It has been almost a year since California’s AB 1228 pushed the fast food minimum wage to $20 an hour, and the academic research is finally catching up to what franchise owners have been saying since day one. A new working paper from UC Santa Cruz, led by economics lecturer Stephen Owen, visited more than 100 fast food outlets across the state and found a picture that is more nuanced and more troubling than either side of the political debate wants to admit.
The headline finding is blunt enough to stand on its own. At one Burger King franchise group operating in coastal markets, shift work declined more than 21% between October 2023 and October 2024. Some locations partially restored hours by 2025, but labor levels never returned to pre-law baselines.
The Application Paradox
One of the more counterintuitive findings involves job applications. The UCSC team tracked monthly application data for a Burger King franchise group operating 50-plus locations in California and found a massive surge in interest. August 2024 saw a 400% increase in applications compared to August 2023.
Higher wages attracted more applicants, but higher labor costs meant fewer positions to fill. The supply-demand mismatch created a situation where more people wanted fast food jobs at the exact moment fewer of those jobs existed. Workers who kept their positions earned substantially more per hour, but many now work fewer hours, limiting improvements to overall take-home pay.
Owen summarized the tension directly. “Based on what we’ve found, I think this legislation is a classic case of ‘no good deed goes unpunished.’”
The Automation Acceleration
Every major chain the UCSC team studied, including McDonald’s, Burger King, and Taco Bell, has invested in technology designed to reduce labor requirements. Automated ordering kiosks, mobile apps, AI-powered drive-through voice systems, and in some locations, automated dishwashing equipment. These investments were already underway before AB 1228, but the wage increase accelerated the timeline significantly.
This is the piece that a competing UC Berkeley study missed, according to Owen’s team. Berkeley analyzed over 11,000 reported salaries and menu prices from 1,500-plus California restaurants and found an 18% pay increase for workers with no detectable employment reduction and just a 3.7% average price bump. But the UCSC researchers argue Berkeley’s methodology failed to account for the labor being replaced by machines rather than eliminated from the payroll in a way that shows up cleanly in aggregate data.
The Numbers Depend on Who You Ask
The range of job loss estimates is wide enough to fuel arguments on both sides, and the methodology behind each number tells a different story. A National Bureau of Economic Research paper found California fast food employment fell 2.7% relative to the rest of the country in the first year, with a median estimate of roughly 18,000 jobs lost. Edgeworth Economics projected 33,000 jobs lost long-term. Bureau of Labor Statistics data showed approximately 10,700 positions eliminated between June 2023 and June 2024. Some industry analyses put the cumulative figure above 22,000.
What is less debatable is the price response. California restaurant menu prices rose 14.5% between September 2023 and December 2024, nearly double the 8.2% national rate over the same period.
What Independent Operators Are Feeling
AB 1228 technically only applies to franchised fast food chains with 60 or more national locations. Slightly more than half of California’s limited-service restaurants are exempt. But the UCSC study found significant spillover effects. Independent restaurants that don’t have to pay $20 an hour are raising wages anyway to compete for employees, shrinking their operating margins in the process.
The irony is that a law designed to target large corporations is squeezing the independents hardest. Franchise operators have corporate infrastructure, bulk purchasing power, and technology budgets to absorb or offset higher labor costs. A family-owned taqueria or sandwich shop has none of that.
Pizza Hut laid off 1,200 delivery drivers and replaced them with DoorDash and Uber Eats. Rubio’s Coastal Grill closed 48 California locations, citing the rising cost of doing business. One Burger King franchise owner in Northern California told the UCSC researchers they plan to close the lowest-performing 10% of their locations over the next two years.
What This Means for Buyers and Sellers
If you are evaluating a restaurant acquisition in California right now, labor cost assumptions need stress testing against this data. The $20 floor is already here for fast food, and the Fast Food Council is discussing raising it to $20.70. Wage pressure does not stay contained to one segment of the industry for long.
For sellers, the message is equally direct. Margins that looked comfortable two years ago may not survive the next round of cost increases. Every quarter you wait, the baseline operating cost moves higher, and buyers are adjusting their models accordingly.
For buyers, the automation trend creates a different kind of opportunity. Concepts that have already invested in labor-efficient operations, whether through technology, limited menus, or counter-service models, are better positioned than labor-heavy full-service formats. The gap between labor-efficient and labor-dependent restaurant valuations is widening, and that trend is not reversing.
The Fast Food Council has the authority to keep pushing wages higher. Whether they exercise it aggressively or incrementally, the direction is clear. Any acquisition model that assumes current labor costs as a ceiling rather than a floor is building on shaky ground.
Source: UC Santa Cruz Institute for Social Transformation, CalMatters, National Bureau of Economic Research
Businesses Mentioned