Here come the price increases!

[storewanderer]

I went to a Burger King in Fresno the other day that has reverted back to Take Out/Drive Thru only in an attempt to save on labor.

Still having difficulty understanding this strategy. It doesn't really save anything. Staffing is exactly the same, skeleton crew, open or closed inside.

Running the take out counter is interesting. If they went drive through only and locked the door they can save a little bit of labor. Less than they think, and who knows how much in lost sales.

I think chains like In N Out will only get stronger against these franchised chains.

[ClownLoach]

I went to a Burger King in Fresno the other day that has reverted back to Take Out/Drive Thru only in an attempt to save on labor.

Still having difficulty understanding this strategy. It doesn't really save anything. Staffing is exactly the same, skeleton crew, open or closed inside.

Running the take out counter is interesting. If they went drive through only and locked the door they can save a little bit of labor. Less than they think, and who knows how much in lost sales.

I think chains like In N Out will only get stronger against these franchised chains.

I think this is going to be the beginning of the end for franchises in California, period. Too many mouths to feed.

[storewanderer]

I think this is going to be the beginning of the end for franchises in California, period. Too many mouths to feed.

There are almost no corporate operated fast foods in CA as the chains have divested those assets on a wider scale nationwide in the US. Chains that once had pretty significant bases of corporate units in CA have few (Carls, McDonalds) or none (Wendys, Taco Bell, Burger King).

The small 1-10 unit franchisees are going to slowly get filtered out. Then the medium 11-30 unit franchisees will get filtered out. Ultimately you will have these large investor/private equity backed "franchise groups" that run hundreds of locations and will basically control certain brands in the state. At that point the prices will be whatever they want them to be and as long as customers keep showing up it will work I guess. In the process they will probably close many marginal performing locations and just be left with the highest performing locations. Or the marginal locations will turn into smaller/independent fast food chains run by the same folks who used to be 1-10 unit chain franchisees, and these new enterprises will not be part of this act.

[reymann]

I think this is going to be the beginning of the end for franchises in California, period. Too many mouths to feed.

There are almost no corporate operated fast foods in CA as the chains have divested those assets on a wider scale nationwide in the US. Chains that once had pretty significant bases of corporate units in CA have few (Carls, McDonalds) or none (Wendys, Taco Bell, Burger King).

The small 1-10 unit franchisees are going to slowly get filtered out. Then the medium 11-30 unit franchisees will get filtered out. Ultimately you will have these large investor/private equity backed "franchise groups" that run hundreds of locations and will basically control certain brands in the state. At that point the prices will be whatever they want them to be and as long as customers keep showing up it will work I guess. In the process they will probably close many marginal performing locations and just be left with the highest performing locations. Or the marginal locations will turn into smaller/independent fast food chains run by the same folks who used to be 1-10 unit chain franchisees, and these new enterprises will not be part of this act.

The big loser could be sandwich chains which are mostly smaller franchises. I could see a lot of marginal subway shops closing in the coming months. A lot of the burger chains in Fresno are ran by large franchises.

[ClownLoach]

I think this is going to be the beginning of the end for franchises in California, period. Too many mouths to feed.

There are almost no corporate operated fast foods in CA as the chains have divested those assets on a wider scale nationwide in the US. Chains that once had pretty significant bases of corporate units in CA have few (Carls, McDonalds) or none (Wendys, Taco Bell, Burger King).

The small 1-10 unit franchisees are going to slowly get filtered out. Then the medium 11-30 unit franchisees will get filtered out. Ultimately you will have these large investor/private equity backed "franchise groups" that run hundreds of locations and will basically control certain brands in the state. At that point the prices will be whatever they want them to be and as long as customers keep showing up it will work I guess. In the process they will probably close many marginal performing locations and just be left with the highest performing locations. Or the marginal locations will turn into smaller/independent fast food chains run by the same folks who used to be 1-10 unit chain franchisees, and these new enterprises will not be part of this act.

