storewanderer wrote: ↑April 9th, 2024, 1:10 am
ClownLoach wrote: ↑April 8th, 2024, 9:52 am
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.