CALIFORNIA STATE – California’s $20 minimum wage for fast-food workers was designed to boost pay for hundreds of thousands of employees.
But more than two years after the law took effect, researchers have identified an unexpected consequence: smaller restaurant chains and “mom and pop” style stores appear to be losing ground to their much larger competitors.
A new study published by the National Bureau of Economic Research found that California’s fast-food wage law has had dramatically different effects depending on the size of the restaurant chain.
While the nation’s largest fast-food companies have experienced relatively little measurable disruption, smaller chains covered by the law have seen employment decline, restaurant openings slow, and closures increase.
The findings suggest that a policy intended to improve conditions for fast-food workers may also be reshaping competition within California’s restaurant industry. But, the results are contested.
Smaller Chains Are Taking the Biggest Hit
The research, conducted by economists Vitor Melo, David Neumark, Liam Sigaud, and Gary Wagner, examined restaurant employment, openings, and closures between 2019 and 2025.
Rather than treating all fast-food restaurants as a single category, the researchers examined 281 chains covered by California’s law, separating the 20 largest companies from 261 smaller chains.
The differences were striking.
Among the smaller covered chains, the researchers found:
- Employment fell approximately 20% in California relative to the same chains’ operations in other states.
- The number of restaurant locations declined about 10%.
- New restaurant openings dropped between 17% and 20%.
- Restaurant closures increased between 9% and 21%.
These figures represent estimated effects relative to comparison groups, not simply raw statewide changes.
Meanwhile, the 20 largest chains, which account for roughly 60% of employment at covered businesses, showed no statistically detectable changes in those measures.
The researchers described their findings in an October 22 analysis published by the Centre for Economic Policy Research.
Their conclusion was that California’s fast-food market appears to be shifting toward its largest chains.
Why the Biggest Fast-Food Companies May Have an Advantage
California’s fast-food minimum wage took effect April 1, 2024, raising the required hourly wage to $20 for workers at covered chains with at least 60 locations nationwide.
At the time, California’s general statewide minimum wage was $16 per hour.
The law does not apply to every restaurant. Independent establishments and smaller chains generally remain outside its coverage, while qualifying chains must meet the higher wage requirement.
But even among covered businesses, the researchers found that size matters.
Large corporations may be better positioned to absorb higher labor expenses because of their sales volumes, operational efficiencies, and investments in technology.
Smaller regional chains may have fewer opportunities to spread those costs across their operations.
The study also identified an important distinction: employment losses among smaller chains were concentrated in restaurant locations that closed, rather than reductions in staffing at locations that remained open.
In other words, the effect was not necessarily restaurants laying off workers individually. Instead, fewer restaurants were opening, and more existing locations were disappearing.
That distinction matters for communities where restaurant closures can mean losing dining options as well as local jobs.
Other Studies Have Reached Different Conclusions
The economic effects of California’s $20 fast-food wage remain contested.
A March 2026 study from UC Berkeley reached a substantially different conclusion.
Researchers Michael Reich and Denis Sosinskiy found that the policy increased average weekly wages for covered workers by approximately 11%, without reducing overall fast-food employment.
They also found that restaurant prices increased approximately 1.5% relative to comparison locations, equivalent to about six cents on a $4 menu item.
A separate National Bureau of Economic Research analysis, revised in October 2026, estimated that California’s limited-service restaurant employment was approximately 3.5% lower after two years than it otherwise would have been.
The differing conclusions reflect researchers’ use of different datasets, comparison groups, and statistical methods.
The newest establishment-level study adds another dimension by suggesting that looking only at statewide employment totals may obscure substantial differences between restaurant chains.
Its authors acknowledge that their findings do not definitively resolve the wider debate about the law’s overall employment effects.
What It Means for California Diners
For California residents, the findings raise questions beyond wages and menu prices.
If smaller covered chains struggle to expand while the largest brands maintain their market positions, consumers could eventually face fewer restaurant choices.
However, the research does not establish that any particular local restaurant closure was caused by the wage law. Many other factors, including rent, food costs, consumer spending, and competition, influence whether individual restaurants succeed.
The study also does not suggest that independent restaurants employing fewer workers under different wage requirements are experiencing the same effects.
For now, the findings suggest that the impact of California’s fast-food wage increase is more complicated than a simple question of whether workers earn more or restaurants charge higher prices.
