Impacts of New Wage Legislation AB-1228 on Latino Restaurant Workers and Latino Franchise Owners in California

By Kiani Alvarez
VP of Marketing
Latino Franchise Association

New York, NY, October 2, 2023. The recent bill AB 1228, signed by The State of California Governor Gavin Newsom to increase the minimum wage for fast-food workers to $20, is creating waves in California's food industry. While the law aims to benefit workers, it presents both opportunities and challenges, especially for the Latino community, which comprises a significant portion of the state's restaurant workforce and franchise ownership. This is a win-win for Latinos Restaurants Workers and Latinos Franchise Owners in the State of California, said Rafael Alvarez, CEO & Founder of the Latino Franchise Association.

According to the National Restaurants Association, 19.7% of all Restaurants and Food Service workers are Latino. This new legislation brings a lot of benefits for the Latino workers population. Some of these benefits include.
Improved Financial Stability: The wage hike directly benefits Latino workers, many of whom have families to support. The increased pay can help mitigate the rising living costs in California.
Promotion of Equality: Latinos, often underrepresented and underpaid in various sectors, may find this legislation a step toward achieving wage parity with other communities.
Potential for Better Working Conditions: With the introduction of the Fast Food Council, workers have a platform to voice their concerns, ensuring their needs are considered in industry decisions.

At the same time, Latino restaurants and food service workers will be facing a lot of challenges like: Job Security: While many will benefit from higher wages, there's a potential downside. Some restaurants, especially smaller ones, might cut down staff or reduce working hours to balance the increased wage costs.
Increased Living Costs: An unintended consequence might be a rise in living costs as businesses across sectors might adjust their prices to offset the wage increases, potentially negating some benefits of the wage hike for workers.

This was not only a victory for Latino restaurant workers, there are some benefits for Latino Franchise Owners as well.

Competitive Edge in Hiring: Higher wages can attract a more skilled and dedicated workforce, which can improve service quality and customer satisfaction.

Standardized Pay Scale: A unified pay structure can simplify wage decisions and ensure consistency across locations.

I believe that the challenges for Latino Franchise owners are more than the benefits. It is challenging enough to manage and operate a franchise restaurant after making so many sacrifices, investing their life time savings in a franchise restaurant hoping that one day they will achieve their American Dream. Here are some of the challenges that Latino Franchise Owners will have to deal with.
Operational Costs: Latino-owned franchises, especially those just starting or with fewer resources, might find the sudden wage increment challenging. They might have to reevaluate their business strategies, prices, or staffing.
Price Adjustments: To cope with the increased labor costs, franchise owners might have to raise their menu prices, which could deter some customers, especially in a competitive market.
Expansion Decisions: As noted by the CEO & Founder of the Latino Franchise Association, Rafael Alvarez, smaller entities might find expansion more challenging in California's new legislative environment. Latino franchise owners might have to reconsider or delay their growth plans in the state.

The introduction of AB 1228, is a double-edged sword for the Latino community. While many Latino restaurant workers will benefit from improved wages, the legislation presents challenges for Latino restaurant owners who need to navigate the increased operational costs. Collaboration between workers, owners, and industry representatives is vital to ensure the law's benefits are maximized while mitigating potential adverse effects.