Two Pizza Hut operators in California are ending in-house delivery services at numerous stores, leading to over 1,200 driver layoffs ahead of the pay bump in April 2024.
The layoffs will happen by the end of February, coinciding with California's minimum wage increase of $4, which is anticipated in April, where fast-food workers in the state will get a pay increase close to 30%, increasing the minimum wage from $16 to $20 per hour.
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WARN Layoff Notice
PacPizza, LLC, known as Pizza Hut, notified through a Worker Adjustment and Retraining Notification (WARN) Act notice that the company decided to eliminate first-party delivery services, removing all delivery driver positions. This information was reported by Business Insider and filed with the state's Employment Development Department. The WARN Act mandates employers to provide advance notice in cases of significant layoffs or plant closures.
Southern California Pizza Co., a second Pizza Hut franchise, is cutting its in-house delivery services and letting go of 841 drivers, as indicated in a WARN Act notice on December 1. The affected drivers are from Pizza Hut locations in cities like Sacramento, Palm Springs, Los Angeles, and others across the state.
Severance Pay Offerings
An anonymous driver, fearing retaliation, mentioned to BI that he was offered a $400 severance if he stayed until his February 5 layoff. Having worked as a driver for nine years, he expressed dissatisfaction, stating, "The money they are giving us as severance pay is a slap on the face. It comes to $3 a month for nine-plus years of service."
Gene Erdman, the Chief People Officer at American West Restaurant Group, did not comment in response to a request. The franchise operates under SoCal South OC LLC and SoCal Pizza Holdings LLC.
Lisa Hough, the Director of Human Resources for PacPizza in San Ramon, California, was the contact person on all five WARN Act notices signed by the company's president, Brian E. Thompson. However, both Hough and Thompson responded to a request for comment.
Third-Party Apps Replacement
Customers can use third-party apps like DoorDash, GrubHub, and Uber Eats for food deliveries at the impacted chain restaurants. Pizza Hut informed Business Insider that its franchisees manage their restaurants independently, following local market dynamics and adhering to all federal, state, and regulations. They continue to offer quality service and food through carryout and delivery.
More Harm to Come for Higher Labor Costs
Mark Kalinowski, a restaurant industry analyst, anticipates additional negative consequences as fast-food chains implement measures to mitigate the impact of increased labor costs.
Chipotle and McDonald's both announced their intentions to offset the high labor costs in California by raising menu prices for customers.
In 2022, California Governor Gavin Newsom signed the FAST Act into law to raise the minimum wage for fast-food workers to $22 per hour in 2023. However, corporate chains like McDonald's, Chipotle, Chick-fil-A, and franchise advocacy groups opposed the law. A coalition of restaurant-industry organizations argued that the law could increase costs for fast-food restaurants by $3 billion and worked to place a referendum on the ballot.
AB 1228, a new law replacing the controversial FAST Act this year, adjusted the minimum wage for fast-food workers to $20 per hour, seen as a compromise between the labor unions representing fast-food workers and the restaurant industry that impacts 557,000 fast-food workers at 30,000 restaurants in California.
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