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**Headline: McDonald’s franchisees push back against fast-food bill in California**

After California lawmakers recently passed a groundbreaking fast-food bill, an independent advocacy group representing McDonald’s owners is expressing concerns about the potential negative financial impact on franchisees in the state. The bill, known as AB 1228, has been passed by the state Senate and is awaiting Governor Gavin Newsom’s signature, to which he has already pledged. The bill entails the establishment of a $20 wage floor for fast-food workers in California employed by chains with at least 60 locations nationwide, effective from April 1.

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The passing of the fast-food bill in California has prompted McDonald’s franchisees to take a stand in opposition, as they predict that it will have devastating financial consequences for their businesses. In a memo addressed to its members, an independent advocacy group representing McDonald’s owners expresses its concerns about the potential negative impact that AB 1228 will have on franchisees in the state. This document was viewed by CNBC.

AB 1228, the bill in question, has been approved by the state Senate and is now awaiting Governor Gavin Newsom’s signature. Governor Newsom has already made clear his intention to sign the bill into law. Once signed, it will establish a wage floor of $20 for fast-food workers employed by chains with at least 60 locations nationwide in the state of California. This provision is set to take effect on April 1.

It is important to note that labor groups had previously sought even higher wages in earlier legislation. However, the negotiated amount of $20 per hour prevailed. This wage increase will have a significant impact on the earnings of fast-food workers in California, especially considering that the current minimum wage in the state is $15.50, and in some municipalities, the pay floor is even higher. Despite the support it has received from franchisee and restaurant advocacy groups, some McDonald’s owners are apprehensive about the implications of this bill, particularly in a challenging labor market and a period of high inflation.

The National Owners Association (NOA), an independent advocacy group representing over 1,000 McDonald’s owners, projects in their memo that AB 1228 will cost each restaurant in the state approximately $250,000 annually. According to the NOA, these costs are simply unsustainable within the business model. Additionally, the group warns that similar legislation may follow in other states, aggravating the situation further.

In its letter to the restaurant system, McDonald’s, as a corporation, acknowledges the bill and the advocacy efforts that they, along with other franchisee groups, have undertaken to combat these policies and protect the owners’ ability to make decisions that benefit their businesses locally. To counter this legislation, McDonald’s formed a coalition of brands to refer an earlier version of the bill to California voters in November 2024. However, due to the unexpected and costly nature of this measure, they felt compelled to take this route. McDonald’s also significantly increased its political engagement in the state, establishing a North America Impact Team, hiring new lobbyists and campaign consultants, and intensifying their political activity.

While McDonald’s refrains from commenting on the NOA’s letter or their stance, franchisee Roger Delph, who served on California’s owner/operator task force, asserts that both he and McDonald’s were actively involved in collaborative efforts to protect the franchised business model in California. Delph affirms that numerous conversations and meetings took place, including direct discussions with the Governor’s office.

In its systemwide letter, McDonald’s outlines some improvements made to the final version of the bill, which they believe are more favorable for owners compared to the initial proposed legislation. For instance, the new bill eliminates the threat of joint franchisor-franchisee liability, which McDonald’s claims would have been detrimental to the franchise model in California and would have stripped restaurant owners of their decision-making authority. Moreover, the bill undoes the reconstitution of the Industrial Welfare Commission, which would have had extensive powers over decisions concerning wages and workplace requirements for restaurants. According to McDonald’s, this commission, if established, would have made immediate and unchecked decisions on wages and working conditions across the state.

Other franchise and restaurant groups have a more positive outlook on the compromise. The CEO of the International Franchise Association, Matt Haller, states that the bill’s passing creates the best possible outcome for workers, local restaurant owners, and brands, while also protecting the franchise business model in California. He further emphasizes that the deal terms took into careful consideration the interests of franchisees during the negotiation process.

The Executive Vice President of Public Affairs at the National Restaurant Association, Sean Kennedy, recognizes the efforts put into crafting this legislation, stating that it provides a stable future for California restaurant operators, as well as making significant investments in the quick-service restaurant workforce. He commends the legislature’s support in passing the bill and acknowledges the collaboration from all sides involved in the negotiation process. Kennedy and Haller are co-chairs of the Save Local Restaurants coalition, which has been actively involved in these negotiations.

Critics of the bill argue that the costs associated with its implementation will disproportionately affect small business owners in the state. To address this concern, the NOA suggests various ways that members, suppliers, and McDonald’s corporate office can offer support to owners in California. The NOA proposes that anticipated menu price increases should lead to a significant revenue increase for the company and recommends that the projected $80 million raised through rent and service fees tied to price hikes be reinvested in California restaurants. They also request that any financial support requests made by owners in the state be given due consideration.

Worker advocates, who were successful in securing wage hikes, although not as substantial as initially sought, express their determination to continue fighting for improved standards in the fast-food industry. Mary Kay Henry, the President of the Service Employees International Union, highlights the significance of California’s Fast Food Council, which brings together all stakeholders, including franchisees, to shape the future of the industry. In this council, workers and franchisees will have a voice that will be heard by global franchisors, ensuring the creation of safer and more sustainable fast-food jobs for all.

In conclusion, the passing of AB 1228 in California has drawn considerable opposition from McDonald’s franchisees, who are concerned about the potential financial consequences for their businesses. The advocacy efforts of franchisee groups, such as the National Owners Association, have been met with opposition from labor groups and other franchise and restaurant organizations. While some deem the bill to be a positive compromise, others argue that it places substantial financial burdens on small business owners. The progression of this landmark fast-food bill in California provides an interesting case study of the challenges faced by franchisees in navigating changing labor laws and the potential benefits and drawbacks for the fast-food industry as a whole.

AI legalese decoder can assist in analyzing the bill and its implications, providing a comprehensive understanding of the legal language. It can quickly identify any potential areas of concern for franchisees, such as joint franchisor-franchisee liability or the powers granted to the Industrial Welfare Commission. Additionally, AI legalese decoder can aid franchisees in presenting their concerns to advocacy groups, lawmakers, and other stakeholders in a clear and concise manner. By leveraging AI technology, franchisees can have a more informed perspective on the bill’s impact and effectively engage in discussions and negotiations to protect their businesses and the franchised business model.

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