JACK - California's fast food wage hikes to face legal challenge

A newly proposed referendum seeks to block newly signed legislation that could raise the minimum wage for California fast food workers to as high as $22 per hour.

The referendum proposed to hit ballots in 2024, will turn the question of whether to allow the FAST Recovery Act to continue toward implementation or be blocked permanently. and let voters decide whether to permanently block it in 2024. According to the Wall Street Journal , the proposal was filed by state residents Amber Evans and Steven McDermed, who are represented by the law firm Nielsen Merksamer.

The challenge comes amid significant backlash against the FAST Recovery Act, or AB 257, by groups representing the restaurant industry.

“Even the Governor’s own Department of Finance said AB 257 would increase costs. This comes at a time when inflation is at record highs and families are struggling every month,” Michelle Korsmo, President & CEO of the National Restaurant Association, said in a statement shortly before its passage. ''For restaurant operators, the FAST Act threatens businesses already contending with a 16% increase in wholesale food prices and ongoing supply chain challenges. In fact, 45% of California’s restaurant operators report that their business conditions are worse today than they were three months ago.”

Jack in the Box ( NASDAQ: JACK ), Chipotle ( CMG ), and El Pollo Loco ( LOCO ) are some of the chains that analysts think could be hurt by the new fast food law. It could also clip growth plans for Dutch Bros. ( BROS ), Noodles ( NDLS ) and Wingstop ( WING ) in the state.

Read more on UBS' forecast for QSR operators in California amid the new regulations.

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