McDonald's weighs in on California fast-food bill

McDonald’s recently weighed in on California’s newly-passed AB 1228. 

Several of the fast-food chain’s executives did so in an internal message that went out last week to those belonging to its U.S. restaurant system and that was obtained by FOX Business. CNBC earlier reported on the communication.

The bill, awaiting the governor’s signature, has various components including key ones such as raising the minimum wage for fast-food workers to $20 per hour and creating a council to govern fast-food chains, set guidelines for wages and make recommendations regarding working conditions. Restaurants with at least 60 locations nationwide, except those that make and sell their own bread, would become subject to its provisions. 

The final version of AB 1228 featured terms "entirely different" that those in the prior version of the bill, McDonald’s said in the internal message. The company had considered the old version "harmful to our business" and its restaurants. 

Ticker	Security	Last	Change	Change %
MCD	MCDONALD'S CORP.	290.28	+1.81	+0.63%

The terms came about after the industry and union officials reached an agreement. California Gov. Gavin Newsom’s office also had involvement in it, according to reports.

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Compared to the initial proposal, AB 1228 as it now stands keeps franchisors and franchisees from facing joint liability, curbs the Fast Food Council’s authority and gets rid of AB 257. Another measure AB 1228 will bring is a "clearer, predictable wage schedule through 2029," according to McDonald’s. 

The company said it had "worked tirelessly" over the past 12 months to push back against California measures it considered harmful to its business model, with its efforts involving "forming a coalition of brands" to subject AB 257 to a referendum and upping its political engagement in the state "significantly." It worked with the California Owner/Operator Task Force and others, according to the message. 

It described California as a place where efforts to take down the franchise model had arisen "time and again."

In the message, the company acknowledged that AB 1228 could bring higher costs for California franchisees. One group representing franchisees recently suggested they could hit $250,000 per location on a yearly basis.

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However, the bill provided "regulatory certainty and avoids legislation that would devalue Owner/Operators’ businesses and their ability to make decisions for their restaurants," McDonald’s said. 

The fast-food giant said it was taking steps to help franchisees of McDonald’s restaurants in California successfully navigate amid the "new operating environment." 

McDonald’s formed a "cross-function, fast-action" team of company staff and franchisees with the purpose of formulating an "action plan" and making co-investments, it said. It will take best practices that other places learned after becoming subject to labor regulations like those coming to California and deploy similar pilot strategies for the Golden State, per the internal message.

There are nearly 1,300 McDonald’s locations in California, according to a March report from the fast-food company. Those restaurants, run by over 230 owners or operators, employ over 70,000 individuals. 

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In the message, the company also foreshadowed its political engagement nationwide would see a boost.

As of Monday, the value of McDonald’s stock has experienced a 5% rise from the start of 2023. Meanwhile, over the past one-year span, it has gone up slightly more, rising 8%.

Jay Caruso contributed to this report.

Correction: An earlier version of this story misstated the council's authority regarding working conditions. It can only make recommendations for those.