Pizza Hut and California are at War- Thousands of Jobs Will Suffer

By: Georgia | Published: Jan 09, 2024

In April 2024, California’s new FAST Act will raise the minimum wage for fast food workers to $22 an hour. This increase has sparked controversy within the industry, with many companies expressing concern over rising costs.

Among them, Pizza Hut franchises in California, specifically, are reacting by eliminating over 1,000 delivery positions, attributing this decision directly to the increased labor costs due to the new law.

Major Layoffs at Pizza Hut Franchises

Business Insider reports that two large Pizza Hut franchises, PacPizza LLC and Southern California Pizza Co., have announced the elimination of delivery jobs in several key locations across California, including Los Angeles and Sacramento.

A man in a beige beanie and brown jacket looks over his shoulder while standing beside a bicycle outside a Pizza Hut entrance

Source: Parham Barati/Unsplash

In total, approximately 1,200 delivery positions will be cut. Business Insider reports this action as a direct response to the upcoming wage law changes in California.


The Severance Offer: A Driver's Perspective

A driver, who remained anonymous for fear of retaliation, spoke to Business Insider about the severance offer from Pizza Hut.

A delivery person wearing a white helmet and black attire rides a red scooter in motion, with a delivery box mounted on the back. The background is a blur of city lights and traffic

Source: Rowan Freeman/Unsplash

The driver, with nine years of service, was offered a severance of $400 if they stayed until their layoff date. “The money they are giving us as severance pay is a slap on the face,” the driver stated, calculating it to be around $3 a month for over nine years of service.

Yum Brands' Stance on Franchise Decisions

Yum Brands, the parent company of Pizza Hut, has not directly intervened in the decisions of its franchises.

An indoor Pizza Hut kiosk with employees wearing red uniforms serving customers. The kiosk is lit with a large overhead sign featuring the Pizza Hut logo, menu displays with prices and pizza images

Source: Wikimedia Commons

ABC reported that in a statement, they implied that franchises operate independently and are free to make their own business decisions. Yum Brands acknowledged being aware of the changes in delivery services at certain franchise restaurants in California.

Customer Impact: Shift to Third-Party Delivery Services

The elimination of in-house delivery services at affected Pizza Hut locations means customers in these areas will have to turn to third-party apps like Grubhub and Doordash for their orders.

A close-up view of a smartphone lying on a wooden surface displaying the Doordash logo on its screen

Source: Marques Thomas/Unsplash

This transition comes with a noticeable price increase. For example, a large Pepperoni Lovers pizza that costs $21.59 in-store is priced at $26.34 on Grubhub.

Wider Industry Concerns Over Wage Increase

The response from Pizza Hut franchises is part of a broader reaction within the fast food industry to California’s wage law.

Food service workers in red uniforms are preparing burgers at a fast-food restaurant assembly line

Source: Marcell Heil/Unsplash

Major players like McDonald’s and Chipotle have also voiced concerns about the impact of rising costs due to the wage increase. This situation highlights the industry-wide implications of the new legislation.


The Future of Fast Food in Light of Wage Changes

As California’s fast food industry adapts to the new wage law, questions arise about the future strategies of franchises.

A food service worker wearing blue gloves is preparing tacos, filling crisp yellow taco shells with lettuce and diced onions on a stainless steel kitchen countertop

Source: Obi - @pixel8propix/Unsplash

Will more companies follow Pizza Hut’s lead in cutting jobs, or will they seek alternative solutions to balance higher wages with their operating costs? The industry is at a pivotal point of adaptation.


Broader Implications for the Fast Food Sector

This development is not just a story about Pizza Hut but reflects the challenges faced by the fast food sector in adjusting to new economic realities.

View from inside a car where a driver, seen from behind, is reaching out to receive a white paper bag with the Chick-fil-A logo from a smiling employee at a drive-thru window

Source: Jeremy Bishop/Unsplash

The response of these companies to wage increases is under scrutiny, particularly regarding how they balance financial viability with fair employee compensation.


Focus on Worker's Rights Amidst Corporate Decisions

The situation at Pizza Hut brings worker’s rights into focus. The reaction of these franchises to the wage increase raises questions about the industry’s commitment to fair treatment and compensation for their employees.

A tattooed chef in a black t-shirt and apron is meticulously assembling a burger in a professional kitchen. Plates with completed burgers and sides are arranged in front of him

Source: Jesson Mata/Unsplash

The severance offered to long-term workers and the lack of direct intervention from Yum Brands are particularly noteworthy in this context.


Increased Costs for Convenience

Customers of Pizza Hut in affected areas are now facing a dilemma.

Close-up of a freshly baked pizza with melted cheese, pineapple chunks, shredded chicken, and red onion rings, garnished with cilantro on a wooden board

Source: Chad Montano/Unsplash

The shift to third-party delivery services not only limits their options but also increases their expenses.


Considering the Human Aspect of Business Decisions

The decisions made by these Pizza Hut franchises have real human consequences. The drivers losing their jobs and the customers facing higher prices represent the human side of these corporate actions.

A delivery person wearing a helmet and gloves is seated on a motorcycle equipped with a large black delivery box on the back bearing the Pizza Hut logo and a phone number for provincial delivery, parked in front of a green wall

Source: Wikimedia Commons

Their experiences are a reminder that business decisions, while often based on financial considerations, have a tangible impact on people’s lives.


Observing the Ongoing Developments

As the situation continues to evolve, the full impact of California’s wage law and the corresponding responses from companies like Pizza Hut remain to be seen.

A traditional Pizza Hut restaurant with a red roof and large signboard alongside a road during the daytime

Source: Wikimedia Commons

The fast food industry in California is in a state of flux, and the consequences of these changes will likely have lasting effects on employees, customers, and the industry as a whole.