Pizza Hut to lay off thousands of California workers

An estimated 10 million low-wage earners are getting a raise in the new year, but not all employers are taking higher minimum wages across 22 states in stride. 

Pizza Hut is laying off more than 1,200 delivery drivers in California ahead of the state's nearly 30% increase in its minimum wage, to $20 an hour from $16. PacPizza, operating as Pizza Hut, and Southern California Pizza Co. — another Pizza Hut franchise, both gave notice of layoffs impacting workers in cities throughout the state, Business Insider reported, citing notices filed with the state.

At least one Pizza Hut franchisee also charges a service fee, citing the increased cost of operating in California in its tacking on an 8.5% service charge to the bill, according to the Los Angeles Times. 

"Pizza Hut is aware of the recent changes to delivery services at certain franchise restaurants in California. Our franchisees independently own and operate their restaurants," a Pizza Hut spokesperson told CBS MoneyWatch in an emailed statement. "Where franchisees have elected to make changes to their staffing approach, access to delivery service will continue to be available via Pizza Hut's mobile app, website and phone ordering," the spokesperson added.

Fast-food chains including McDonald's have already said menu prices would rise in the state to counter the higher labor costs. 

The Golden Arches in November said its menu prices rose just over 10% nationwide this year, with CEO Chris Kempczinski telling analysts in an earnings call that "there will certainly be a hit in the short-term to franchisee cash flow in California." 

On the other side of the country, DoorDash is getting rid of tipping prompts in New York City and upping its service fee to all transactions, but is still letting customers add gratuity once the delivery is finished, the delivery app said.

The changes come in response to a new minimum wage hike for app-based food delivery workers in New York City, who must be paid at least $17.96 an hour plus tips, or what DoorDash called "the ill-conceived, extreme minimum pay rate for food delivery workers in New York City [that] will have significant consequences for everyone who uses our platform." 

The switch in tipping policy also comes a month after DoorDash told users that customers who don't tip may have to wait longer for their food deliveries. 

"New regulations have changed how delivery apps like Uber Eats work in New York City," Uber stated in a blog, limiting work-time options for its couriers. 

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York.