San Diego-based Mexican fast-food chain Rubio’s Coastal Grill is closing down 48 locations in California due to the rising cost of doing business in the state. The closure is attributed to the state’s $20 per hour fast-food minimum wage that came into effect in April, which is pressuring businesses in the state. The privately-owned chain stated that the decision to close these underperforming locations was made after a thorough review of operations and the current business climate.
The $20 per hour fast food minimum wage in California that has been in place since April 1 has been linked to the loss of 9,500 jobs by the end of April, representing a 1.3% decrease since September 2023. In response to higher labor costs, fast-food chains are turning to greater automation and increased prices as a way to offset these expenses. The pressure on small businesses to raise wages in order to attract minimum wage workers is also increasing due to the competition from fast-food chains.
The National Federation of Independent Business California Director John Kabateck pointed out the challenges faced by businesses in the state, including a patchwork of minimum wage laws, difficulties in matching sales with expenses, proposed paid leave policies making it harder to retain employees, and higher unemployment insurance taxes. These factors are contributing to the closure of fast-food franchises in California. Currently, California has the highest unemployment rate in the nation at 5.3%.