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Here's what we learned about California's wage increase after one quarter

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Here's what we learned about California's wage increase after one quarter


The second quarter was an important litmus test for restaurant operators with a footprint in California, as it marked the first reporting period following the state’s implementation of AB 1228 on April 1. The law raised the minimum wage at quick-service restaurants to $20 an hour, or by 25%.

The legislation initially raised some hell in the industry, to put things lightly. Some companies blamed the hike for layoffs, others for closures. Some operators vowed not to include California in their expansion plans. For public companies, however, the reaction has been a bit more measured. In summary, it’s full speed ahead in California, a state that is experiencing population growth for the first time in three years. But, it’s full speed ahead with significant price increases to offset the labor inflation, and those price increases have impacted traffic at many, if not most, concepts. According to Revenue Management Solutions, traffic in California has declined by 5.9% since January versus the U.S. average of negative 3.6%.

RMS’ data finds that menu prices in California have risen over four percentage points more than the U.S. average since January, or 7.5% compared to 3.1%. Domino’s, Shake Shack, and Chipotle are three such companies that took high-single-digital pricing increases in the state following the implementation of AB 1228.

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Labor optimization

In addition to taking pricing, several chains are sharpening their focus on “labor optimization” to offset wage inflation. California-based The Habit Burger Grill is one of them.

“… A comprehensive store level labor optimization effort … contributed to an impressive 520 basis point expansion of restaurant level margins from the first quarter, despite a double-digit increase in restaurant level labor rates in California stores,” David Gibbs, CEO of parent company Yum Brands, said during his company’s earnings call earlier this month.

El Pollo Loco, which has a massive footprint in California, is exploring “labor productivity initiatives,” like deployment and scheduling, in addition to increased menu prices. CFO Ira Fils said traffic in California was “a little more” down compared to other markets, but overall, “we didn’t see a whole lot of difference between the markets.”

Sweetgreen is also making improvements to its labor optimization, according to CFO Mitch Reback, while Portillo’s is testing kiosks in the California market.

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QSRs hit

Of course, QSRs have beared the brunt of this inflation and executives acknowledged as much during their respective Q2 calls. McDonald’s chief financial officer Ian Borden simply called wage pressures in California “a headwind we’re working through,” adding that margins could be “down a little bit” from 2023 accordingly, but still good considering the “overall context of what we’re working through.” McDonald’s experienced its first negative same-store sales quarter since 2020.

As for Wendy’s, CEO Kirk Tanner called California “unfortunate from a wage and labor standpoint,” adding that the company is focused on “driving more productivity.”

“If you look at where consumers are, our focus is on winning and competing well in this environment. And we’re doing that with that strategy, including places like California. It goes to delivering our core, having compelling innovation and having relevant value,” Tanner said. Wendy’s sales were essentially flat in Q2.

Jack in the Box felt a swift impact, with labor costs up 200 basis points from the prior year, while franchise-level margin was $74.6 million, compared to $75.3 million a year ago. CEO Darin Harris said the chain will “regain” its margin through improved sales, and “ongoing equipment, technology, and financial fundamentals initiatives.” The chain has adopted a new oil management process, for instance, and is in the process of testing a fryer automation system, while its sister chain, Del Taco, is testing kiosks. Jack in the Box also worked with its franchisees to take a “surgical approach” to pricing. Despite the early hit on margins and sales, executives remain optimistic about California.

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“California fared substantially better than we thought,” CEO Darin Harris said.

“This was the first full quarter of operating under the increased minimum wage law and we are proud of how our teams executed through this change,” CFO Brian Scott said. “[For] Jack in the Box company-owned restaurants, which are predominantly in California, same-store sales performance was better than all but one market. Del Taco had a similar result, with California being one of their top markets in the quarter.”

Full-service insulated?

Despite the law only applying to QSRs, full-service wasn’t completely insulated. Consider Kura Sushi as an example here. The company’s second quarter performance fell well short of expectations, with chief executive officer Hajime Jimmy Uba citing AB 1228 as a main culprit given that comparable same-store sales decelerated in California in April.

