Two and a half years after the $20 floor took effect, here is who it covers, what the competing studies found and how Bakersfield retail owners should read quick-service tenants.
The AB 1228 fast food minimum wage requires limited-service restaurants in national chains of more than 60 establishments to pay California workers at least $20 an hour, effective April 1, 2024. Gov. Gavin Newsom signed the law Sept. 28, 2023, and it created a Fast Food Council that can raise the rate each year. The floor is still $20, above the $16.90 statewide minimum.
Key takeaways
- Since April 1, 2024, covered fast food restaurant employees in California must be paid at least $20.00 an hour under AB 1228.
- The Fast Food Council may raise the wage annually, starting no earlier than Jan. 1, 2025, by no more than the lesser of 3.5% or the change in the consumer price index (CPI). The rate remains $20, and CalMatters reported in May 2026 that the council had no chair and had held no full meeting in over a year.
- A UC Berkeley study dated April 1, 2026 found wages for covered workers rose about 11% with no significant employment loss, and menu prices rose about 1.5%.
- An NBER working paper by Clemens, Edwards and Meer found California fast food employment fell 2.7% relative to the rest of the country from September 2023 to September 2024, a median estimate of about 18,000 jobs.
- The gap between the fast food floor and the statewide minimum narrows from $3.10 an hour in 2026 to $2.60 in 2027, when the state rate rises to $17.40.
AB 1228 at a glance
| Item | Detail |
|---|---|
| Law | Assembly Bill 1228 (Holden), Chapter 262, Statutes of 2023; Labor Code sections 1474 to 1476 |
| Signed / effective | Sept. 28, 2023 / $20 wage from April 1, 2024 |
| Who it covers | Limited-service restaurants in national chains of more than 60 establishments, including franchised locations |
| Wage | $20.00 per hour (statewide minimum: $16.90 in 2026, $17.40 in 2027) |
| Administered by | Labor Commissioner; Fast Food Council within the Department of Industrial Relations |
| Council authority | Annual increases starting no earlier than Jan. 1, 2025, capped at the lesser of 3.5% or CPI |
| Main exemptions | Certain bakeries; restaurants in grocery stores over 15,000 SF; airports, hotels, event centers, theme parks, museums, gambling sites; public-land concessions; corporate campuses |
| Status | In force at $20; no Council-approved increase announced |
| Open questions | Fast Food Council action; narrowing gap as the statewide minimum rises |
What is the AB 1228 fast food minimum wage?
It is a sector-specific minimum wage for large fast food chains in California. Newsom signed AB 1228 on Sept. 28, 2023 (Chapter 262, Statutes of 2023). According to the Labor Commissioner, covered fast food employees have had to be paid at least $20.00 an hour since April 1, 2024. The law also created a Fast Food Council inside the Department of Industrial Relations, with power to raise that floor and recommend standards for the industry.
The fast food rate sits well above the general state minimum, which is $16.90 an hour in 2026 and rises to $17.40 on Jan. 1, 2027, according to CalChamber’s HRWatchdog. CalChamber notes that fast food employees covered by Labor Code sections 1474 to 1476 have a minimum wage of $20 an hour. The UC Berkeley Labor Center’s inventory of local wage ordinances lists no Kern County city with its own minimum wage. Kern CRE’s guide to California employment laws for 2026 covers the wider rules employers face.
Which restaurants must pay the $20 fast food minimum wage?
A restaurant is covered if it is a limited-service restaurant, belongs to a national chain and mainly sells food and drinks for immediate consumption. Limited-service means customers order and pay before eating. The Labor Code defines a national fast food chain as a set of limited-service restaurants with more than 60 establishments nationally that share a common brand or standardized decor, marketing, products and services. The Labor Commissioner’s FAQ describes the same three tests. The statute also defines franchisees, so a local franchisee of a national brand pays the same floor as a corporate store.
| Type of location | Covered by $20 floor? |
|---|---|
| Drive-thru or counter-service unit of a national chain (more than 60 locations) | Yes |
| Franchised unit of a national chain | Yes |
| Independent or small regional restaurant (60 or fewer locations nationally) | No; state minimum applies |
| Full-service, sit-down restaurant | No; not limited-service |
| Bakery producing stand-alone bread items of at least a half pound | No; exempt |
| Restaurant inside a grocery store over 15,000 SF | No; exempt |
| Restaurants at airports, hotels, large event centers, theme parks, museums or gambling establishments | No; exempt |
| Concessions on public land and restaurants inside corporate campuses | No; exempt |
For shopping center owners, the practical point is that the same pad can house a covered or an uncovered tenant. A national quick-service brand pays $20, while a local taqueria or a regional concept below the chain threshold pays the state minimum.
Has the $20 fast food wage increased since 2024?
