. In the long term, they could face non-renewal of their licenses.”
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What’s next for AB 1228?
California Gov. Gavin Newsom has until October 14 to sign or veto the bill — but his past comments suggest he may be in favor of the law.
When signing this bill’s predecessor — AB 257, the Fast Recovery Act — into law, Newsom said: “California is committed to ensuring that the men and women who have helped build our world-class economy are able to share in the state’s prosperity. Today’s action gives hardworking fast-food workers a stronger voice and seat at the table to set fair wages and critical health and safety standards across the industry.”
Even if Newsom chooses to veto the bill, the NOA has expressed concerns that its passage through the Senate could lead to similar efforts by legislative bodies across the country — efforts that may jeopardize franchisees’ ability to make local business decisions.
Expressing his disappointment over the bill in a statement to FOX Business, California McDonald’s franchisee Roger Delph said: “Anyone who is suggesting this was not a collaborative and successful effort to protect the franchised business model in California, or that franchisee involvement was absent, was either not involved or is contorting the facts.
“We need to remain unified so that this can not gain a foothold anywhere else.”
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