Seeing how the large franchise corporations have struggled around the country, like the large one that Burger King had to acquire, I am not sure even they will withstand this. The customer thankfully has choices that are cheaper and higher quality, and smart owners will figure out ways around the law as those groups expand. An example could be a small growing chain in LA County called The Win-Dow which serves totally fresh smash burgers, chicken sandwiches, shakes and cones for less than some of these mega Carl's and Burger King franchises do. They converted the longtime KFC in Belmont Shore recently, they gut the dining room and make it open outdoor seating to save on labor (hose it down nightly). They could grow dozens of locations and absorb many closed Carl's and BK and Wendy's as they inevitably fail. Heavy Handed is already growing locations in LA too with insanely delicious short rib burgers and as much as their pricing was criticized here recently their combo is cheaper than the Jack in the Box smashed Jack combo. As long as nobody hits that magic store count number they are exempt, and although one could argue everyone will have to be paying over $20 to compete the truth is that the franchise fast food chains are going to make the work so grueling and miserable nobody is going to want the jobs. They're already terrible places to work with factory assembly line operations where one must keep their feet on the "X" on the floor at all times and such as these places are more labor engineered than an aircraft plant. The word will get out that it isn't worth the stress or aggravation to work at $20 an hour for McDonald's, Wendy's etc. where you're responsible for everything from cooking, bagging, drinks, payment, floor mopping, truck unloading, and toilet cleaning.

The issue is that the entire franchise model is not going to withstand the number of mouths to feed. You need to pay the overhead, the franchise fees, the payroll, the share to the owner, and the share to the franchisor. Too little money going to too many people renders the restaurants unprofitable so they have to raise prices through the roof for the food which has suffered through the factory processes and batch cooking to the point where it is disgusting. I will keep mentioning Wendy's who invented the technology to cook burgers fresh to order at triple the speed of In-N-Out, but has resorted to batch cooking and microwaving hours old patties. They might as well throw away all the double sided grills they invented and stop using fresh beef to save even more money. I'm sure In-N-Out uses 1000% more labor per burger than Wendy's did even when they still made fresh to order, yet Wendy's has always cost more when compared across the board.

Higher wages necessitate a simpler ownership structure to lower costs dramatically. Owner-operated restaurants, period. No branding fees, licensing agreements, franchise fees etc. I expect to see Shake Shack for example blow up in California and replace many of the franchise burger places for the same reason In-N-Out is successful, they're already working on drive thru models and smaller restaurants that would work here. Raising Cane's isn't franchising in California last I checked. Chick-fil-A isn't a true franchise in the first place and is more like Grocery Outlet where you "buy in" to be a general manager.

I'm interested in seeing how some of the oddities and outliers handle this. The Barstow Del Taco operation is in name only, all the food is custom fresh made and direct sourced. Even the receipt calls it Del Taco Original. Will the family ownership be able to claim they are a 3 unit chain called Del Taco Original and as such escape the law? I would argue they are effectively a separate company since their totally different menu is only served at 3 different locations.

The Habit Burger bought back the founding family's franchised locations in Santa Barbara County area and made them company owned stores. This was a bad change in my opinion, but the family saw what was going to happen and cashed out to retire and/or pursue other ventures like their new Hook Burger chain.

The franchise model is going to die in California as a result of this, I don't see any other way out.

[storewanderer]

I think this is going to be the beginning of the end for franchises in California, period. Too many mouths to feed.

There are almost no corporate operated fast foods in CA as the chains have divested those assets on a wider scale nationwide in the US. Chains that once had pretty significant bases of corporate units in CA have few (Carls, McDonalds) or none (Wendys, Taco Bell, Burger King).

The small 1-10 unit franchisees are going to slowly get filtered out. Then the medium 11-30 unit franchisees will get filtered out. Ultimately you will have these large investor/private equity backed "franchise groups" that run hundreds of locations and will basically control certain brands in the state. At that point the prices will be whatever they want them to be and as long as customers keep showing up it will work I guess. In the process they will probably close many marginal performing locations and just be left with the highest performing locations. Or the marginal locations will turn into smaller/independent fast food chains run by the same folks who used to be 1-10 unit chain franchisees, and these new enterprises will not be part of this act.

