In a bid to improve wages for fast food workers, California enacted a new law that raises the minimum wage for employees of fast food chains from $16 to $20 an hour. However, the wage increase will not apply to chains operating within airports, hotels, event centers, theme parks, museums, and grocery stores.

Last fall, Governor Gavin Newsom signed Assembly Bill 610, paving the way for the wage hike. The legislation received mixed reactions, with companies like McDonald's and Chipotle warning that the increased labor costs would inevitably lead to higher menu prices for consumers. Scott Rodrick, an operator of 18 McDonald's locations in the San Francisco Bay Area, expressed concerns about the rising costs but stated that he would not charge $20 for a Happy Meal.

Under the new law, fast food chains operating within "grocery establishments" are exempt, provided the retail space measures over 15,000 square feet and primarily sells household foodstuffs for offsite consumption. Moreover, the grocery establishment must generate at least 50% of its gross income from selling such foodstuffs and employ workers who staff the fast food restaurant within the establishment. Chains failing to meet these criteria would be required to pay the $20-an-hour minimum wage to their employees.

One controversial aspect of the exemption relates to the sale of bread. Restaurants that sell bread as a "stand-alone menu item" are exempt from the law, but only if the bread is made in-house and weighs at least half a pound after cooling. However, if a restaurant uses pre-made or non-in-house dough and the bread weighs more than half a pound, it does not qualify for the exemption. Chains selling muffins, croissants, scones, rolls, or buns as standalone items must adhere to the new minimum wage requirement.

Earlier this year, Bloomberg News reported that Panera Bread would benefit from the exemption due to lobbying efforts by billionaire franchisee Greg Flynn, who had close business and political ties to Governor Newsom. However, after facing backlash, Newsom's office clarified that Panera Bread did not qualify for the exemption as the chain does not produce its dough in-house. The legislation had already included the requirement of in-house dough production before Bloomberg News published its story. Flynn later confirmed that his Panera Bread stores would comply with the new minimum wage requirements.

To deter fast food chains from attempting workarounds, the law specifically states that the bread exemption only applies to restaurants that were already making and selling bread as a standalone item as of September 15 of the previous year.

The new minimum wage law seeks to balance the interests of fast food employees with the financial impact on businesses. As chains navigate the wage increase, it remains to be seen how the exemption for certain entities and the regulations surrounding the sale of bread will affect the overall implementation of the law.