'A devastating financial blow': California's so-called 'draconian' fast-food bill is now law — here's why a McDonald's franchisee group says it'll cost small business owners $250K a year

What's in the bill?

AB 1228 applies to fast-food chains with at least 60 locations nationwide — except for those that make and sell their own bread. The bill’s landmark change is a minimum wage hike to $20 per hour, almost $5 higher than the Golden State’s minimum wage of $15.50.

It would also see the establishment of a Fast Food Council to set wages and make recommendations for working conditions. The council has the power to increase the new minimum wage each year through 2029 up to 3.5% or the average change in the Consumer Price Index for urban wage earners, whichever is lower.

One key part of the bill has been removed since its proposal. Previously, AB 1228 would have made fast-food corporations jointly liable if franchisees committed labor violations, which the NOA believes could have led to “frivolous lawsuits against franchisees” that would then force the larger corporate head offices to exert more control over local operations.

“That was a tectonic plate that had to be moved,” Newsom said, referring to what he recalled were the more than 100 hours of negotiations that took place to reach an agreement between industry and labor groups.

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What now?

In exchange for the dropped attempt to make corporations liable for the misdeeds of franchisees, industry leaders agreed to pull a voter initiative that would have triggered a referendum related to worker wages in 2024, giving way to the wage increases included in the bill.

Fast-food workers in California will have to wait until April 1 of next year to reap those benefits in full; however, they may receive a small bump in the new year when the state’s minimum wage for all employees increases to $16 per hour on Jan. 1, 2024.

As for the NOA, it has expressed concerns that the passage of the bill could lead to similar efforts by legislative bodies across the country — efforts it says may jeopardize franchisees’ ability to make local business decisions.

“We need to remain unified so that this can not gain a foothold anywhere else,” the NOA said, per Fox Business.

Editor's note, Sept. 29, 2023: A previous version of this article indicated that AB 1228, when passed by the California Senate, would have made fast-food franchisors jointly liable if franchisees committed labor violations. This was amended out of the bill. Correction: The final quote, previously attributed to Roger Delph, was actually from the NOA.