Fast food franchisees fear business woes after California’s wage hike

The $4 an hour pay raise could boost paychecks for an estimated 500,000 fast food workers in California. But in the lead up to the new $20 minimum wage policy taking effect April 1st, business owners like Amir Samadi and San Jose project a pinch. As an owner or as an employer, you have to have like coverage to pay them. If you cannot, you have to shut your door. During the pressure of the pandemic, Samadi says he didn't lay off any workers or cut hours. With the new increase though, he's not sure he can afford that same protection. A collective of franchisees for Pizza Hut and Roundtable Pizza already indicated plans to lay off at least 1,200 delivery drivers this year, according to the Wall Street Journal. Roundtable Pizza tells NBC News the franchisee is transferring their delivery services to third party, calling it unfortunate, but we look at this as a transfer of jobs. Pizza Hut has not returned our request for comment and has not said publicly the change is connected to the new law. Others said they've paused hiring or cut back on workers hours. Governor Gavin Newsom signed the FAST Act into law last fall. This is a big deal. $20 an hour. Requiring the pay bump at any fast food chain with 60 or more locations nationwide, like Pizza Hut or Panera Bread. That's a 25% increase from the state's broader $16 minimum wage, which had grown over the last eight years. It's a result in part from a decade of fight for $15 protests. The movement now ballooning to a fight for $20 motto in response to inflation and higher costs of living. But this law is just for one industry, those who work in fast food. What is the point of having a separate minimum wage for fast food workers versus just across the board? It's very, very unusual to have a separate minimum wage for a particular sector. I still think there's this common misconception that, oh, well, that business owner makes a lot of money. They can afford it. That might be true, right? But that doesn't mean they won't change their behavior. When the minimum wage goes up, some low-skilled workers lose their jobs. And while it threatens those jobs, consumers could be eating the new cost, too. McDonald's, Chipotle and Jack in the Box have already said they'd raise menu prices in response to the law, creating several losers in a play that was sold as one that would win. Maura is joining us now. Maura, it's great to see you here on set in Washington. So as we're looking ahead to what happens Monday there, right, I know you've been talking with experts here with some questions about whether a pay raise like this actually is the most effective way to help workers. Basically, economists— It feels like it should be. It seems like it. Point blank, right? But the way it looks to economists, when you dig a little deeper, they told me it's essentially political theater. It makes people like Governor Newsom look really good because it says he's doing something. But what happens is you raise the minimum wages, the businesses feel, like we laid out in the package there. But also you don't have to raise taxes and then you don't really see any changes in the budget deficit. It really just hurts those employees when the businesses can't keep up. Now, there is a real need for wage adjustment when it comes to this industry. The fast food industry actually has more workers living in poverty than any other industry. But economists tell me that something like a tax credit for those workers would be more effective. That's interesting. Maura Barrett, thank you so much for that reporting. Appreciate it. Thanks for watching. Stay up to date about breaking news and top stories on the NBC News app or follow us on social media.