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California restaurants prepare for new wage law by reducing staff

California restaurants are reportedly cutting staff and limiting working hours to bring down costs before a new state law to increase the hourly wages of fast-food workers to $20 on 1 April 2024 comes into effect, The Wall Street Journal has reported.

The legislation, introduced in September 2023, mandates that restaurant chains will have to increase their pay rates from $16.21 to $20 per hour. The law applies to restaurant brands with 60 or more locations across the US.

Pizza Hut and Round Table Pizza, with a network of 400 outlets predominantly on the West Coast, are planning to lay off 1,280 delivery drivers in 2024.

Their plans have been disclosed in compliance with the Worker Adjustment and Retraining Notification Act, which requires large employers to submit records to the state before executing substantial layoffs.

In 2023 several Pizza Hut franchises filed notices indicating the cessation of their delivery services, which primarily affected delivery driver positions.

Michael Ojeda, a Pizza Hut driver from Ontario, California, shared with The Wall Street Journal that he was notified by franchisee Southern California Pizza in December 2023 that his employment would terminate in February.

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“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,” a Pizza Hut spokesperson told FOX Business at the time. 

The Southern California Pizza Company announced in December that 841 drivers would be laid off across the state, affecting locations in Los Angeles, Orange, San Bernardino, Riverside and Ventura counties.

FAT Brands, the parent company of Round Table Pizza and Excalibur Pizza, has also confirmed that the layoffs would involve delivery drivers.

FOX Business quoted FAT Brands’ statement that: “The franchisee is transferring their delivery services to third party. While it is unfortunate, we look at this as a transfer of jobs.

“As you know, many California restaurant operators are following the same approach due to rising operating costs. We anticipate third-party delivery providers in turn will see a boost in their businesses, which will require additional staff on their end.”

A spokesperson for Round Table Pizza also verified to The New York Post that the layoffs are concentrated among delivery personnel.

Brian Hom, the owner of two Vitality Bowls restaurants in San Jose, mentioned that he operates with half the usual staff, leading to longer customer wait times and higher prices to offset increased labour expenses.

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