After serving customers for more than 30 years, a McDonald’s restaurant located in San Francisco, Calif., shut its doors for the last time Sunday because of the state’s new $20 minimum wage and the store’s high rent.
Franchise owner Scott Rodrick described the store’s last day as a “gut-wrenching” one for his family, a local ABC affiliate reported. In a farewell note posted on the restaurant’s door, Rodrick wrote he was pleased to serve the local area. He also noted that all of his employees will be working under his restaurant company at other McDonald’s nearby.
The store was located at the Stonestown Galleria shopping mall, about eight miles outside of downtown San Francisco.
The decision was, in part, due to the landlord’s refusal to negotiate long-term rent for the Stonestown location, which saw the highest property taxes and tenant mall fees for the owner’s company.
California’s decision to raise its minimum wage for fast-food workers from $16 to $20 an hour also contributed to the restaurant’s strain, Rodrick said. The new starting wage took effect on April 1, forcing numerous restaurant franchises to raise prices, cut jobs, or close locations.
Earlier this month, Rubio’s Coastal Grill shuttered 48 California locations, roughly a third of its eateries, and subsequently filed for Chapter 11 bankruptcy to facilitate a sale of the business. The company cited “significant increases to the minimum wage in California” among the reasons for its decision. The Mexican taco chain’s remaining 86 stores located in California, Arizona, and Nevada remain open.
Red Lobster also filed for Chapter 11 bankruptcy last month, taking a hit from California’s wage hike. Signed into law by Governor Gavin Newsom last fall, the mandated wage increase affects over 553,000 fast-food employees and chains with at least 60 locations nationwide.
Menu prices at fast-food restaurants rose by as much as 8 percent immediately after the new wage took effect, according to an April study. Wendy’s experienced the highest price hikes, while Chipotle’s prices have gone up by 7.5 percent. Taco Bell and Burger King saw a 3 percent and 2 percent increase, respectively.
McDonald’s has faced similar increases. Rodrick told CNN in April that 18 of his stores raised prices by 5 to 7 percent.
“As a business owner, when you’re dealing with this kind of extraordinary overnight change, you know, a 25% increase in wages, . . . [no] stone has to remain unturned,” Rodrick said at the time. “And so we have looked at price, although I can’t charge $20 for a Happy Meal. My customers’ appetite to absorb menu board prices is not unlimited.”
Prior to the wage hike, California restaurants, particularly pizza chains, began laying off delivery drivers and outsourcing deliveries to third-party apps, as National Review previously reported. Other companies considered raising food prices, slowing hiring, shaving employee hours, and pausing expansion plans or expanding in other states instead, among other actions.
Restaurants cut about 9,500 fast-food jobs, according to Hoover Institution’s April analysis. Notably, that does not include the number of jobs lost since the wage took effect. The think tank estimated that Rubio’s abrupt closures this month disappeared roughly 1,250 jobs.