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Why McDonald

Autor: Tuhin Das Mahapatra

Jun 25, 2024 11:34 AM IST

The McDonald’s at Stonestown Galleria closed, citing high rent and a $20 minimum wage. Franchise owners struggle with increased costs, and layoffs.

After 30 years of service, the McDonald’s located at the Stonestown Galleria shopping mall in San Francisco closed its doors on Sunday.

 A self-service ordering kiosk is displayed at a McDonald's restaurant on May 08, 2024 in San Francisco, California. One month after California raised the minimum wage for fast food workers to $20 per hour, menu prices at some chain fas food restaurants have surged as much as 8 percent. Justin Sullivan/Getty Images/AFP (Photo by JUSTIN SULLIVAN / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)(Getty Images via AFP)
A self-service ordering kiosk is displayed at a McDonald’s restaurant on May 08, 2024 in San Francisco, California. One month after California raised the minimum wage for fast food workers to $20 per hour, menu prices at some chain fas food restaurants have surged as much as 8 percent. Justin Sullivan/Getty Images/AFP (Photo by JUSTIN SULLIVAN / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)(Getty Images via AFP)

A simple half-sheet of paper, which was hung on the glass door of the restaurant on Winston Drive, thanking the loyal customers: “We are thankful to have been part of your daily meal routine, either for an Egg McMuffin in the morning or a Happy Meal with the kids after an afternoon of shopping at Stonestown,” as reported by The San Francisco Chronicle.

Why do they have to shut down the 30-year-old chain?

Franchisee Scott Roderick cited two primary reasons for the closure: the steep charges for rent and the newly established minimum wage of $20 per hour for fast-food employees in California, effective from 1 April. The state legislative assembly has supported the law, which recognizes that out of more than half a million employees in the fast food industry, most of them are not young people looking for part-time jobs but family earners.

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The law received support from the trade association representing fast-food franchise owners. Nonetheless, and as has become evident in this paper where several franchise owners have claimed that the act has financially crippled their business in light of the dwindling economy in California, franchise owners have had a number of concerns with regards to the act.

Alex Johnson, who owns 10 Auntie Anne’s Pretzels and Cinnabon locations in the City by the Bay, shared his struggles with the Associated Press the new wage law. He noted that sales have slowed in 2024, leading him to lay off his office staff and rely on his parents for payroll and human resources assistance. Johnson explained that the wage increase would cost him approximately $470,000 annually.

To manage these increased costs, he plans to raise prices at his stores by 5% to 15% and has halted hiring and expansion plans in California. “I try to do right by my employees. I pay them as much as I can. But this law is really hitting our operations hard,” Johnson said.

ALSO READ| Burger King vs McDonald’s: Fast-food rivals battle it out with $5 meal deals, Wendy’s says ‘stop taking…’

The California Business and Industrial Alliance reported earlier this month that over 10,000 workers were sacked due to the state’s minimum wage. CABIA President slammed Governor Gavin Newsom and stated, “California businesses have been under total attack and total assault for years. It’s just another law that puts businesses in further jeopardy.”

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