California Pizza Hut franchises laying off delivery drivers before new $20 minimum wage
SAN JOSE, CA - Multiple Pizza Hut franchises in California are planning to lay off delivery drivers as the restaurant chain braces for an increase in the minimum wage for fast food workers next year.
Several Pizza Hut operators filed notices to comply with the Worker Adjustment and Retraining Notification Act saying they were discontinuing their 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," a federal WARN Act notice filed by the fast-food operator with the state's Employment Development Department said, Business Insider reported.
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Pizza Hut franchise owners are expected to cut over 1,200 delivery drivers starting in February.
A local business analyst says Pizza Hut isn’t well known for delivering pizza, and now that there are other companies who only deliver food, paying drivers a higher wage will no longer work for their bottom line.
"Pizza Hut, a restaurant, nicer pizza, you ate there. The home delivery was never the core part of the business," said Kirthi Kalyanam, a Retail Management professor at Santa Clara University.
A Pizza Hut customer in San Jose told KTVU he isn't happy about the job cuts.
"I think it was a horrible decision. We should definitely put money in the community, so everybody can survive. Everybody out here is having a hard time right now and firing people isn’t the solution," said Hao Ngo, of San Jose.
In April 2024, under Assembly Bill 1228, the minimum wage requirement for fast food restaurants increases to $20 an hour. Pizza Hut will now have its customers rely on companies like Grub Hub, Door Dash and Uber Eats for deliveries.
"Basically, Door Dash has done to restaurant home delivery, what Amazon has done to retail. A highly predictable business model that really works. So, consumers now, and particularly with the pandemic, there was a lot of home delivery business happening," said Kalyanam.
California’s minimum wage increase for fast food workers will impact 30,000 restaurants state-wide. Other restaurants like Chipotle and McDonald's say they plan to raise menu prices in anticipation of the minimum wage increase.
"I feel like we don’t have a choice, as people. If they’re going to raise the price, I’m still going to have to get it. So, we’re really suffering on the back end," said Ngo.
Kalyanam says it’s too early to tell if other businesses will be impacted by the fast food wage increase or how delivery companies may benefit from Pizza Hut’s decision to no longer deliver.
Another operator, Southern California Pizza Co. also announced layoffs of around 841 drivers across the state. The moves impact Pizza Hut locations in Los Angeles, Orange, San Bernardino, Riverside and Ventura counties.
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The wage increase was proposed as a way to offset the increasing cost of living for Californians.
One Pizza Hut delivery driver told Business Insider that he was offered a $400 severance if he stuck around through his February 5 layoff date.
"The money they are giving us as severance pay is a slap on the face," he told Insider. "It comes to $3 a month for nine-plus years of service."
FOX Business has reached out to the Pizza Hut operators, but has not yet heard back.