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Newsom grants minimum wage exception to donor, second-largest Panera owner

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(The Center Square) – California Governor Gavin Newsom granted an exemption to the state’s $20 per hour minimum wage for fast-food employees to national fast-food chains with bakeries, a category that only includes Panera. Billionaire Greg Flynn, the largest franchise owner in the United States, is the second-largest Panera operator in the world and a classmate and major donor of the governor’s, leading Bloomberg to report that Flynn was able to get Newsom to secure a carve-out from the new wage for his stores.

On September 14, 2023 the California legislature passed AB 1228, a bill raising California’s minimum wage for fast food workers to $20 per hour and creating and a new Fast Food Council that will establish working conditions and minimum wages that would rise each year by the lesser of 3.5% or the past year’s inflation recorded in the Consumer Price Index. The law notably included an exemption for fast-food chains operated within grocery stores where chain employees work for the grocery store, and for fast-food chains baking and selling bread on-premises as a standalone item. While the first exemption exists to stop labor differences between employees working for the same employer, to many, the second seemed quite arbitrary — that is, until Bloomberg’s report on Flynn’s connection with Newsom and AB 1228.

According to Bloomberg, Flynn, who has donated at least $164,800 to Newsom’s campaigns, pushed Newsom’s staff on the idea that Panera is not fast food, with the fast food unions ultimately allowing for a bakery exemption to gain the governor’s support.

Flynn’s top competitor in the fast-casual category, Chipotle, announced it is raising its prices in the mid-to-high single digits to make up for the new wage. While Chipotle is the top-performing fast-casual chain in the country, the Panera minimum wage exemption — allowing workers to be paid the state’s overall minimum wage of $16 per hour — could prove to be a major competitive advantage, allowing it to offer lower prices as increasingly cost-conscious consumers look for better deals.

National Federation of Independent Business State Director John Kabateck says this exemption, which leaves many of his members who own fast-food franchises behind, is deeply unfair and will drive many operators to increase prices and reduce employment.

“It must be nice for the governor to literally break bread with his high school friends and political donors to give them an off-ramp to an egregious law that will devastate everyone else,” Kabateck told The Center Square. “Many will likely be forced to raise prices or, more likely, scale back shifts, benefits, hours, or entire positions because they just won’t be able to make ends meet.”

Flynn first entered the franchise business by becoming the largest Applebee’s franchisee in the nation. As a full-service restaurant Applebee’s is exempt from the fast food minimum wage. Flynn owns over 2,600 locations of seven global brands, employing over 75,000 staff and bringing in over $4.5 billion in revenue per year.