In our blog posted May 3, 2023 we discussed the potential impact of pending California legislation that would establish a minimum wage and other workplace requirements for fast-food workers. Recently, labor groups, primarily the S.E.I.U., and fast-food companies reached an agreement that resulted in legislation that established increases in minimum wages for fast-food workers and addressed some workplace issues while dropping some of the more onerous parts of the original proposed regulations.
While the final bill is somewhat less onerous, it may create new problems for franchisees. Investors should recognize that California persists in legislating business decisions made by politicians with little or no business experience or any direct interest in the outcome of their actions.
In this regard, it might be useful to review Senator George McGovern’s encounter with reality. As a life-long liberal politician, Senator McGovern was successful in passing many onerous regulations on business. Following his career in the public sector, he ventured into the private sector with the acquisition of the Stratford Inn in Connecticut. After four years the business failed, leading to his writing a letter to The Wall Street Journal, entitled “A Politician’s Dream is a Businessman’s Nightmare.” In the letter he stated: “While I never doubted the worthiness of any of these goals, the concept that eludes legislators is: ‘Can we make consumers pay the higher prices for increased operating costs that accompany public regulation and reporting requirements with reams of red tape.’”
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA