McDonald's and Chipotle Mexican Grill executives said they will raise their menu prices next year in California to off-set the minimum wage increase for fast food workers. Under California's recently passed minimum wage bill, most of the state's 500,000 fast-food workers will be paid at least $20 per hour starting in 2024.

McDonald's has yet to decide how much their prices will increase, according to CEO Chris Kempczinski.

Meanwhile, Chipotle expects it will raise prices by a “mid-to-high single-digit” percentage in California, according to Chief Financial Officer Jack Hartung who told analysts the company has not made a "final decision" during a conference call last week.

According to the U.S. Bureau of Labor Statistics, food prices away from home increased 6% in September compared to a year ago.

Fast food prices expected to increase

Chipotle has raised prices four times within the last two years, the most recent price increase of 3% took place in October. While inflation is finally moving in a better direction, consumer prices this month still rose overall by 3.7% from earlier years after hitting a 40-year high of 9.1% in June 2022.

McDonald's Chief Financial Officer Ian Borden said the company increased prices in the U.S. in the third quarter at a lower rate. McDonald’s expects its U.S. prices will increase just over 10% for the full year, according to Borden.

During a conference call earlier this week, Kempczinski said McDonald’s will likely look at ways to cut restaurant costs and improve productivity, along with increasing prices as a way to offset labor costs.

Kempczinski told financial analysts during the call that "there will certainly be a hit in the short-term to franchisee cash flow in California… tough to know exactly what that hit will be because of some of the mitigation efforts. But there will be a hit."

Earnings rise for McDonald's and Chipotle

According to McDonald's most recent quarterly results, same-store sales increased 8.1% in the U.S. – the company attributed this to increased localized prices.

Chipotle's net sales increased 11.3% in Quarter 3 to $2.47 billion, while McDonald's revenue rose 14% to $6.69 billion.

McDonald's reported a net income of $2.3 billion for the quarter, while Chipotle's was $313.2 million in the same period.

How many fast-food chains exist in California?

California is home to about 1,300 McDonald's restaurants or 10% of the chain's businesses. More than 230 owner/operators and 70,000 restaurant crew and managers are in the Golden State.