California's Minimum Wage Increase Raises Concerns in Restaurant Industry

Estimated Read time: 4 minutes and 32 seconds

Notable Comp: Don McMinn of Marcus & Millichap, just sold his 32nd Dollar General this year in Knox, IN.

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Here’s what we’ve got for you today:

• California Governor signs law raising minimum wage for fast-food employees, causing concerns in the restaurant industry.

• Meridian sells 70 Burger King restaurants to corporate and four other franchisees.

• Slim Chickens opens new restaurant in Colorado Springs, marking its 10th location; another 1,150 under development.

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CALI TWEAKIN

California Raises Minimum Wage for Fast-Food Workers, Sparking Concerns in the Restaurant Space

Wage increase details: The new law raises the minimum wage for quick-service restaurant (QSR) workers to $20 an hour, applicable to employees at restaurants with 60 or more locations nationwide. The legislation also establishes a council to provide recommendations on wages, working hours, and conditions.

Opposition and concerns: Despite industry representation during the law-making process, some in the restaurant industry remain opposed to the wage hike. Some industry insiders and experts fear that the cost will be passed on to consumers, leading to price increases and potential challenges for smaller players in the market.

💰 THE MONEY SHOT

Preserving the franchise model: The National Restaurant Association and the International Franchise Association support the law, citing the stability and predictability it brings to the QSR industry. They argue that the legislation eliminates existential threats faced by franchise businesses and ensures opportunities for small business owners.

BK FRANCHISEE GOES BK

Meridian Sells 70 Burger King Restaurants to Corporate, Kansas King, Dakota Restaurant Partners, Kraf, and Snake River Foods

Meridian Restaurants Unlimited, which filed for court proceedings due to Covid pressures, sold 70 of its 91 restaurants to Burger King and four other franchisees for a total of over $17 million.

• Burger King was the biggest buyer, acquiring 32 units for $4.7 million across Utah (17), Montana (12), and Wyoming (three).

• Kansas King bought 16 units for $2.2 million in Kansas (11) and Nebraska (five).

• Dakota Restaurant Partners bought 12 locations for $3.4 million in Minnesota (two), Montana (one), and North Dakota (nine).

• Kraf purchased seven Arizona-based restaurants for $7 million.

• Snake River Foods acquired three Montana-based units for $632,250

💰 THE MONEY SHOT

Adapt or Die: According to court documents, the remaining 21 restaurants did not receive acceptable qualified bids. Meridian blamed its bankruptcy on cash flow issues caused by increased wages, labor costs, shipping, food inflation, decreased availability of staff, and declining food traffic. This sale is part of Burger King's $400 million comeback plan, which aims to replace low-performing operators with higher-performing ones to improve overall profitability.

WILL THE REAL SLIM CHICKEN PLEASE STAND UP

Slim Chickens Has 1,150 Locations Currently Under Development

A growing brand: Slim Chickens has opened over 245 locations across the United States and the United Kingdom, offering hand-breaded, cooked-to-order tenders and building a passionate following among its customers.

Strong franchise support: With a focus on quality food and a diverse menu, including 17 house-made dipping sauces, Slim Chickens differentiates itself in the "better-chicken" segment. The brand's success is attributed to its franchisee support system and partnerships with experienced operating groups like Mile High Chicken.

💰 THE MONEY SHOT

Expanding nationwide: As Slim Chickens continues to expand, its franchise opportunity offers prime markets for multi-unit development. The brand seeks to partner with qualified and experienced multi-unit groups to bring its high-quality food and southern hospitality to communities across the globe.

TRIPLE NET TENDIES

🧠 Thought Leader: Sam Zoldock goes off on LinkedIn about why express car washes are going to be the next big redevelopment play

👂 Ear Hustle: Rahul Chhajed Explains Veterinary Real Estate Fundamentals

💎 Web Gem: Matthews Releases the Q2 2023 REIT Report

Net Lease Nuggies

• Bojangles: expands with 250-unit pipeline and venture into non-traditional segments.

• Interest Rate Warning: Dimon predicts rates could go as high as 7%, causing more pain than previous increases.

• The Fresh Market: The specialty grocery chain plans to add 22 locations under majority owner Cencosud.

• Redevelopment Success: CMK Properties partners with Tractor Supply Company to transform a former Walmart.

• Angry Franchisees: McDonald's franchisees in California are upset that they were not involved in the negotiations and estimate that this will cost them $250,000 in cashflow.

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