When UC Santa Cruz researchers visited Taco Bell on Mission Street in Santa Cruz, there were no printed menus on the walls because customers ordered only from kiosks. The human order-taker position, a staple of fast food employment for decades, was gone.

That observation appears in a November 2025 working paper titled Let Them Eat Big Macs, Crunchwraps and Whoppers, released by UC Santa Cruz economics lecturer Stephen Owen and a team of undergraduate researchers. The study draws on firsthand interviews with franchise operators and independent restaurant owners, internal payroll data from Burger King and McDonald’s franchises, and statewide economic indicators.

California’s Assembly Bill 1228, which took effect in April 2024, mandated a $20 minimum wage for fast food workers at chains with 60 or more locations. The paper asserts that the law created a roughly 25% wage increase for fast food workers in most California counties.

What internal records reveal about minimum wage

The researchers analyzed internal franchise records from a Burger King group with over 100 California locations, showing average daily employee hours per location falling from 61 in October 2023 to 48 in October 2024. The numbers partially recovered to 53 by October 2025, which was still below pre-mandate levels. Similarly, across 18 McDonald’s Central Valley locations, total labor hours dropped from 1,100,192 to 971,452.

Overtime hours, the researchers found, were largely eliminated across franchised fast food operations. For longer-tenured hourly workers, overtime had been a primary path to meaningfully higher take-home pay.

Benefits eligibility eroded alongside hours, according to the research. The report found that “measures to limit employee hours and keep them under the eligibility threshold for benefits have increased sharply at franchised fast food restaurants.”

That same Burger King franchise group saw applications surge 400% in August 2024 compared to August 2023. By January 2025, the group was receiving more than 39,000 applications in a single month. The higher wage made fast food jobs desirable, but the franchise was simultaneously cutting shifts.

Industry turnover rates, historically estimated at 150%-300%, dropped to approximately 150%-200% after the wage increase. Lower turnover means lower recruiting and training costs, but the researchers note the net effect on franchise economics remains unclear, and lower turnover didn’t stop operators from cutting hours.

Tech substitutes for human work

The report also documented how franchise operators responded to higher labor costs not through headcount reductions alone, but through technology substitution.

Burger King, McDonald’s and Taco Bell franchises studied by the researchers had all invested in automated ordering kiosks. A Bay Area Burger King was running Hi-Auto, a bilingual AI voice-ordering system in its drive-through, with the franchise owner preparing to expand it to additional locations. Taco Bell, the paper notes, expanded a separate AI drive-through trial from five California locations to 30 in May 2025.

The report points out other chains, not limited to the researcher’s Santa Cruz visits, that are pulling in new service and kitchen tech. They pointed out that Chipotle is testing its Autocado robotic guacamole prep system and an automated assembly line called the Augmented Makeline. Sweetgreen reports that locations using its Infinite Kitchen technology have higher margins, fewer employees, better order accuracy and lower turnover.

The researchers predict a trajectory. “We anticipate that when the Chipotle Cobots and Sweetgreen Infinite Kitchens are more widely deployed in California, there will be a substantial reduction in labor requirements.”

Pressure on adjacent businesses

The study includes a finding that has received less attention than the franchise data. The legislation puts wage pressure on businesses that it doesn’t even cover. Independent restaurants, exempt from the act, compete for the same workers as McDonald’s and Burger King, now paying $20 an hour.

A 40-year-old sushi restaurant on Santa Cruz’s Mission Street told researchers: “If they can work at a fast food chain restaurant down the street for $20 an hour, why would they want to work here for just $17 an hour?” A nearby Brazilian café had raised its prices “three or four times in the last year,” while a falafel restaurant open since 1988 described a labor market it couldn’t have survived entering today.

For HR leaders in healthcare, hospitality, retail and other hourly-heavy sectors, this spillover effect is the most transferable lesson. Sector-specific mandates create market-wide wage pressure regardless of whether a given employer is legally covered.

21 states experience minimum wage increases in 2026

Twenty-one states are rolling out wage increases this year and 18 states and Washington, D.C., now have floors of $15 or more. The federal rate remains frozen at $7.25, unchanged since 2009. For HR leaders who need a quick compliance snapshot, Paycom’s 2026 state-by-state minimum wage guide offers a practical reference.

The guide also flags the compliance complexity for multi-state employers. Not every city or municipality with its own minimum wage requirement is captured in state-level data, and rates for tipped workers, contractors and specific industries vary further still. Paycom advises employers to consult legal counsel for jurisdiction-specific guidance. A reminder that compliance tracking at the state level is a floor, not a ceiling.

While the U.C. Santa Cruz paper highlights hours reductions and automation, an early 2024 analysis from U.C. Berkley found that the CA law raised fast-food wages 18% with no employment drop and 3.7% menu price hikes, implying profit margins absorbed much of the cost. Similarly, a 2024 brief from Harvard reported $2.50+ hourly gains for California fast-food workers versus peers, with no cuts to hours or understaffing. These pre-2025 studies emphasize wage benefits without disemployment, contrasting later critiques.

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