Is California’s $20 Minimum Wage Forcing Jack in the Box to close restaurants and explore selling Del Taco?
This article was written by Katy Grimes and originally published by the California Globe.
San Diego based Jack in the Box just announced it will be closing 150-200 restaurants “to improve long-term financial performance across its restaurant system, strengthen its balance sheet and demonstrate its commitment to running an asset-light business model — all of which will position the Company for sustainable growth in the coming years.”
That’s an appropriate way of saying they are consolidating and skinnying-up operations in order to remain viable.
Is this more evidence of the destruction courtesy of California’s $20 fast food minimum wage law? As Rebekah Paxton, research director at the Employment Policies Institute recently said, “The law has forced restaurants to raise their prices, causing customers to eat out less, therefore triggering restaurants to slash thousands of jobs or close up shop. It’s time for Newsom and the SEIU to cut the crap.”
Jack in the Box will close 150 to 200 “underperforming” restaurants and said they will explore selling the Del Taco brand, which the company purchased in 2022.
Jack in the Box is calling this its “JACK on Track” plan – “a comprehensive series of actions to improve long-term financial performance across its restaurant system, strengthen its balance sheet and demonstrate its commitment to running an asset-light business model — all of which will position the Company for sustainable growth in the coming years.”
The recently named CEO Lance Tucker said in a statement, “Our actions today focus on three main areas: addressing our balance sheet to accelerate cash flow and pay down debt, while preserving growth-oriented capital investments related to technology and restaurant reimage; closing underperforming restaurants to position ourselves for consistent net unit growth and competitive unit economics; and, an overall return to simplicity for the Jack in the Box business model and investor story.”
California has 942 Jack in the Box restaurants. “Jack in the Box acquired Del Taco in 2022 for around $585 million,” Times of San Diego reports. “The company operates approximately 2,200 Jack in the Box outlets in 22 states. Del Taco has approximately 600 restaurants in 17 states.”
According to the U.S. Bureau of Labor Statistics’ Current Employment Statistics (CES), 22,717 fast food jobs have been lost in the past year when seasonally adjusted. The Berkeley Research Group also found that fast food prices in California have gone up by 14.5% since a year ago – about double the national average of 8.2%. And that’s not even getting into the 89% of all restaurants in the state reducing employee hours to offset rising costs, with 87% planning additional cuts over the next year, the Globe reported.
AB 1228 was signed into law by Governor Gavin Newsom September 28, 2023, creating the new $20 minimum wage for fast food employees – a massive 25% increase from the $16 minimum wage.
There is little doubt that the cost of doing business in California with the $20 per hour minimum wage, high utility costs, high taxes, high utilities, high gas prices, cap-and trade climate change regulations, CalOSHA regulations, air quality management district regulations, mandatory overtime, workers compensation insurance, and myriad DEI regulations led to Jack in the Box making this decision.