“What we have seen … is a general perception that restaurants as a category have become expensive, introducing industry-wide pressures regardless of a given restaurant’s relative value,” he said.

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Still, many full-service concepts have experienced no change at all, or even a small tailwind from the QSR-focused legislation. For example, Texas Roadhouse’s handful of California stores are doing “fine,” according to executives.

BJ’s Restaurants, which is headquartered in Huntington Beach, Calif., also hasn’t seen changing trends from its consumers, perhaps because gas prices have come down, according to chief financial officer Tom Houdek. BJ’s executives made it a point to also note that labor levels haven’t been impacted by higher wages at QSRs and that the company is “in a better place” than in 2019 with staffing. That said, Houdek called the statewide pricing increases a “sticker shock” for consumers.

Denny’s has leaned into a silver lining from California’s wage increases, expanding its virtual Banda Burrito brand to over 300 restaurants with a priority on the state to add the revenue channel. CEO Kelli Valade said traffic outperformed QSRs during the quarter because of lower menu prices relative to QSRs, as well as the expansion of Banda Burrito. Notably, Denny’s is also targeting California as one of its growth markets for its Keke’s brand.

“We have not experienced a material increase in team wages at our 22 California company restaurants as a result of AB 1228. We believe this is in part due to our servers earning well above the AB 1228 minimum wage when factoring in tip income,” CFO Robert Verostek said, adding,The [market share] gap we were experiencing to overall QSR, we’ve cut in half in California specifically.”

Cheesecake Factory is also seeing consistency across its geographies with no added pressure from California. CEO David Overton said the legislation mostly impacts QSRs, “which is positive for us.”

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Notably, full-service brands aren’t the only ones with optimism. Wingstop had a meteoric second quarter relative to the rest of the industry, AB 1228 be damned. Wingstop did not experience transaction changes after implementing pricing increases to offset wage increases at its 400-ish California locations.

“In fact, the trends in California are following a very similar trend to what we see outside of California for our business,” CFO Alex Kaleida said.

Further, Dutch Bros experienced a 60-basis-point year-over-year increase in labor costs primarily driven by the wage increase in California, where about 20% of its system is located. The company took a 1.5% pricing increase to help offset the pressure but has otherwise been focused on business as usual.

“We had two of our top first week performers in California in the first half of this year,” CEO Christine Barone said. “We continue to be very bullish on our prospects in California and continue to look for sites and opening shops in California.”

Contact Alicia Kelso at [email protected]

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Trump claims without proof Democrats are ‘trying to steal’ California primaries

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Trump claims without proof Democrats are ‘trying to steal’ California primaries


Donald Trump has alleged without evidence that Democrats are cheating in California’s primaries and claimed in a late-night social media post that the US attorney’s office in Los Angeles was investigating.

As counting continues in the most populous state in the US, the president’s unfounded remarks are likely to further alarm election observers, who have warned of the risk of escalating misinformation in the absence of a final result.

Trump has a history of undermining election results that don’t go in his favor. He has repeatedly alleged that Democrats “stole” the 2020 presidential election, which he lost to Joe Biden, despite privately admitting his defeat, according to aides.

At 12.48am on Thursday, Trump posted: “The Dumocrats are at it again! They are trying to STEAL THE GOVERNOR OF CALIFORNIA PRIMARY, AND THE MAYOR OF LOS ANGELES, PRIMARY, AWAY FROM TWO GREAT REPUBLICAN CANDIDATES. Here we go with the very late and massive numbers of MAIL IN BALLOTS.”

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“There’s BIG cheating by the Dumocrats in California,” he said 17 minutes later in another post on his Truth Social platform. “Votes are all tied up. May not be in for weeks. Under investigation by the U.S. Attorney’s Office in Los Angeles. Why the vote counting DELAY??? President DJT”.

The US attorney’s office said it had no comment on Trump’s claim that his allegations of cheating are “under investigation” by US attorneys. The Department of Justice in Washington DC did not immediately respond to a request for comment.

