Several states across the country could follow the lead of California, which passed a law last year with implications for the restaurant industry and raising concerns for franchisors and franchisees.
The Fast Food Accountability and Standards Recovery, or FAST Act, was signed into law in California in September, only to be injuncted early in 2023. Had it been implemented, the legislation would have created a board with the authority to make decisions related to pay, benefits and other aspects of the fast food industry on behalf of the workers.
The big sticking point is the minimum wage, as it would increase to $22 per hour and go up 3.5 percent per year afterward. Because of the injunction, though, the board hasn’t been created, and the law will be put up for a public referendum vote in the 2024 general election.
Rochelle Spandorf of Davis Wright Tremaine
Attorney Rochelle Spandorf of Davis Wright Tremaine sees it positioned as a “pocketbook issue.”
“I would not be surprised if the referendum was to defeat the FAST Act,” Spandorf said. “Save Local Restaurants is going to make the pitch that your fast-food tab is going up because this act proposes to increase the minimum wage of fast-food restaurant workers.”
Save Local Restaurants, a coalition led by the International Franchise Association, National Restaurant Association and the U.S. Chamber of Commerce, also argues that the act will damage operators’ ability to hire employees, which would create a ripple effect as they try to compete.
“This council that will apply to set the rules on fair wages and working conditions for fast food workers can make regulations without having to go through the very checks and balances that apply to legislation generally,” Spandorf said. “It’s not going to be transparent to the public what they’re doing, either.”
Spandorf clarified that she’s for workers having better conditions, but the FAST Act was enacted in a way she finds “objectionable” since it wasn’t done via a union vote.
Since the FAST Act’s introduction, other states have been considering similar bills. Virginia, for one, has House Bill 2478. Lee Plave, an attorney at Reston-based Plave Koch, is not confident in its passing, however.
“I think it has a snowball’s chance in Hades of passing,” he said. “My mother would have used different words, but I’m going to use that.”
Like in California, the Virginia bill would establish a board to set standards for the fast-food industry in the state. Virginia’s political environment, however, is different from California’s, with a Republican governor and Republican-controlled House. Though Plave doesn’t believe the bill will pass, he noted the FAST Act itself has “caused some concern” amongst business owners.
“There’s always tension regarding wages between employees and business owners,” he said.
Minimum wage and safety standards are already set on a federal and state level. In Plave’s opinion, the main challenge isn’t creating these layers of legislation, but actually seeing them through. Dividing opinions and facts when it comes to doing the research would be the biggest challenge to mitigating safety issues and financial needs, he said.
Plave also acknowledged that wages and financial struggles are a real concern. But he doesn’t see the FAST Act and Virginia’s bill helping the issue.
“Don’t expect business to be the place you solve societal problems,” he said. “It’s not that businesses won’t be part of the solution. It’s that you can’t do it on the backs of business alone.”
Arizona’s HB 2404, meanwhile, is similar to California’s Franchise Relationship Law, though there are some additions.
Dan Warshawsky of Warshawsky Seltzer
“It’s basically the next Californication of Arizona, I would say,” said Dan Warshawsky of Warshawsky Seltzer. His firm, based in Scottsdale, works with franchisors and franchisees.
The bill is designed to protect owners after they purchase a franchise, specifically regarding terminations, contract renewal and transfers. Arizona has no state franchise relationship laws for business format franchises. Warshawsky, who used to live in California, said franchisors should have serious concerns about the bill, as it could become law thanks to Arizona’s changing political climate.
“I could absolutely see this pass,” he said. “It’s very one-sided, and it’s not really well thought through as far as the impact it could have on franchising.”
He noted one consequence of the FAST Act has been franchisors simply choosing not to franchise in California. The worry for Warshawsky is the same could happen in Arizona, an undesired outcome. He also called out the ability franchisors had to provide relief to franchisees during the pandemic and said if HB 2404 becomes law, franchisors may be hesitant to offer that flexibility in the future.
His advice? Pay attention and stay informed. And of course, bring in skilled legal counsel when appropriate.