Chipotle, McDonald’s, Starbucks, Jack in the Box and Shake Shack are planning to raise menu prices. Fast-food franchisees are laying off employees or cutting their hours. Smaller independent business owners, meanwhile, worry their workers will bolt unless they also increase wages.

With California’s mandatory minimum wage for fast-food workers set to jump to $20 an hour on Monday, major restaurant chains are scrutinizing every aspect of their businesses to find ways to offset the extra money they will soon be spending on labor. In many cases, customers will end up eating the cost.

“It’s going to be a pretty significant increase to our labor,” Jack Hartung, Chipotle’s chief financial officer, said of the new law during the company’s third-quarter earnings call. He estimated that the burrito chain would boost prices by “a mid-to-high single-digit” percentage as a result. “We are definitely going to pass this on.”

The pay increase established by Assembly Bill 1228 applies to California fast-food workers employed by any chain with more than 60 locations nationwide, and covers corporate-owned and franchised locations. The state has more than 540,000 fast-food workers, about 195,000 of them in Los Angeles and Orange counties, according to the latest May 2022 figures from the U.S. Bureau of Labor Statistics.

The current minimum wage in California, regardless of industry, is $16 an hour, meaning many cashiers, line and prep cooks, counter attendants and baristas will see as much as a 25% raise overnight.

Jaylene Loubet, 25, has worked as a cashier at a McDonald’s in Cypress Park since 2017, initially making $16.25 an hour.

Since then her hourly pay has only risen to $17.50, she said, the same amount that her mother, a longtime cook at the same location, makes. The two live with Loubet’s father in a one-bedroom apartment in Glassell Park, unable to afford a bigger place.

“When you’re in a tough financial situation, even though it’s not enough to be comfortable, it does help,” Loubet said of her upcoming raise. That said, “food is going up as well, rent is going up as well, bills are going up as well. Even with the $20, money is still going to be tight.”

With the federal minimum wage stuck at $7.25 an hour since 2009, many states and cities have taken it upon themselves to lift the pay floor. But the California bump for fast-food workers is unusual for targeting a specific business sector and adjusting the minimum rate by so much at once.

“This is such a dramatic increase on a state minimum wage that was already quite high,” said Harry Holzer, a Georgetown University public policy professor and the Labor Department’s chief economist in the Clinton administration. “The workers who keep their jobs will be happy — they will be better off.”

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