Is California the worst state for fast food operators?

”Survey says” looks at various rankings and scorecards judging geographic locations while noting these grades are best seen as a mix of artful interpretation and data.

Buzz: California has the nation’s harshest conditions to run a fast food joint, according to my ranking of key industry benchmarks.

Source: My trusty spreadsheet created a fast food business scorecard for the 50 states, gauging the relative hurdles faced by operators of quick-serve restaurants. The overall benchmark included rankings of wages, prices, food expenses, utilities, overall business costs and food spending.

Topline

When Rubio’s Coastal Grill recently closed 48 California restaurants, the chain blamed “business conditions” and “the rising cost of doing business in California” – no doubt a shot at the state’s new fast food law that mandates a minimum hourly wage of $20 for fast-food workers at certain large restaurant chains.

Well, California ranked dead last on my fast food business climate scorecard. Next worst were Hawaii, Alaska, Connecticut and Maryland.

The best place to own a fast food restaurant, by this math, is Texas – then North Carolina, Arkansas, Louisiana, and Mississippi. By the way, Florida was No. 26.

Details

Let’s look inside the five slices in this ranking recipe.

Pay: Even before California upped its minimum wage by $4 an hour for fast food workers, labor costs were high.

California ranked No. 2 with a $16.91 median hourly wage for front-line fast-food workers as of May 2023. The Bureau of Labor Statistics’ figures show California was 19% above the $14.20 national rate. (We’ll note here that California’s minimum wage in 2024 for other larger companies is $16 hourly.)

Top fast food pay was found in Washington at $17.16, and after California came Massachusetts at $16.75. The lowest pay was Mississippi at $10.39, Louisiana at $10.74 and Alabama at $10.99.

Pricing: California diners pay up for their quick-serve meals. That can be seen as a marketing challenge compared to home cooking.

The state had the second-costliest fast food – 18.5% above the national norm, the combined reports from NetSpend, World Population Review and Datassential show us.

Tops was Hawaii at 19.5% above average, and after California came Alaska at 16%. The cheapest fast food was found in Mississippi, 6.3% below average, Alabama, 5.6% below and Nebraska, 4% below.

Food costs: It’s not just wages boosting pricing. Ingredients are a big slice of restaurant expenses.

California ranked No. 3 with costs 12% above the national norm, using a grocery cost index from the Council for Community & Economic Research as a yardstick of food prices.

The priciest ingredients were found in Alaska, where they’re 24% above average, then Hawaii, 17% higher. Cheapest? North Dakota and Oklahoma, 6% below average, and Louisiana, 5% under.

Utility bills: Fast food joints use lots of electricity, natural gas, water, etc., and California isn’t a cheap spot for those services either.

The state ranked 10th-highest with expenses 11% above the US norm, as measured by a loose yardstick for these bills – scorecards on residential utility prices by Move.org and RubyHome.

Costliest was Hawaii, 46% above average, Georgia, 23% above, and Alaska, 21% above. Utility bargains were New Mexico, 20% below the norm, Wisconsin, 18% below, and Michigan, 14% below.

Business expenses: California is a costly place to run any company.

The state ranked fourth-highest on overall business expenses, according to recent rankings from Forbes magazine. The only pricier states were Hawaii, New Jersey and Massachusetts.

The cheapest place to run a business was South Dakota, then Delaware and Texas.

Food spending: The Golden State’s key business lure are consumers with deep pockets.

Californians spent $9,362 per capita on food, beverages and hotels in 2022, according to the Bureau of Economic Analysis. That’s the third-largest consumer outlay among the states and 19% above the $7,893 nationally.

The top spot was Hawaii at $10,147, then Colorado at $9,620. Arkansans spent the least at $6,079, then Oklahoma at $6,361, and Idaho at $6,512.

Bottom line

It’s tough for California fast food operators. It’s also tough for fast food workers, too.

Let’s not forget that low-wage jobs in California buy quite a bit less when the state’s expensive life is factored into the math.

California’s seemingly high fast food wage – after it’s adjusted for the cost of living – was only $13.47 hourly as of May 2023. That’s 17th lowest among the states and 5% below the $14.20 national norm.

The best spot for cost-adjusted fast food pay was Colorado at $16.12 an hour, South Dakota at $15.54, and North Dakota at $15.48. Lowest pay? Hawaii at $9.60, Louisiana at $11.83, and Mississippi at $11.97.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com