The lunch rush at a McDonald’s restaurant south of Koreatown isn’t quite as busy as it used to be, franchise owner Kerri Harper-Howie says. Though on a recent Wednesday, about a dozen workers hustled to take orders at the drive-through, cook fries in hot oil, and line up wrapped sandwiches on a conveyor belt.
Harper-Howie and her sister own 21 McDonald’s restaurants in LA County, and she says second quarter sales are down about 5% compared to the first quarter. Harper-Howie attributes that in part to increasing menu prices, which she gradually began raising toward the end of last year to help cover increasing wages.
“It is significant for any business, period,” says Harper-Howie, a franchisee who pays McDonald’s a fee to represent the brand. She says this is the first time in more than 10 years that the business has seen negative sales and guest counts.
“People don't understand that it's not billion-dollar-making corporate McDonald's. This is our family business.”
California raised minimum wages at most large chain fast-food restaurants to $20 an hour on April 1. Many workers there praised the move, while concerned franchise owners warned the added cost could devastate already struggling businesses.
Harper-Howie says the cost of paying her 1,500 employees increased by about 25%. Her business was already making adjustments for the rising cost of supplies and insurance rates under inflation.
Like many in the industry, she increased menu prices by a few percentage points in anticipation of the wage increase. A Big Mac combo at one of her McDonald’s now runs $10.49. Any more than that, and Harper-Howie says she would lose her low-income customers.
“We can't raise prices that would allow us to pay for this minimum wage increase, because our customers would literally not be able to afford the food,” says Harper-Howie.
Another way to keep the revenue flowing is to try to get by with fewer workers.
But like many others in the industry, that’s something Harper-Howie says she’s not even considering. Some of her employees may be getting fewer hours at her restaurants, but she says that’s the result of sales slowing last year after they began raising prices.
“We're not just passing [higher wage costs] on to our customers. We're not just cutting our employees’ hours,” says Harper-Howie. “We're not doing any of the things that I think people assume we are doing. We are absorbing [the] loss, period.”
Despite the cuts in profits, many franchise owners are retaining employees and even hiring. According to state Employment Development Department numbers, in June a record high of 361,500 people were employed in fast food in Southern California.
The industry added 7,600 jobs since March, before the new wage went into effect. While these are not seasonally adjusted numbers, they are still higher than the historical trend.
Big picture, economists say it’s still too soon to tell where things are headed for the industry in California, and whether or not the wage increase will lead to mass layoffs and closures.
Some chains have notoriously announced closures. Rubio’s Coastal Grill shut down 48 locations in California, citing the wage hike among the factors that led to their decision.
Meanwhile, other chains are taking the higher pay in stride. Fatburger is planning a 10-year expansion of 40 new locations in the state.
Jaylene Loubet, a fast-food worker advocate and McDonald’s cashier, attended rallies this spring in support of California’s new fast-food minimum wage. Photo by Megan Jamerson/KCRW.
As for individual workers, the new wage appears to be helping.
When Jaylene Loubet, a McDonald’s cashier in Northeast LA (not one owned by Harper-Howie), received her first check with the new wage she saw the difference. “It's exciting,” she says.
Before the pay raise, Loubet struggled to get by on the City of LA’s minimum wage of $17.25 an hour.
“It does get very emotional, especially when it comes to like, ‘Oh, do you want to have a roof over your head, or do you want food on the table?’ It's like you got to pick and choose your battles,” she told KCRW in May. “Sometimes it's better to have a roof over your head, and just go without food for a day or two.”
Loubet lives in a one-bedroom apartment in Glassell Park with her sibling and parents. She is currently the primary provider with both her parents out of work because of medical issues.
On doctor’s orders, her mom, who is also a McDonald’s worker, is supposed to eat more fresh fruit, vegetables, and lean meat. That’s where the wage increase is going, says Loubet.
“Sometimes at the end of the day, I'm [at] zero dollars, but at least I am able to afford what I need.”
Loubet worked on the statewide campaign to get this raise, and will continue advocating for fast-food workers.
“I definitely am happy with the $20, but I still feel like we have a long way to go,” says Loubet. “The cost of living in Los Angeles keeps going up. It’s only fair that our wages keep going up.”