McDonald’s CEO says fast food sales are suffering in California as menu prices increased to offset the state’s $20 minimum wage for fast-food workers.”You’re seeing in California, the business there is falling off to a greater degree than what you’re seeing in other markets around the US,” CEO Chris Kempczinski told CNBC’s Squawk Box.”We’ve had to do everything in the playbook, basically, in California, from finding productivity opportunities in the restaurants, looking at staffing, looking at hours, and then, yes you do have to look at pricing,” he said.California raised the minimum wage for workers at limited-service restaurant chains with at least 60 locations to $20 an hour in April.Before this, the state’s minimum wage of $16 an hour had applied to them, though many cities and counties within California had set higher minimums.”I think what happened in California, I hope, is a unique situation,” Kempczinski told CNBC. “It was a piece of very lopsided legislation that was targeting one industry.”
McDonald’s did not respond to Business Insider’s request for further comment.The fast-food industry lobbied intensively against the legislation, warning that the higher wages would force some restaurants to lay off workers. McDonald’s was one of the companies opposing the bill, with Joe Erlinger, the president of McDonald’s US, calling it “costly and job-destroying.”Some fast-food chains have laid off workers in California, including in some cases by closing restaurants, partly in response to the new legislation.The $20 minimum wage was introduced to support workers in a state with a notoriously high cost of living. The fast-food industry, particularly, is characterized by low pay, long shifts, and irregular schedules.However, the industry is facing a wider slump in sales. McDonald’s global comparable sales dropped by 1% in the second quarter, which Kempczinski said on Monday was because the company hadn’t focused enough on value. Customers are being more discerning about where they spend their money, and some are cooking more at home instead.Are you a restaurant franchisee in California? Email this reporter at gdean@insider.com.
