The National Owners Association called California’s recently-passed AB 1228 “draconian” and dear to franchisees in a memo distributed to its members.
“The brand new ‘AB 1228’ laws has been voted into law and can lead to a devastating financial blow to California McDonald’s franchisees at a projected annual cost of $250,000 per McDonald’s restaurant,” the advocacy group representing some 1,000 McDonald’s franchisees said within the memo obtained by FOX Business.
“These costs simply can’t be absorbed by the present business model.”
CNBC earlier reported on the NOA memo.
Among the many bill’s key components:
- It might raise the minimum wage for fast-food staff to $20 per hour.
- It might apply to restaurants with a minimum of 60 locations nationwide, aside from restaurants that make and sell their very own bread.
- It might also create a 10-person council to manipulate fast-food chains and set guidelines for working conditions and wages.
When signing the unique version of the laws, California Gov. Gavin Newsom said, “California is committed to making sure that the lads and ladies who’ve helped construct our world-class economy are in a position to share within the state’s prosperity. Today’s motion gives hardworking fast-food staff a stronger voice and seat on the table to set fair wages and significant health and safety standards across the industry.”
The state Senate passed AB 1228 Thursday.
Gov. Gavin Newsom advocated for the bill in an attempt to offer fast food staff more rights. AP
The NOA said franchisees, suppliers and McDonald’s “must engage to support our California McFamily” and identified steps it said they each should take with ideas starting from the franchisees establishing 501(c)4 entities and state political motion committees (PACs) to create an official arm to lobby the federal government.
Suppliers urged the reduction of costs in operations that may lead to cost savings for fast-food restaurants they work with.
The NOA called on McDonald’s to direct “rent and repair fees collected from sales” from potential price increases in response to the bill to efforts like “overhauling” the operational platform and doing more labor-related research and development to assist franchisees.
In its memo, the NOA also made allegations a couple of “small coalition of franchisors” having “negotiated a cope with” the Service Employees International Union without franchisee involvement “causing the legislative consequence to now develop into certain.” It mentioned McDonald’s, the National Restaurant Association and the International Franchise Association.
McDonald’s logo is seen on the restaurant in Wroclaw, Poland on August 25, 2023.NurPhoto via Getty Images
IFA CEO Matthew Haller told FOX Business he participated within the negotiations with a goal of constructing sure franchises had involvement and representation. Some franchisees spoke on to the governor’s office, he added.
FOX Business also reached out to the National Restaurant Association for comment.
“Over the past yr, I’ve worked closely with company leaders, a task force of fellow franchisees and our own independent advisers as a part of a coalition of brands working to guard our business model against an all-out attack on restaurant owner/operators,” California McDonald’s franchisee Roger Delph said in an announcement to FOX Business.
“Anyone who’s suggesting this was not a collaborative and successful effort to guard the franchised business model in California, or that franchisee involvement was absent, was either not involved or is contorting the facts.”
The NOA suggested AB 1228’s passage may lead to similar efforts by legislative bodies elsewhere within the country, adding, “We’d like to stay unified in order that this will not gain a foothold anywhere else.”
In a recent internal message obtained by FOX Business, McDonald’s told its restaurant system AB 1228’s terms “are entirely different” in comparison with the prior version of the bill that it described as “harmful to our system.”
It said AB 1228 created a “significantly limited Fast Food Council,” did away with AB 257, prevented joint liability from getting applied to franchisors and franchisees, and made a “clearer, predictable wage schedule through 2029,” amongst other things.
California McDonald’s franchisees will see a projected annual cost of $250,000 per McDonald’s restaurant.Getty Images
McDonald’s “worked tirelessly” with the “California Owner/Operator Task Force” and others within the state to “protect owner/operators’ ability to make decisions for his or her businesses locally and protect their restaurants and their crew,” the corporate said within the message.
Those included the creation of a “coalition of brands to refer AB 257 to California voters in November 2024” and “significantly” increasing its “political engagement within the state,” in accordance with the message.
The corporate said it has established a “cross-function, fast-action team of McDonald’s staff in addition to Owner/Operators from California, Latest York and Illinois, to co-invest and work collaboratively on an motion plan.”
It is going to “pilot progressive short and long-term solutions” for California using best practices adapted from other places which have experienced similar laws, in accordance with the inner message.
Jay Caruso contributed to this report.
