It’s almost lunchtime. At a McDonald’s restaurant south of Los Angeles’ Koreatown, owner Kerri Harper-Howie watches as fries are fried in hot oil and a conveyor belt carries a steady stream of wrapped sandwiches to an employee who packs them into bags.

Harper-Howie and her sister own 21 McDonald’s locations in Los Angeles County and employ about 1,500 people. They recently raised those employees’ pay from about $16 to $20 an hour, the new state-mandated minimum wage for fast-food restaurants in California, part of a chain with more than 60 locations across the country.

When the pay rise came into effect on April 1, it was welcomed by many workers, while some franchisees warned that it could be ruinous for their already struggling businesses.

“We are of course happy to always follow the law and do what we have to do, but that certainly brings challenges,” said Harper-Howie.

When it reported its second-quarter figures after the wage increases came into effect, profits had fallen by 5% – and it was the first decline in revenue and guest numbers in over a decade.

“This is a big deal for any company, period,” said Harper-Howie, who pays McDonald’s a fee to represent the brand. “People don’t understand that this is not the billion-dollar McDonald’s. This is our family business.”

Harper-Howie said her company has already made adjustments to account for rising costs for deliveries and insurance premiums due to inflation.

Like many others in the industry, she raised menu prices by a few percentage points in anticipation of the pay increase. A Big Mac meal at one of her McDonald’s restaurants now costs $10.49. If the price were higher, Harper-Howie said, she would lose her low-income customers.

“We cannot raise prices enough to pay for the minimum wage increase because our customers literally cannot afford the food.”

Still, many franchise owners like Harper-Howie are retaining employees and even hiring new ones. Between January and June, 19,800 new jobs were created in the fast-food industry in California, according to the Bureau of Labor Statistics.

This is similar to what happened when California raised the minimum wage to $15 an hour in 2022. According to Brian Callaci, an economist at the Open Markets Institute, businesses adjusted. “We haven’t seen any real negative impact on employment. California has continued to create jobs.”

Some chains have announced their closures since April. Rubio’s Coastal Grill 48 branches in California have been closed, with wage increases being cited as one of the reasons for the decision. Other chains are now taking the higher wages in their stride. Fatburger is planning a 10-year expansion with 40 new branches in the state.

Employees, in turn, find it easier to pay their bills because of their better pay.

When Jaylene Loubet, a cashier at a McDonald’s in Northeast Los Angeles (which is not owned by Harper-Howie), received her first check with the new salary, she saw the difference. “It’s exciting,” she said.

Before the raise, Loubet earned $17.25 an hour. Given the high cost of living in LA, that’s not enough to support herself and her parents. They are both unemployed due to health reasons and all live together in a one-bedroom apartment.

“I am the main provider for my family,” Loubet said.

On doctor’s orders, her mother should eat more fresh fruit, vegetables and lean meat. The pay raise will be used for this, Loubet says. “I’m certainly happy with the $20, but I feel like we still have a long way to go.”

And in fact, there are already talks at the California State Capitol about another pay raise for fast-food workers next year, she said.

“The cost of living in Los Angeles is constantly rising,” Loubet said. “It’s only fair that our wages continue to rise.”