- In April 2024, California fast-food workers will get a nearly 30% pay bump to $20 an hour.
- Fast-food chains like Chipotle say they'll raise prices to offset higher labor costs in the state.
- A Pizza Hut franchisee plans to lay off 366 delivery drivers in February at 72 California stores.
A Pizza Hut operator in California is eliminating its in-house delivery service at 72 stores, resulting in 366 driver layoffs, according to federal employment notices reviewed by Business Insider.
The layoffs, effective throughout February 2024, impact Pizza Hut delivery drivers in California, stretching from Sacramento to Palm Springs. The Pizza Hut franchisee, PacPizza, and its affiliates are reducing staff as fast-food chains in California brace for a new law that increases worker pay to $20 an hour in April 2024.
"PacPizza, LLC, operating as Pizza Hut, has made a business decision to eliminate first-party delivery services and, as a result, the elimination of all delivery driver positions," according to one of five federal WARN Act notices filed by the fast-food operator with the state's Employment Development Department.
The Worker Adjustment and Retraining Notification Act, or WARN Act, requires employers to give notice of plant closures or mass layoffs.
Other PacPizza affiliates filing notices included Southern PacPizza LLC, CalPac Pizza LLC, and PacPartners LLC.
Lisa Hough, director of human resources for PacPizza in San Ramon, California, was listed as the contact on all five WARN Act notices signed by company president Brian E. Thompson. Hough and Thompson did not return a request for comment.
Consumers will have to rely on third-party delivery apps to get Pizza Hut delivered from these locations. Most Pizza Hut restaurants in the state work with third-party delivery apps such as DoorDash, Uber Eats, and Grubhub.
It's unclear if other Pizza Hut franchisees plan to scrap in-house delivery in California.
Pizza Hut, owned by Taco Bell parent Yum Brands, said the company is "aware of the recent changes to delivery services at certain franchise restaurants in California."
"Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations, while continuing to provide quality service and food to our customers via carryout and delivery," Pizza Hut told Business Insider.
Restaurant industry analyst Mark Kalinowski wrote in a note this week that he expects "more harm to come" in various ways as fast-food chains "take action in an attempt to blunt the impact of higher labor costs."
Chains such as Chipotle and McDonald's said they plan to pass the costs of higher wages in California to customers by raising menu prices.
In 2022, California Gov. Gavin Newsom signed the FAST Act into law. It called for the minimum wage for fast food workers to increase to $22 an hour in 2023. But corporate chains such as McDonald's, Chipotle, Chick-fil-A, and franchise advocacy groups fought the law. A coalition of restaurant industry organizations said the law could raise costs for fast-food restaurants by $3 billion. They rallied to get a referendum on the ballot.
A new law, AB 1228, replaced the controversial FAST Act this year. The minimum wage increase for fast food workers was changed to $20 an hour. The new law was viewed as a compromise between the labor unions representing fast-food workers and the restaurant industry.
The law impacts 557,000 fast-food workers at 30,000 restaurants in California.
Are you a fast-food worker or franchisee in California impacted by the state's wage law? Got a tip? Contact this reporter via email at [email protected].
