Two major California Pizza Hut franchisees — PacPizza and Southern California Pizza Company — are laying off more than 1,200 delivery workers ahead of the new statewide minimum wage hike for fast food workers, from $16 an hour to $20 an hour, starting April 1.
The two companies — which together own hundreds of Pizza Hut restaurants in Orange, Los Angeles, Riverside, San Bernardino and Ventura counties — are eliminating the delivery driver position as the layoffs become official in February, according to federal WARN Act notices filed last month with the Employment Development Department, as first reported by Business Insider.
"PacPizza, LLC, operating as Pizza Hut, has made a business decision to eliminate first-party delivery services and, as a result, the elimination of all delivery driver positions," the WARN Act notice stated, implying that these stores would instead be relying on third-party delivery services.
PacPizza and Southern California Pizza Company did not respond to request for comment, and neither did other California-based Pizza Hut franchisees, including American West Restaurant Group.
“Pizza Hut is aware of the recent changes to delivery services at certain franchise restaurants in California,” Pizza Hut said in a statement emailed to NRN. “Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations, while continuing to provide quality service and food to our customers via carryout and delivery. Where select California franchisees have elected to make changes to their staffing approach, access to delivery service will continue to be available via Pizza Hut’s mobile app, website and phone ordering and the customer ordering experience will remain consistent.”
AB 1228 was signed into law by Calif. Gov. Gavin Newsom last September as a modified version of the FAST Act, which was originally passed a year ago, and then was put on hold following a lawsuit initiated by the Save Local Restaurants Coalition. The new version of the legislation was proposed by state assemblymember Chris R. Holden and supported by several industry lobbying groups, including the Service Employees International Union, the National Restaurant Association, and the International Franchise Association. It took out some of the more extreme versions of the law including the original $22 an hour minimum wage starting Jan. 1, and the controversial joint liability rule between fast food franchisors and franchisees.
But some feel that franchisees did not really have a seat at the table, and that franchise owners — many of them small entrepreneurs — are shouldering the brunt of the effects of this modified legislation.
“It wasn't so much about fighting the wage increase as it was making a deal behind closed doors…that didn’t really include franchisee representatives in the room,” Keith Miller, franchisee advocate consultant and owner of three Subway locations in California, said, clarifying that there were ‘handpicked representatives’ from Yum Brands and McDonald’s in the room debating the bill. “I think most franchisees would have pushed back more on…the fact that the negotiation ended with a high minimum wage for this specific industry, and in a sense, really targeted franchisees.”
Miller said that for his businesses, labor is already pretty tight, so he does not foresee resorting to layoffs, but instead his teams will have to raise prices and become more efficient. His prediction is that businesses will invest even more in labor-saving technology solutions to offset these new minimum wages, and that eventually other industries in the state will catch up just to stay competitive in the market.
“A Domino’s or Pizza Hut franchisee would be paying $20 an hour to their delivery drivers, but DoorDash drivers aren’t getting that $20 on the hour,” Miller said. “They obviously did the equation of what it costs to pay the in-house drivers, and have the liability insurance, car reimbursement, etc. and figured it makes more sense to do it that way…. The workforce is changing.”
Although these two Pizza Hut franchisees are implementing layoffs, not all California-based companies will be. Chipotle and Panda Express — both California-based, non-franchised brands — confirmed with NRN that there are no layoffs planned in response to this legislation. In fact, a Chipotle representative said that the company is hiring (both in California and elsewhere) in 2024, with up to 315 restaurant openings planned this year.
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