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Fast food affordability

Rowe's concerns are echoed by many in the restaurant industry. For instance, Andrew Wiederhorn, chairman and founder of restaurant operator FAT Brands, told Fox Business that dining out costs would rise in response to minimum wage increases.

In fact, McDonald’s, the brand synonymous with affordable offerings like the Quarter Pounder, is already grappling with how to remain accessible to consumers.

During McDonald’s latest earnings conference call, CEO Chris Kempczinski said: “I think what you're going to see as you head into 2024 is probably more attention to what I would describe as affordability.”

The company’s CFO Ian Borden further stated that pricing decisions will be “consumer led,” adding that it’s the franchisees who set prices in their respective restaurants.

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‘Bad look for the governor’

Rowe also commented on Panera Bread’s specific situation in relation to California’s minimum wage increase.

The new law exempts chains that bake their own bread and sell it as a standalone item from this wage increase requirement, notably benefiting Panera Bread. There have been allegations that this clause was included due to the relationship between Governor Gavin Newsom and billionaire Greg Flynn, a major Panera franchisee and a longtime donor to Newsom.

More recently, though, Flynn said that the Panera Bread restaurant he owns in California will start paying workers at least $20 an hour.

Rowe pointed to market forces as a driving factor behind Flynn’s decision to comply with the new minimum wage law.

“If you're suddenly the only guy who isn't paying $20 an hour, and you're looking at a finite pool of people who want to work in the fast food industry, well, who's going to apply for a job with you? Right? so they probably kind of had to do it,” he noted.

“I thought it was a bad look for the governor. I think it's a bad look for Panera ... There's always a price to pay for doing a short term thing that looks and feels good to do and say.

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Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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