Scott Rodrick, the owner of the McDonald's locations in northern California, has expressed concerns over the rising labor costs and the implications they will have on his profitability.

Rodrick has indicated that he may reduce store hours, increase menu prices, and postpone renovation plans to mitigate the impact of the new law, which came into effect on April 1. He stated that the current economic climate, coupled with escalating grocery inflation, has created a challenging situation for restaurants.

Having already implemented a price increase between 5% and 7% between January and March, Rodrick acknowledges that there is a limit to how much customers are willing to pay. He fears that excessively high prices may drive customers to opt for fast-casual dining options such as Chili's and Applebee's, which offer similar dining experiences for only a marginally higher cost.

To alleviate labor costs, Rodrick is contemplating revising operating hours and potentially delaying capital expenditures. He cited an example of deferring the replacement of an HVAC unit until 2025 or 2026. Furthermore, he mentioned the possibility of postponing a dining room remodel at one of his McDonald's locations, all to protect his unit profitability.

Rodrick voiced disappointment with California's decision to exclusively raise the minimum wage for workers at limited-service restaurant chains. He believes that a fair starting wage should be consistent across all industries and expressed concern over the potential impact on businesses like McDonald's. Representatives from Rodrick Management Group, his company overseeing the McDonald's locations, did not immediately respond to requests for comment.

McDonald's CEO Chris Kempczinski had previously acknowledged that inflation would necessitate menu price increases, even before the California law took effect. In affluent regions such as Fairfield County, Connecticut, some McDonald's outlets are charging customers around $18 for a Big Mac meal. Meanwhile, a separate McDonald's location in Connecticut was charging $7.29 for an Egg McMuffin and $5.69 for a side of hash browns.

As the effects of the $20 hourly minimum wage continue to be felt by McDonald's franchisees, business owners like Scott Rodrick face tough decisions regarding pricing strategies and investments. Balancing the need for profitability with customer satisfaction will be crucial to navigating these challenging times in the fast-food industry.