In anticipation of a new California law that will raise the minimum wage for fast-food workers, Pizza Hut franchisees are opting to eliminate more than 1,200 delivery driver positions. The franchisees appear to instead be moving toward the third-party delivery services of companies like DoorDash, GrubHub and UberEats.
The news, which was first reported by Business Insider, came via federal-employment notices sent to the drivers in accordance with the WARN Act. The drivers’ employment will be terminated at the end of February, with at least one driver offered a $400 severance check if they stay through Feb. 5.
In April, fast-food workers are set to have their minimum wage bumped to $20 per hour thanks to AB 1228. For many drivers, that equates to about a 30% raise in pay. The new law, which was passed by the California General Assembly in September, replaced the controversial FAST Act, which would’ve raised the minimum wage to $22 rather than $20. AB 1228 was viewed as a compromise between labor unions and the ownership groups and franchisees of large fast-food chains.
Related: How The Largest Pizza Chain Makes All That Money
At least five different Pizza Hut franchisee groups were involved in the move. One, Southern California Pizza Co., which operates “dozens” of stores in several different counties, will lay off about 841 drivers and discontinue its in-house delivery services.
“PacPizza, LLC, operating as Pizza Hut, has made a business decision to eliminate first-party delivery services and, as a result, the elimination of all delivery driver positions,” said a WARN Act notice filed by the franchisee. The WARN Act is a 1988 federal law that protects workers by mandating that companies with over 100 employees must give 60 days notice before a mass layoff.
Yum! Brands, which owns Pizza Hut in addition to other brands like Taco Bell and KFC, told Business Insider that it was “aware of the recent changes to delivery services at certain franchise restaurants in California.” Still, the franchisor moved to distance itself from the decision.
“Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations while continuing to provide quality service and food to our customers via carryout and delivery,” Pizza Hut told Business Insider.
This is likely the first domino in a series of them yet to fall in California, as AB 1228 affects over 557,000 workers at 30,000 restaurants in California. It’s important to note, however, that the law only affects restaurant brands with 100 or more locations nationwide. In other words, independent pizzerias, and small and even many medium-sized pizza chains will not be affected by the law.
Perhaps, then, this is another area where independent pizzerias can compete with the big chains: by offering a personal touch with first-party delivery.