Seeing how the large franchise corporations have struggled around the country, like the large one that Burger King had to acquire, I am not sure even they will withstand this. The customer thankfully has choices that are cheaper and higher quality, and smart owners will figure out ways around the law as those groups expand. An example could be a small growing chain in LA County called The Win-Dow which serves totally fresh smash burgers, chicken sandwiches, shakes and cones for less than some of these mega Carl's and Burger King franchises do. They converted the longtime KFC in Belmont Shore recently, they gut the dining room and make it open outdoor seating to save on labor (hose it down nightly). They could grow dozens of locations and absorb many closed Carl's and BK and Wendy's as they inevitably fail. Heavy Handed is already growing locations in LA too with insanely delicious short rib burgers and as much as their pricing was criticized here recently their combo is cheaper than the Jack in the Box smashed Jack combo. As long as nobody hits that magic store count number they are exempt, and although one could argue everyone will have to be paying over $20 to compete the truth is that the franchise fast food chains are going to make the work so grueling and miserable nobody is going to want the jobs. They're already terrible places to work with factory assembly line operations where one must keep their feet on the "X" on the floor at all times and such as these places are more labor engineered than an aircraft plant. The word will get out that it isn't worth the stress or aggravation to work at $20 an hour for McDonald's, Wendy's etc. where you're responsible for everything from cooking, bagging, drinks, payment, floor mopping, truck unloading, and toilet cleaning.

The issue is that the entire franchise model is not going to withstand the number of mouths to feed. You need to pay the overhead, the franchise fees, the payroll, the share to the owner, and the share to the franchisor. Too little money going to too many people renders the restaurants unprofitable so they have to raise prices through the roof for the food which has suffered through the factory processes and batch cooking to the point where it is disgusting. I will keep mentioning Wendy's who invented the technology to cook burgers fresh to order at triple the speed of In-N-Out, but has resorted to batch cooking and microwaving hours old patties. They might as well throw away all the double sided grills they invented and stop using fresh beef to save even more money. I'm sure In-N-Out uses 1000% more labor per burger than Wendy's did even when they still made fresh to order, yet Wendy's has always cost more when compared across the board.

Higher wages necessitate a simpler ownership structure to lower costs dramatically. Owner-operated restaurants, period. No branding fees, licensing agreements, franchise fees etc. I expect to see Shake Shack for example blow up in California and replace many of the franchise burger places for the same reason In-N-Out is successful, they're already working on drive thru models and smaller restaurants that would work here. Raising Cane's isn't franchising in California last I checked. Chick-fil-A isn't a true franchise in the first place and is more like Grocery Outlet where you "buy in" to be a general manager.

I'm interested in seeing how some of the oddities and outliers handle this. The Barstow Del Taco operation is in name only, all the food is custom fresh made and direct sourced. Even the receipt calls it Del Taco Original. Will the family ownership be able to claim they are a 3 unit chain called Del Taco Original and as such escape the law? I would argue they are effectively a separate company since their totally different menu is only served at 3 different locations.

The Habit Burger bought back the founding family's franchised locations in Santa Barbara County area and made them company owned stores. This was a bad change in my opinion, but the family saw what was going to happen and cashed out to retire and/or pursue other ventures like their new Hook Burger chain.

The franchise model is going to die in California as a result of this, I don't see any other way out.

Don't forget the franchisees also often have hefty bank loans they are paying off. I agree fully there are too many mouths to feed...

Raising Cane's as I understand it isn't doing new franchises anymore except in some special cases (such as to Panda Express for Alaska and Hawaii). They bought out the AZ/NV franchisee a number of years ago and turned all those to corporate stores. I hate to say it but they were actually run better operationally as franchise stores (cleaner, better service, far more active management). But the food seems better since they became corporate stores.

The bigger issue is the general "feed the beast" mentality of business. If you are trying to attract funding for your chain but you can only grow your chain to 59 stores they you have to quit growing, it will be very difficult to find investors. Investors want to be sold on a story of never-ending growth. A profitable 59 store chain is going to lose investor interest once it caps out at 59 stores. Maybe they can find 59 franchisees who like making the profit from the chain and that would work...

