The Franchise-Level Reality: Headcount Stability vs. Drastic Labor Hour Cuts
A major source of confusion in the minimum-wage debate is the contradiction between macro-level econometric studies (which often find stable overall employment headcounts) and the operational reality at individual franchises. While a restaurant might maintain its headcount to ensure peak-hour coverage, it frequently absorbs higher labor costs by aggressively cutting labor hours, eliminating overtime, and reducing shifts.1
The UC Santa Cruz Empirical Findings
A breakthrough working paper released in November 2025 by UC Santa Cruz economics lecturer Stephen Owen and a team of researchers, titled "Let Them Eat Big Macs, Crunchwraps and Whoppers: A Working Paper Describing the Statewide Impact of California’s $20 Fast Food Minimum Wage", provides the first detailed look at internal payroll data from major California franchise groups following the implementation of AB 1228.
The paper's key empirical findings include:
- Drastic Cuts in Labor Hours:
- For a Burger King franchise group with over 100 California locations, internal records revealed that average daily employee hours per location fell from 61 hours in October 2023 to 48 hours in October 2024. By October 2025, hours had only partially recovered to 53 hours, remaining significantly below pre-mandate levels.
- Across 18 McDonald's Central Valley locations, total labor hours dropped from 1,100,192 to 971,452 (an 11.7% reduction in total labor hours).
- Elimination of Overtime: Overtime hours, which historically served as a primary path for long-tenured hourly workers to earn higher take-home pay, were "largely eliminated across franchised fast food operations."
- Erosion of Benefits Eligibility: To offset the $20 wage floor, franchise operators implemented strict shift scheduling to keep individual workers under the weekly hour thresholds required for benefits eligibility.
- Surge in Job Applications: Because the $20 wage made fast-food positions highly desirable, job applications for the studied Burger King franchise group surged by 400% in August 2024 compared to August 2023. By January 2025, this single franchise group received over 39,000 applications in a single month, even as shifts and hours were being cut.
- Reduction in Turnover: Industry employee turnover rates, historically averaging 150% to 300%, dropped to a range of 150% to 200% post-mandate, lowering recruitment and training costs.
Spillover Pressures on Uncovered Businesses
The UCSC study also highlights the "spillover" wage pressure exerted on adjacent, independent restaurants that are legally exempt from the $20 mandate (which only applies to chains with 60+ national locations). To compete for the same labor pool, independent operators were forced to raise wages and prices. A sushi restaurant owner on Santa Cruz's Mission Street told researchers:
"If they can work at a fast food chain restaurant down the street for $20 an hour, why would they want to work here for just $17 an hour?"
This franchise-level reality illustrates that while overall headcounts may appear stable in macro data, the operational adjustment is borne by workers through a reduction in scheduled hours, the loss of overtime pay, and stricter benefits thresholds.
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An instance of Wage mandates squeeze shift hours and margins long before they trigger layoffs. — It illustrates that service-industry businesses respond to wage shocks by optimizing shift scheduling and reducing worker hours rather than conducting outright layoffs. ↩︎