Скачать или смотреть How has California's $20 per hour minimum wage impacted McDonalds & Chipotle? Benjamin Z Miller An

California's recent minimum wage increase to $20 per hour for fast-food chain employees has significantly influenced visitation trends for McDonald's and other fast-food restaurants in the state. Analyst R.J. Hottovy notes that the wage hike, effective April 1, 2024, led to a noticeable shift in consumer behavior, particularly as fast-food chains raised their menu prices to offset the increased labor costs.

Data shows that year-over-year fast-food visit trends in California were slightly ahead of national averages before the wage increase but fell behind after the new wage took effect. This shift was especially evident during the April-May 2024 period, where California's fast-food visitation rates underperformed compared to national trends. Notably, McDonald’s saw its California locations underperform the national average by about 250 basis points post-wage increase.

R. J. Hottovy, a CFA in Chicago who is the Head of Analytical Research at Placer.ai did a very interesting analysis. He did a great job and it is worth reading. He highlighted in his analysis that fast-food burger chains were hit the hardest by the wage increase, with other major chains in California also underperforming their national averages. Chipotle, for example, experienced a similar downturn in visitation trends after raising menu prices by 6%-7% in the state. This trend indicates that higher prices may be driving consumers away from fast-food options.

Interestingly, the increase in fast-food prices may have inadvertently benefited casual dining chains. Hottovy points out that concepts like Olive Garden and Chili’s have outperformed their national averages in California since April. This suggests that as fast food becomes more expensive, consumers might be opting for casual dining alternatives that offer better value propositions, even if their prices are slightly higher.

In summary, R.J. Hottovy's analysis reveals a complex ripple effect of California's minimum wage increase on the restaurant industry. While fast-food chains struggle with reduced visitation due to higher prices, casual dining establishments seem to be gaining traction. This shift underscores the broader economic implications of wage policies on consumer behavior and business operations within the food service sector.

If you are interested in things like this and thinking about how it all might impact shares in McDonalds or Chipotle, you should join the Benjamin Z Miller Investor Networking Group. We have meetings every week. Just send me an email to [email protected] for more information.

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