[reymann]

I feel like at some point they will want to make this a blanket $20 minimum wage knowing how powerful the unions are in california. Fast food places near the colleges in fresno are planning to reduce dining room hours after the semester with some closing around 8-9 pm.

[storewanderer]

Have been in some CA fast food locations the past few days. During meal periods I am seeing basically no front counter staffing at all. Still 1-2 employees trying to do drive through then the one bagging jumps and handles front counter/handing out orders. During slower times like mid afternoon I am seeing what is obviously the general manager running the front register and drive through both and the only employees who are hourly are in the back cooking; saw this at two different Carls units (different franchisees; one called AMS and the other called BTO Investments) and one Wendys unit.

I think mandatory kiosk ordering is coming. I hate to say it but the hated midwest Steak N Shake kiosk model with mandatory kiosk even if you use cash and self serve everything with zero customer service/employee interaction is probably the future of most fast foods in CA.

[ClownLoach]

There are almost no corporate operated fast foods in CA as the chains have divested those assets on a wider scale nationwide in the US. Chains that once had pretty significant bases of corporate units in CA have few (Carls, McDonalds) or none (Wendys, Taco Bell, Burger King).

The small 1-10 unit franchisees are going to slowly get filtered out. Then the medium 11-30 unit franchisees will get filtered out. Ultimately you will have these large investor/private equity backed "franchise groups" that run hundreds of locations and will basically control certain brands in the state. At that point the prices will be whatever they want them to be and as long as customers keep showing up it will work I guess. In the process they will probably close many marginal performing locations and just be left with the highest performing locations. Or the marginal locations will turn into smaller/independent fast food chains run by the same folks who used to be 1-10 unit chain franchisees, and these new enterprises will not be part of this act.

Seeing how the large franchise corporations have struggled around the country, like the large one that Burger King had to acquire, I am not sure even they will withstand this. The customer thankfully has choices that are cheaper and higher quality, and smart owners will figure out ways around the law as those groups expand. An example could be a small growing chain in LA County called The Win-Dow which serves totally fresh smash burgers, chicken sandwiches, shakes and cones for less than some of these mega Carl's and Burger King franchises do. They converted the longtime KFC in Belmont Shore recently, they gut the dining room and make it open outdoor seating to save on labor (hose it down nightly). They could grow dozens of locations and absorb many closed Carl's and BK and Wendy's as they inevitably fail. Heavy Handed is already growing locations in LA too with insanely delicious short rib burgers and as much as their pricing was criticized here recently their combo is cheaper than the Jack in the Box smashed Jack combo. As long as nobody hits that magic store count number they are exempt, and although one could argue everyone will have to be paying over $20 to compete the truth is that the franchise fast food chains are going to make the work so grueling and miserable nobody is going to want the jobs. They're already terrible places to work with factory assembly line operations where one must keep their feet on the "X" on the floor at all times and such as these places are more labor engineered than an aircraft plant. The word will get out that it isn't worth the stress or aggravation to work at $20 an hour for McDonald's, Wendy's etc. where you're responsible for everything from cooking, bagging, drinks, payment, floor mopping, truck unloading, and toilet cleaning.

The issue is that the entire franchise model is not going to withstand the number of mouths to feed. You need to pay the overhead, the franchise fees, the payroll, the share to the owner, and the share to the franchisor. Too little money going to too many people renders the restaurants unprofitable so they have to raise prices through the roof for the food which has suffered through the factory processes and batch cooking to the point where it is disgusting. I will keep mentioning Wendy's who invented the technology to cook burgers fresh to order at triple the speed of In-N-Out, but has resorted to batch cooking and microwaving hours old patties. They might as well throw away all the double sided grills they invented and stop using fresh beef to save even more money. I'm sure In-N-Out uses 1000% more labor per burger than Wendy's did even when they still made fresh to order, yet Wendy's has always cost more when compared across the board.

Higher wages necessitate a simpler ownership structure to lower costs dramatically. Owner-operated restaurants, period. No branding fees, licensing agreements, franchise fees etc. I expect to see Shake Shack for example blow up in California and replace many of the franchise burger places for the same reason In-N-Out is successful, they're already working on drive thru models and smaller restaurants that would work here. Raising Cane's isn't franchising in California last I checked. Chick-fil-A isn't a true franchise in the first place and is more like Grocery Outlet where you "buy in" to be a general manager.

