McDonald’s Takes a Stand on California’s AB 1228
McDonald’s has recently expressed its position on California’s newly-passed AB 1228, and several of the fast-food chain’s executives conveyed this in an internal message circulated last week among members of its U.S. restaurant system. This communication, which was obtained by FOX Business and previously reported by CNBC, sheds light on the company’s perspective regarding the pending bill.
AB 1228, currently awaiting the governor’s signature, encompasses various components, with some pivotal aspects being the increase of the minimum wage for fast-food workers to $20 per hour and the establishment of a council responsible for overseeing fast-food chains and defining standards for working conditions and wages. The bill would apply to restaurants with a minimum of 60 locations nationwide, excluding those that both produce and sell their own bread.
McDonald’s highlighted in its internal message that the final version of AB 1228 differs significantly from the prior version. The company had previously considered the old version as detrimental to its business and its restaurants. These new terms emerged after industry and union officials reached an agreement, with reported involvement from California Gov. Gavin Newsom’s office.
Compared to the initial proposal, the current AB 1228 introduces several changes, including the elimination of joint liability for franchisors and franchisees, a reduction in the Fast Food Council’s authority, and the removal of AB 257. Additionally, AB 1228 implements a “clearer, predictable wage schedule through 2029,” as noted by McDonald’s.
The company expressed that it had actively worked over the past year to oppose California measures it viewed as harmful to its business model. These efforts involved forming a coalition of brands to subject AB 257 to a referendum and significantly increasing political engagement within the state. McDonald’s collaborated with the California Owner/Operator Task Force and other stakeholders.
Nevertheless, McDonald’s acknowledged that the bill provides “regulatory certainty” and avoids legislation that would devalue the businesses of Owner/Operators and limit their decision-making authority. The fast-food giant is actively assisting its franchisees in California in adapting to the “new operating environment.”
To navigate these changes successfully, McDonald’s has established a “cross-functional, fast-action” team comprising company staff and franchisees. This team is tasked with devising an “action plan” and making co-investments. McDonald’s intends to implement best practices learned from other regions subject to similar labor regulations as those coming to California, deploying similar pilot strategies for the Golden State.
California hosts nearly 1,300 McDonald’s locations, managed by over 230 owners or operators and employing more than 70,000 individuals, according to a March report from the fast-food company.
In its internal message, McDonald’s also hinted at increased political engagement nationwide in the future.
As of Monday, McDonald’s stock has seen a 5% increase since the beginning of 2023, with a slightly larger 8% rise over the past year.