California’s headline-grabbing minimum wage increase went into effect on April 1, ensuring pay of at least $20 per hour for all fast-food workers across the state.
The $4-per-hour increase for this group of workers at chains with at least 60 locations nationwide has led to reports of employee hours reductions and shuttered locations.
But it has also led to a widespread increase in menu prices, according to an analysis by Datassential.
Using our Price Monitor solution, Datassential has found that menu prices for limited-service restaurants (incorporating both fast-food and fast-casual operators) in California have risen notably at a pace faster and more significant than anywhere else in the country ahead of the change.
In an effort to exclude one-off price hikes or special menu introductions, the analysis only considered items that returned to a menu in the months prior to the law’s enactment (Sept. 28, 2023) and the wage’s effective date (April 1.)
Here are a few key findings:
- California led the nation in menu price inflation in the period leading up to the wage increase enactment with a menu price inflation rate among limited-service restaurants (LSR) of 7 percent.
- The percentage of LSR menu items with a price increase was higher in California than the total U.S. in all but one month from May 2023 to March 2024.
- In the six months leading up to the wage’s effective date, all of California’s 30 area codes were in the top 30% of the highest limited-service menu price inflation area codes across the country.
- The area code 530, which covers a portion of Northern California, had the highest net LSR menu price inflation among limited service restaurants in the same six-month period, at 8.9%.
Full-service restaurants in California – which includes sit-down restaurants from midscale chains to fine-dining, raised menu prices at a far more moderate pace in that six month period, although it still exceeded the national average. Net menu price inflation nationwide for full-service restaurants in the period was 2.4%, while California full-service menu prices rose by 3.3 percent.
When looking at the percentage of full-service menu items with price increases, California only topped the national average about half the time between May and March (6 out of 11 months.)
DOWNLOAD EASY-TO-READ TABLES BROKEN OUT BY:
California vs. Total U.S.
- Percentage of menu Items with an increased price, by month
- Average % price increase, by month
- Percentage of total price increase, by month
- Net inflation, Sept. 2023-March 2024
Nationwide
- Menu price inflation by area code
- Net menu price inflation by state
Media resources & citation notes
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When citing the data, please refer to Datassential as a global food and beverage intelligence company. And when possible, include a link to this post.
Methodology
This analysis was conducted using data from Datassential’s Price Monitor tool, which leverages AI to standardize and code menu items to give restaurant companies an unparalleled view of price variations across menu items, locations over time, and in comparison to local competitors.
For more information on Price Monitor, request a demo.