No. The Fast Food Council may set annual increases, but not before Jan. 1, 2025, and each is capped at the lesser of 3.5% or the change in CPI, per the Labor Commissioner. CalChamber’s Aug. 3, 2026 update still lists the fast food rate at $20. CalMatters reported May 18, 2026 that the council had no chairperson and had held no full meeting in more than a year. The council has not announced an approved increase.
Meanwhile, the statewide minimum keeps rising with inflation. The premium covered chains pay over non-covered restaurants is shrinking: $3.10 an hour in 2026 and $2.60 in 2027. Health care facilities follow their own minimum wage schedules under SB 525, which can matter for medical tenants in the same centers.
What does research say about the $20 fast food minimum wage?
Economists disagree. The two most-cited studies reach different conclusions from overlapping data, and both are working papers, not final peer-reviewed results.
| Study | Data | Employment finding | Wages and prices |
|---|---|---|---|
| Sosinskiy and Reich, UC Berkeley IRLE (April 1, 2026) | Glassdoor, Square payroll, QCEW, foot traffic, Uber Eats menus | No significant effect; estimate near -1.2%, statistically indistinguishable from zero | Weekly wages up about 11%; menu prices up about 1.5% |
| Clemens, Edwards and Meer, NBER Working Paper 34033 (July 2025) | QCEW, California vs. rest of U.S. | Down 2.7% unadjusted, 3.2% adjusted for pre-trends; about 18,000 jobs (median estimate) | Not the focus |
QCEW is the federal Quarterly Census of Employment and Wages, built from payroll records.
The Berkeley study concludes that the $20 minimum wage “did not significantly affect fast-food employment.” It estimates prices rose about 6 cents on a $4 item, roughly half of the added wage cost passed to customers. The NBER paper finds California’s fast food employment fell 2.7% relative to fast food employment elsewhere from September 2023 through September 2024. Its median estimate equals 18,000 jobs lost relative to the counterfactual.
The gap comes largely from method: which comparison areas and time windows are used, how pre-existing trends are handled, and whether job counts come from payroll records or surveys. For a landlord, the takeaway is narrower than the policy debate. Labor cost per store rose, some of it reached customers through prices, and the effect on any one tenant depends on sales volume, margins and franchise structure.
How does AB 1228 affect Bakersfield restaurants and retail centers?
Bakersfield’s retail market is tight, which cushions landlords. Regional brokerage reports put Q2 2026 retail vacancy at 5.20%, down from 5.54% a year earlier. The same report showed 344,991 square feet of 12-month net absorption and only 8,630 square feet under construction. It described recent activity as led by smaller-format users such as fitness operators, discount retailers and healthcare providers.
Quick-service demand still shows up in local planning. Recent Kern approvals and proposals include drive-thru and restaurant pads at 7th Standard Marketplace, a southwest Bakersfield plan at Buena Vista Road and McCutchen Road, and a Weedpatch Highway fuel stop with a restaurant. None of these is tied to AB 1228 tenants. They show that operators still want well-located pads, but higher labor cost raises the sales volume a store needs to make the rent work.
What should retail landlords look at in quick-service tenants?
AB 1228 did not change lease law. It changed the math inside a tenant’s profit and loss statement. Owners and buyers of centers with quick-service tenants should look at:
- Sales and occupancy cost: ask for unit-level sales and compare total occupancy cost (rent plus NNN charges) with sales. Higher labor cost leaves less room for rent.
- Who signs the lease: a corporate lease from a national brand is a different credit than a single-unit franchisee. Look at the guarantor and the franchisee’s other units. Kern CRE’s overview of single-tenant net lease investing covers credit in more depth.
- Percentage rent and reporting clauses: require periodic sales reporting so stress shows up before a default.
- Co-tenancy and go-dark rights: a quick-service anchor’s closure can trigger rent reductions for other tenants.
- Renewal and assignment terms: franchisee sales and transfers are common, so make sure assignment provisions protect credit.
- Coverage status: a tenant whose brand grows past 60 locations nationally becomes subject to the $20 floor.
Checklist for Bakersfield restaurant operators and landlords
- Operators: a brand that meets the chain test pays the floor unless an exemption applies to the location.
- Operators: budget for the $20 floor and for statewide increases that lift wages for non-covered staff and nearby competitors.
- Landlords: collect sales reports from restaurant tenants and track occupancy cost trends.
- Landlords: underwrite franchisee guarantors, not just the brand name.
- Buyers: in due diligence on retail centers, restaurant tenant sales history from 2023 forward shows how each unit absorbed the April 2024 increase.
How big is the wage premium compared with rent for a Bakersfield drive-thru?
In this illustration, the $20 floor adds wages equal to roughly 60% to 71% of a drive-thru’s base rent. These figures are illustrative only, not data from any tenant. Assume a covered drive-thru restaurant on a 2,400-square-foot pad uses 22,000 hourly labor hours a year and rents at an illustrative $40 per square foot per year NNN, or $96,000 in base rent.