The president presented no substantive basis for questioning the legitimacy of the election.

Mail-in ballots factor heavily in California political races – typically about 80% of votes cast – and those ballots can be counted up to a week after election day, as long as they are postmarked before election day.

California uses a “jungle” primary process, in which the two candidates with the most votes advance to a runoff – regardless of their political party – unless one candidate wins an outright majority. A huge field of 61 candidates fragmented the vote in the race for governor, but Republicans have coalesced around Steve Hilton. Together with Xavier Becerra and Tom Steyer, the three are in a contest that remains too close to call as votes are tallied.

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Mail-in ballots tend to favor Democrats, which implies the possibility that Hilton – whom Trump has endorsed – may drop into third place by the time all the ballots are counted.

The last Republican to win the California gubernatorial race was Arnold Schwarzenegger in 2006. Republicans have polled just under 40% in each of the last four contests.

Last month Gavin Newsom sent a letter to elections officials to thank them for their work while warning that a long process invites disingenuous accusations of misconduct.

“We must acknowledge that the longer the vote count takes, the more mis- and dis-information spreads,” wrote the California governor. “That means we must do all that we can to tabulate votes quickly and accurately. Time is of the essence in preventing election lies from taking root.”

On Wednesday evening, election observers echoed those concerns. “Conducting elections with integrity and ensuring that every eligible vote is counted are fundamental to maintaining public confidence in our democracy,” said Mike DuHaime of the Democracy Defense Project, a bipartisan effort to combat election misinformation.

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“At the same time, prolonged delays in ballot tabulation, such as those that have become increasingly common in California, can undermine public trust and create unnecessary uncertainty around election outcomes,” DuHaime added. “The longer election results remain unresolved, the greater the opportunity for misinformation and speculation to spread online, eroding confidence in our electoral process. Accuracy must always remain the highest priority, but accuracy and timeliness are not mutually exclusive.”



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California man charged with bringing explosives to Sacramento airport after repeatedly calling FBI tip line | CNN

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California man charged with bringing explosives to Sacramento airport after repeatedly calling FBI tip line | CNN


A California man was charged Tuesday after authorities say he brought an explosive device and other weapons through a security checkpoint at Sacramento International Airport.

Kimani Osayande Jones, who also uses the last name Jackson, attempted to bring an improvised explosive device, a knife and other bladed weapons, a torch lighter and zip ties through a TSA security checkpoint on May 30, according to court documents filed Tuesday in the Eastern District of California.

Officials believe Jones, 49, repeatedly called the FBI tip line to report he was being threatened and intimidated in the months leading up to the incident.

Sacramento County Sheriff’s Office bomb technicians safely removed the explosive device and tested its powder and fuse, both of which were determined to be “viable and energetic,” officials say.

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Investigators said the device had the potential to damage an aircraft and cause a loss of cabin pressure.

Jones’ other luggage, which had already been through security and loaded onto an American Airlines flight to Charlotte, North Carolina, was hand-searched and examined by a canine unit upon arrival, and investigators said nothing “illegal or concerning” was found.

Jones has been charged in federal court with unlawful possession of explosive material at an airport. He faces up to five years in prison and a $250,000 fine if convicted.

His attorney, Meghan McLoughlin, told CNN in a statement: “There is often more to these cases than the government’s allegations, and that the criminal process will reveal Mr. Jones’ story as well.”

Multiple cell phones and repeated FBI tip line calls

The Sacramento resident went through security on May 30 wearing a face covering and blue latex gloves, court documents say.

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When officers found the explosive device and other items in Jones’ carry-on bag, he told them he was unaware the items were in his possession and said “he would be okay with just discarding them.” When authorities informed him that explosive material could not simply be thrown away, he denied ownership of the backpack.

Jones also had five mobile phones in his possession. The cameras on each phone had been covered with painter’s tape, which authorities believe was intended to prevent his surroundings from being recorded.

