Wendy's and Jersey Mike's franchisees in California have cut hours and eliminated jobs to offset the increase in labor costs caused by the state's new $20 minimum wage.

Lawrence Cheng, who runs seven Wendy's stores in Southern California with his family, has not only cut his hours but has also stepped in to cover shifts at his burger shops, he said.

“I schedule one less person and then come in at the time I didn't schedule and work that hour,” Cheng told the Associated Press.

Lawrence Cheng says the new law has made it more expensive to operate his Wendy's stores. AP

At his Wendy's branch in Fountain Valley, Orange County, he has reduced the number of employees working the afternoon shift to seven. Before the state increased the minimum wage from $16 to $20, there were about a dozen.

Cheng has also limited overtime pay, but said he has no plans to lay off any of his 250 employees.

The situation is different for Jersey's Mike's owner Juancarlos Chacon, who runs nine branches in Los Angeles. The higher minimum wage that came into effect in April has forced him to cut 20 part-time employees from 165 to 145 and reduce employees' working hours.

He also had to raise prices on some dishes – something many of his fast-food competitors at McDonalds, Wendy's, Burger and In-N-Out have also done.

Other notorious chains, including In-N-Out, were forced to raise their prices. Getty Images

“I've been in the business for 25 years and I have two different brands, and I've never had to raise prices as much as I did last April,” Chacon told the Associated Press.

Cheng raised prices at his Wendy's store by about 8 percent in January, prepared for higher labor costs resulting from the law signed by California Governor Gavin Newsom.

“If labor costs increase by more than 25 percent overnight, any restaurant business that already has thin margins will be forced to cut spending elsewhere,” said Jot Condie, president and CEO of the California Restaurant Association, which opposes the bill.

The long-term impact on recruitment rates is still being assessed, but smaller chains will be at a disadvantage when it comes to recruiting staff. REUTERS

“Other than raising prices, reducing operating hours or reducing the workforce, they don’t have many options.”

As the Post previously reported, the new law also forced some popular chains, including Rubio's California Grill, to close dozens of locations in the state due to higher labor costs.

Newsom argued that the raise was necessary to ensure a living wage for California's more than half a million fast-food workers.

California Governor Gavin Newsom supports the bill and points to the need for a living wage. AP

According to the U.S. Bureau of Labor Statistics, fast-food restaurants in the state added 8,000 jobs in the first two months after the law took effect, compared to the same period in 2023.

No figures were available for June.

“Several franchisees have found that the higher wages are already attracting better applicants and thus reducing turnover,” said Joseph Bryant, executive vice president of the Service Employees International Union.

With post wires

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