I'm interested in seeing how some of the oddities and outliers handle this. The Barstow Del Taco operation is in name only, all the food is custom fresh made and direct sourced. Even the receipt calls it Del Taco Original. Will the family ownership be able to claim they are a 3 unit chain called Del Taco Original and as such escape the law? I would argue they are effectively a separate company since their totally different menu is only served at 3 different locations.

The Habit Burger bought back the founding family's franchised locations in Santa Barbara County area and made them company owned stores. This was a bad change in my opinion, but the family saw what was going to happen and cashed out to retire and/or pursue other ventures like their new Hook Burger chain.

The franchise model is going to die in California as a result of this, I don't see any other way out.

Don't forget the franchisees also often have hefty bank loans they are paying off. I agree fully there are too many mouths to feed...

Raising Cane's as I understand it isn't doing new franchises anymore except in some special cases (such as to Panda Express for Alaska and Hawaii). They bought out the AZ/NV franchisee a number of years ago and turned all those to corporate stores. I hate to say it but they were actually run better operationally as franchise stores (cleaner, better service, far more active management). But the food seems better since they became corporate stores.

The bigger issue is the general "feed the beast" mentality of business. If you are trying to attract funding for your chain but you can only grow your chain to 59 stores they you have to quit growing, it will be very difficult to find investors. Investors want to be sold on a story of never-ending growth. A profitable 59 store chain is going to lose investor interest once it caps out at 59 stores. Maybe they can find 59 franchisees who like making the profit from the chain and that would work...

I think you start doing the Tommy's Burgers thing. First 59 are Tommy's. Next 59 are Tommi's. Next 59 are Tomy's. Next 59 are Tommy's Plus. Next are Tommy's (in small print below "By Tom's") And so on... Cook up the paperwork so they're separate.

I don't think anyone would necessarily want to get around the law over the wages. Everyone is going to have to pay that much due to the competition for labor. It's the lack of control and not knowing what kind of BS is coming next as they start to try to change work rules. At least the owners have seats on that "Fast Food Council" and they're going to be able to start showing the uneducated, illiterate fry cooks and such that were appointed to the board that their actions have led to XX thousand lost jobs, X thousand closures and bankruptcies of small business family owners, and most importantly that the big corporations they thought they were standing up against are doing just fine. But then these are the same people who probably supported the Senate candidate that wanted a $50 minimum wage, so we can implement the new $10, $20, and $30 Dollar Menu... You tell these people that the restaurant makes low single digit profits, if at all, and they just think that there's some magic hidden Fort Knox vault in there somewhere with fantastical amounts of profits and it just can't be true that once the employees, vendors, lenders, rent etc. is paid there's basically little to nothing left. I just read somewhere that a "good profit" for a restaurant after everyone is paid is about $50K per MILLION in revenue, but few owners/operators are good enough to even make that much. Let that sink in...

[ClownLoach]

I think mandatory kiosk ordering is coming. I hate to say it but the hated midwest Steak N Shake kiosk model with mandatory kiosk even if you use cash and self serve everything with zero customer service/employee interaction is probably the future of most fast foods in CA.

It's basically here. McDonald's, Taco Bell, Burger King is installing nationwide, and now Jack and Del Taco are joining in. Carl's is using AI drive thru ordering and call centers. The net result of this $20/hour stuff is going to be an overall reduction in total payroll spent along with thousands of job losses by the end of the year. I'll bet the biggest political donors for this law were the kiosk vendors and AI companies. The unions should be ashamed of themselves for falling for this scam.

If the unions thought they could start here with the endgame being running up the total minimum wage, then bringing up the union contract wage, it's going to blow up in their faces. There are increasing numbers of retailers with all RFID tagging and they could rapidly move to RFID "cart tunnels" that scan and ring the entire basket instantly, eliminating all cashiers. Right now it's still costing about a penny per item tagged, but push the labor up much more and it becomes both a cost savings and the ultimate customer convenience, the full elimination of checkout lines.