California Gov. Gavin Newsom signed a law that exempts Panera Bread from a new $20-an-hour minimum wage hike for fast food chains after the billionaire owner of several of the chain’s locations donated to his campaign, according to a report.
In September, Newsom, a Democrat, signed into law a measure that raises the minimum wage of food fast workers from $16 an hour to $20 an hour.
But the Fast Food Accountability and Standards Recovery Act (FAST Act) includes an unusual carve-out that exempts “chains that bake bread and sell it as a standalone item,” according to Bloomberg News.
Newsom reportedly sought the exemption, which benefits among others Greg Flynn, the billionaire CEO of Flynn Restaurant Group, the company that owns some two dozen Panera Bread locations in the state.
Flynn, who attended the same high school as Newsom, has been involved in business dealings with the California governor, according to Bloomberg News.
He has also contributed to Newsom’s political campaigns.
In 2014, Flynn, who is the largest franchisee in the US with thousands of brands including Applebee’s, Pizza Hut, Taco Bell, and Wendy’s, acquired a Napa Valley resort that was managed by Newsom’s hospitality firm, according to disclosure forms.
Flynn has a net worth valued at $1.1 billion, according to the Bloomberg Billionaires Index. He has donated at least $164,800 to Newsom’s campaigns.
The Post has sought comment from Flynn, Newsom, and Panera Bread.
Flynn told Bloomberg News that he played no role in crafting the bread exemption.
Newsom told reporters last month that the exemption was “part of the sausage-making” in politics.
Michelle Korsmo, head of the National Restaurant Association, told an industry conference last year that “everyone’s scratching their head” about the bread exemption.
“You may be celebrating or you may be lamenting the bakery exemption,” Korsmo was quoted as saying by Bloomberg. “But remember, all of that comes through relationships.”
The governor’s office told Bloomberg News that the law was the “result of countless hours of negotiations with dozens of stakeholders over two years.”
Flynn was publicly critical of the legislation when it was first floated in 2022.
He said that raising the minimum wage of fast-food employees would have an adverse business effect on franchise owners.
Flynn quietly lobbied Newsom’s aides to reconsider whether Panera Bread can be considered fast food, according to Bloomberg News.
The exemption for bread sellers was inserted into the legislation after the union that was pushing for the hike in minimum wage accepted it as a concession aimed at getting the governor’s support, the report stated.
Earlier this month, Chipotle executives warned that consumers in California should expect to see “significant” price hikes due to the minimum wage hike.
Jack Hartung, Chipotle’s chief financial and administrative officer, told investors on an earnings call that the price hikes are necessary to keep up with increasing labor costs.
McDonald’s CEO Chris Kempczinski warned in October that the Big Mac maker would also need to hike the price of its menu items in California.
The chain has increased prices nationwide amid rampant inflation, including charging $18 for a Big Mac meal.
Earlier on Wednesday, Panera Bread agreed to pay $2 million to settle a class-action lawsuit that accused the chain of misleading customers about fees and menu prices for delivery orders.
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