Compared with a non-covered restaurant paying the state minimum, the $20 floor adds about $68,200 in wages in 2026 and about $57,200 in 2027, before payroll taxes. That premium is roughly 60% to 71% of the illustrative base rent ($57,200 and $68,200 divided by $96,000). It explains why landlords now ask harder questions about unit sales.
| Year | State minimum | Fast food floor | Premium per hour | Premium on 22,000 hours |
|---|---|---|---|---|
| 2026 | $16.90 | $20.00 | $3.10 | $68,200 |
| 2027 | $17.40 | $20.00 | $2.60 | $57,200 |
Frequently asked questions
What is the fast food minimum wage in California in 2026?
Covered fast food employees must be paid at least $20.00 an hour, the rate in effect since April 1, 2024 under AB 1228. The Fast Food Council can raise it each year by up to the lesser of 3.5% or inflation, but no increase has been approved. The general state minimum is $16.90 in 2026 and $17.40 in 2027.
Which restaurants have to pay the $20 minimum wage?
Limited-service restaurants that belong to a national chain of more than 60 establishments and mainly sell food and drinks for immediate consumption. Franchised units of those chains count. Exemptions include certain bakeries, restaurants inside grocery stores over 15,000 square feet, and locations at airports, hotels, large event centers, theme parks, museums and gambling establishments. Public-land concessions and corporate campuses are also exempt.
Will the fast food minimum wage go up in 2027?
Only if the Fast Food Council approves it, and the council has not met as a full body in more than a year, CalMatters reported in May 2026. Any increase would be capped at the lesser of 3.5% or the change in CPI. Workers outside covered chains will see the state minimum rise to $17.40 on Jan. 1, 2027.
Did the $20 fast food wage cost California jobs?
The studies disagree. A UC Berkeley paper by Denis Sosinskiy and Michael Reich found about 11% higher wages, no statistically significant job loss and menu prices up about 1.5%. An NBER paper by Jeffrey Clemens, Olivia Edwards and Jonathan Meer found fast food employment 2.7% to 3.2% lower than in other states, equal to about 18,000 jobs.
Does AB 1228 apply to franchisees?
Yes. Coverage turns on the chain, not on who owns the store. A franchisee running a limited-service restaurant that belongs to a national chain of more than 60 establishments must pay covered employees at least $20 an hour, as a company-owned unit would. Smaller local or regional brands pay the state minimum.
How does the fast food minimum wage affect retail landlords?
It raises labor costs for quick-service tenants, which can squeeze the margin between sales and rent and weaken franchisee credit. Landlords can require sales reporting, underwrite franchisee guarantors, negotiate co-tenancy and go-dark clauses and track sales history from 2023 forward. With Bakersfield retail vacancy at 5.20% in Q2 2026, good pads still lease, but tenant quality matters more.
If you own, lease or are buying a Bakersfield retail center with restaurant tenants, Kern CRE can help you review tenant mix, lease terms and pad demand. Call Kern CRE at 855-KERN-CRE (855-537-6273) or contact us. Get Kern County CRE news monthly: subscribe to the Kern CRE report.
Sources
- Fast Food Minimum Wage Frequently Asked Questions, California Labor Commissioner (DIR), updated September 2024.
- Labor Code Section 1474, Justia (2025 California Code).
- California’s ‘groundbreaking’ fast food council lacks a leader, hasn’t met in over a year, CalMatters, May 18, 2026.
- Minimum Wage Frequently Asked Questions, California Labor Commissioner (DIR), December 2025.
- 2027 California Minimum Wage Increasing to $17.40/Hour, CalChamber HRWatchdog, Aug. 3, 2026.
- Effects of a $20 Minimum Wage: Evidence from Granular Data on Wages, Employment and Prices, UC Berkeley Institute for Research on Labor and Employment (Denis Sosinskiy, Michael Reich), April 1, 2026.
- Did California’s Fast Food Minimum Wage Reduce Employment? (Working Paper 34033), National Bureau of Economic Research (Jeffrey Clemens, Olivia Edwards, Jonathan Meer), July 2025.
- California AB 1228 (2023): Fast food restaurant industry: Fast Food Council, LegiScan, chaptered Sept. 28, 2023.
- Q2 2026 Bakersfield, CA Retail Market Report, Lee & Associates, July 2026.
- Inventory of US City and County Minimum Wage Ordinances, UC Berkeley Labor Center, 2026.
About this article
Kern CRE prepared this article with help from AI research and writing tools. An editor reviewed the draft, checked its facts against the sources linked above and edited it for accuracy and clarity. It is general information, not legal, tax, investment or financial advice; talk with a qualified professional about your situation.