After the recent increase in California’s minimum wage for fast food workers, Taco chain stores have closed dozens of locations.
According to a report from Microsoft’s personalized news “Microsoft Start”, Rubio’s Coastal Grill, a popular casual Mexican chain restaurant known for its fish tacos, suddenly announced the closure of 48 stores in California on May 31st. The reason cited was the continuous rise in operating costs in California, exacerbated by the increase in California’s minimum wage for fast food workers starting in April.
On Monday (June 3rd), Rubio’s announced that they have closed about a third of their 134 restaurants, leaving only 86 restaurants in California, Arizona, and Nevada, with the majority of the remaining stores located in Southern California.
A spokesperson for Rubio’s stated in a press release, “The closure of these stores is due to the rising operating costs in California. Although it is a difficult decision, it is a necessary step in our long-term strategic plan to ensure Rubio’s success in the coming years.”
The company did not provide further details on the specific reasons for closing the stores, only mentioning that these stores were “underperforming” and the decision was made after a “comprehensive review of the company’s operations and the current business environment”.
This decision comes two months after California implemented a $20 per hour minimum wage for fast food workers, a 25% increase compared to the current $16 minimum wage in almost all other industries in California.
Governor Gavin Newsom signed this new law last fall, affecting over 553,000 fast food employees and some chain brands with at least 60 outlets nationwide.
Since the law took effect on April 1st this year, the fast-food chain industry has suffered significant impacts. California has seen price hikes and layoffs across the board. Last month, after closing several locations, Red Lobster filed for Chapter 11 bankruptcy protection.
According to The Wall Street Journal, following the new wage implementation, in the first week of April, menu prices at Chipotle’s 500 restaurants in California increased by 6% to 7% compared to the same period last year. Similarly, since mid-February, Chick-fil-A’s prices in California have risen by an average of 10.6%.
Other chain brands affected by the wage increase include McDonald’s, Domino’s, Burger King, Pizza Hut, Jack in the Box, and Shake Shack.
Before the minimum wage adjustment, California’s restaurant industry, particularly pizza chain stores, had already started cutting delivery driver positions and outsourcing delivery services to third-party apps. Other companies are considering raising food prices, slowing down hiring, reducing employee hours, or pausing expansion plans, and some may choose to expand their businesses in other states.
Rubio’s filed for Chapter 11 bankruptcy protection in October 2020 in response to the Covid-19 pandemic and subsequently restructured its business. At its peak, the chain brand had 200 restaurants.