When quick meals eating places throughout California have to start out paying employees $20 per hour on April 1, one main chain will likely be exempted from the mandate—and it simply so occurs to have a connection to a longtime pal and donor to Gov. Gavin Newsom.
Panera Bread is poised to get a lift from a weird clause within the fast-food minimal wage regulation that exempts “chains that bake bread and sell it as a standalone item,” Bloomberg studies, including that “Newsom pushed for that break, according to people familiar with the matter.”
That exemption stands to learn Greg Flynn, proprietor and CEO of the Flynn Restaurant Group, a conglomerate that operates greater than 2,300 eating places nationally and is the second-largest Panera franchisee on the planet, in response to the corporate’s web site. Flynn and Newsom go means again: Bloomberg studies that the 2 attended the identical highschool on the identical time—Flynn was pupil physique president throughout Newsom’s freshman 12 months—and the restauranteur has donated to Newsom’s gubernatorial campaigns and bragged to colleagues about his shut relationship with the governor.
That relationship doubtless explains the bizarre carve-out that may exempt bakeries from the brand new minimal wage regulation, although nobody concerned is keen to confess as a lot.
Requested straight in regards to the bakery exemption at a press convention final 12 months, Newsom stated it was “part of the sausage making” of the legislative course of. “We went back and forth, and it was part of the negotiation,” he added.
Bloomberg‘s reporting suggests it was one thing Newsom sought in these negotiations: The bakery carve-out “was adopted as a means of winning the governor’s support for the legislation, said a person with knowledge of the discussions. The rationale was the governor’s longstanding relationship with a Panera franchisee, the person said.”
Newsom signed the Quick Meals Accountability and Requirements Restoration Act (FAST Act) in September 2023. The regulation consists of the $20 per hour minimal wage and a wide range of different rules that may apply to restaurant chains with greater than 60 areas nationally.
As a result of labor prices account for a big chunk of the overhead at any quick meals restaurant, the brand new regulation is predicted to have a number of repercussions. McDonald’s and Chipotle have already introduced plans to boost menu costs. Supply drivers for Pizza Hut have been laid off. Extra automation is prone to happen.
Flynn additionally operates Applebee’s, Taco Bell, Arby’s, Wendy’s, Pizza Hut, and Planet Health franchisees throughout 44 states, in response to his firm’s web site—however his solely California-based institutions are a number of Applebee’s (which aren’t topic to the brand new regulation since it isn’t outlined as a quick meals restaurant) and 24 Panera cafes.
It is truthful to query how a lot the carve-out for Panera will even matter. In an atmosphere the place different fast-food eating places competing with Panera for labor are required to pay $20 per hour, Panera will doubtless have to supply comparable wages with a purpose to appeal to and retain employees. (One may also surprise if McDonald’s and Burger King will all of a sudden get into the bakery business.)
In different phrases, the actual story right here is not {that a} profitable businessman was in a position to get a particular exemption written into regulation. And, certainly, it is exhausting guilty Flynn for searching for what’s in his companies’ finest curiosity right here—he’d beforehand warned state lawmakers that passing the FAST Act would “effectively kill the franchise business model in the state” and put 728,000 jobs in danger.
The true scandal is that Newsom was apparently keen to push for this particular exemption that advantages his private pal whereas throwing different California companies (and shoppers) beneath the bus.
The deeper lesson is that giving the federal government extra energy to set wages (or regulate different elements of the economic system) creates the situations for precisely this type of factor to occur. It may very well be {that a} rich particular curiosity used his connections to the governor to safe particular therapy, or {that a} governor tried to assist out his pal. Both means, it could not have occurred with out the federal government injecting itself into the connection between employees and employers.
And the extra the federal government does that, the extra alternatives there will likely be for officers to reward their associates and punish their enemies. That is not truthful, nor ought to or not it’s fascinating. Panera—or any enterprise—should not survive or fail in California due to its connections within the halls of energy.