One phone contained a 15-minute timer ready to start and another had a message from an unknown number on the screen stating, “we will be awaiting your call,” according to court documents.

An individual police believe to be Jones made approximately 13 calls to the FBI tip line leading up to the incident, beginning in March.

On May 24, the caller reported being followed to and from a doctor’s appointment and described what he said were threats and intimidation by another individual.

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He said he was “being coerced in sleep to say certain phrases through digital media” and described “hearing sounds coming through walls, window panes, or even outside, attributing the outside sounds to drones,” court documents say. The call was ultimately terminated because of its “nonsensical nature.”

On the day of the incident, the same caller again contacted the FBI tip line, alleging that several individuals were threatening him throughout the past year through “cyber means.” He also referenced exercising his Second Amendment rights while denying any intention to harm others.

The Sacramento County Sheriff’s Office also noted it had prior contact with Jones, “wherein he had a history of being paranoid.”



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California may take weeks to finalize primary results. ‘This is normal’

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California may take weeks to finalize primary results. ‘This is normal’


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Although results from California’s primary election began rolling in on Tuesday, June 2, it could take days or even weeks before the final counts are certified. 

“This is normal … We have a process that by law ensures both voting rights and the integrity of elections, so I would call on all Californians to be patient,” Secretary of State Shirley N. Weber said in a June 2 news release.

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The Golden State’s lengthy vote-counting process has “become a national narrative about California elections,” according to Thad Kousser, a professor of political science at the University of California, San Diego.

“In California, it takes a long time to certify votes, to verify the signatures, to then count the ballots; all of that process takes a while,” Kousser said in an interview last week. “It may take a while for us to learn who the top candidates who emerge are.”

Here are some factors behind California’s lengthy vote-counting process. 

Mail-in ballots come with added verification step 

With each mail-in ballot cast, elections officials must compare the signature on a returned vote-by-mail envelope to the voter’s signature on their voter registration card. Various factors go into determining whether the signatures match, including the slant of the signature, whether it is printed or written in cursive, and the size, proportions, or scale. 

Vote-by-mail ballots were Californians’ preferred voting method in both the 2024 primary and general elections, with drop-off locations — such as ballot drop boxes and voting centers — the most popular way to return mail-in ballots. 

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During California’s 2024 primary, more than 7.7 million votes were cast statewide, and 90 percent of those were mail-in ballots. This means election officials had to verify the signatures on more than 6.8 million ballots before they could be counted. For the November 2024 general election, 80% of cast ballots, or about 13 million, were vote-by-mail. 

Reviewing conditional voter and provisional ballots 

California also allows for same-day voter registration, also known as conditional voter registration. Voters who need to register, or re-register, within 14 days of an election can do so at their county elections office, polling place, or vote center. These ballots will be processed and counted after the county elections office has completed the voter registration process. 

In addition to conditional voter ballots, there are provisional ballots that must be verified before they are counted. Voters cast provisional ballots for a wide array of reasons, including if their name does not appear at a polling place or if they’ve made a mistake on their ballot. After a voter casts a provisional ballot, it will not be counted until election officials have confirmed that the voter is registered to vote in that county and has not already voted in that election. 

Vote-by-mail ballots can be sent on Election Day 

Though state officials recommend voters mail their ballots sooner rather than later, state law allows vote-by-mail ballots postmarked by Election Day to be counted if they arrive within a specified window afterward, thereby extending the tallying process. 

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For the primary, ballots needed to be postmarked on or before June 2 and received by county elections office no later than June 10.  

California is, well, big 

California is the most populous state in the nation. And, as of May 18, a record total of 23,155,447 Californians were registered to vote. 

While not all registered voters are expected to have voted, county election officials estimate that more than 5 million ballots were cast statewide. 

When to expect final results 

Under state law, county elections officials are required to report the results for most ballots by June 15, or 13 days after the election, according to Weber. However, some ballots can take counties up to 30 days to count every ballot and then conduct a post-election audit. 

State law requires county elections officials to report final official results to state officials July 3. State officials then have until July 10 to certify the results of the election.

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