McDonalds President Says It Might Be 'Impossible' to Operate in These Key States

The Fast Food Accountability and Standards Recovery Act is ruffling fast-food industry feathers.

While the pandemic accelerated both discussions and movement of businesses, talk of how California's high tax rates and liberal leadership has made it "impossible" to do business in the state is anything but new. So are alarm-raising statements about how big business is fleeing the Golden State en masse.

In 1933, one state official wrote that "if we set up a tax on one of their supercolossal $7,000,000 productions, [the movie industry] would no doubt transfer their operations to" Florida. Similar fears of a business exodus to Nevada pushed local legislators to give a property tax break to equipment manufacturers in the 1960s.

More recently, Elon Musk told the audience at the All In Summit in Miami that the Golden State had "gone from a land of opportunity to the land of taxes, over-regulation and litigation." He had earlier moved the Tesla  (TSLA) - Get Free Report offices from the Silicon Valley to Austin, Texas at the end of 2021.

This Is What McDonald's Has Against California

While discussions around the tech exodus took place throughout much of 2020 and 2021, a new discussion has begun around an industry that exists in every state in the country: the fast food business.

In the fall of 2022, the state passed what shortens to the FAST bill -- the Fast Food Accountability and Standards Recovery Act could require fast-food restaurants to pay workers up a minimum wage of $22 an hour with an annual raise of 3.5%.

While initially passed, the law has faced significant pushback both from the industry and local voters. A referendum vote has been set to November 2024 and implementation is blocked until that takes place.

Industry leaders have predictably been very vocal against the law. In an open letter from January 25, McDonald's USA President Joe Erlinger wrote that it "makes it all but impossible to run small business restaurants."

"Under the FAST Act, an unelected council of political insiders, not local business owners and their teams, would make big decisions about crucial elements of running a business, fracturing the economy in the process," Erlinger wrote while adding that paying fast-food workers such a wage could raise the cost of eating at a McDonald's by as much as 20%.

Another State's Worker Movement Is Also Causing A Headache For McDonald's

While California has led the pack with fast-food worker protection movements, Virginia followed with a similar bill just six months later. This month, it introduced Virginia's House Bill 2478.

While not committed to a specific minimum wage, the passed law would require a council of state legislators, elected officials, industry representatives and fast-food workers to get together and regularly oversee worker conditions and compensation.

With both a Republican governor and Republican-controlled house, the bill is extremely unlikely to pass in Virginia in the near future. That said, it still managed to ruffle the feathers of McDonald's leadership -- in the same open letter, Erlinger also takes aim at Bill 2478 as an example of what can happen if California sets an example and, in his words, "this one-sided style of democracy is mimicked elsewhere."

"Just last week, a Virginia legislator imported from California introduced a near-identical piece of legislation that state leaders now have an opportunity to stop in its tracks," Erlinger wrote. "And no doubt, they'll keep looking for backdoors in California."