(Scypre.com) – The National Owners Association expressed strong concerns about California’s recently enacted AB 1228, labeling it as excessively restrictive and financially burdensome for franchisees in a communication circulated among its members.
The advocacy group, representing approximately 1,000 McDonald’s franchisees, emphasized the profound fiscal impact this new legislation would have on California’s McDonald’s franchisees, projecting an estimated annual cost of $250,000 per McDonald’s restaurant. The memo, obtained by FOX Business, conveyed the group’s assertion that such costs could not be accommodated within the current business framework.
CNBC had previously reported on the content of the NOA memo.
The key provisions of the bill outlined include an increase in the minimum wage for fast-food workers to $20 per hour, application to restaurants with a minimum of 60 locations nationwide (excluding those producing and selling their own bread), and the establishment of a 10-person council to oversee fast-food chains, setting guidelines for working conditions and wages.
Upon signing the original version of the legislation, California Governor Gavin Newsom affirmed the state’s commitment to ensuring that workers within the fast-food industry can partake in the state’s prosperity by having a stronger voice and influence over fair wages, health, and safety standards.
The NOA urged franchisees, suppliers, and McDonald’s to collaborate in supporting their Californian operations. They recommended actions such as establishing 501(c)4 entities and state political action committees (PACs) to lobby the government effectively.
Furthermore, suppliers were encouraged to minimize operational costs, potentially resulting in cost savings for the fast-food restaurants they serve. The NOA called upon McDonald’s to allocate the proceeds from potential price increases in response to the bill towards efforts such as operational overhaul and increased labor-related research and development to aid franchisees.
The NOA’s memo also alleged the involvement of a “small coalition of franchisors” negotiating with the Service Employees International Union without franchisee engagement, affecting the legislative outcome. McDonald’s, the National Restaurant Association, and the International Franchise Association were mentioned in this context. The IFA CEO, Matthew Haller, stated that efforts were made to ensure franchisee involvement and representation in the negotiations.
In response to these developments, McDonald’s emphasized their collaborative efforts to protect the franchise business model in California, involving franchisees and coalitions to safeguard their businesses and maintain local decision-making autonomy.
Concerned that the passage of AB 1228 could set a precedent for similar legislation in other regions, the NOA stressed the need for unity to prevent its proliferation.
An internal communication from McDonald’s to its restaurant system emphasized the significant differences between AB 1228 and the previous version of the bill, which was considered detrimental to their system. The company underscored its commitment to collaborate and innovate, leveraging experiences from other regions to develop strategies for California’s unique challenges posed by the legislation.