Bakery chain Panera Bread is exempted from California's new law that raises hourly wages of fast food workers from $16 to $20, thanks to a major franchisee with close ties to Gov. Gavin Newsom.
In September 2022, Newsom signed the Fast Food Accountability and Standards Recovery (FAST) Act that codifies the wage increases for fast food workers in the Golden State. However, a clause in the FAST Act – which will take effect in April – exempts "chains that bake bread and sell it as a standalone item." Incidentally, Panera Bread falls under this category.
"Other restaurants such as Paris Baguette and Great Harvest Bread Co. also appear to qualify for the carve-out, although the details remain uncertain ahead of the law's debut," Bloomberg News mentioned. "Many restaurants located inside grocery stores are also spared."
Newsom himself reportedly sought the exemption – a boon for Greg Flynn, owner and CEO of Flynn Restaurant Group (FRG). The company is the largest franchisee in the U.S., with thousands of brands under its wing. Brands under FRG include Applebee's, Pizza Hut, Taco Bell, Wendy's and Panera Bread, with the company owning around two dozen locations of the bakery chain in California. (Related: Cashless society: Panera Bread debuts "frictionless" palm payment system.)
The ties that bind Newsom and Flynn appear to stretch way back, as both attended Redwood High School in the city of Larkspur. A yearbook from the high school stated that Flynn served as student body president in his senior year, concurrent with Newsom playing basketball as a freshman.
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Bloomberg News also mentioned that Flynn has been involved in business dealings with the California governor. Disclosure forms revealed that one such deal happened in 2014, when the FRG head acquired a Napa Valley resort that was managed by Newsom's hospitality firm. The outlet also mentioned that Flynn "has been known to tout his relationship with Newsom … with one saying the fast-food entrepreneur has said he can reach the governor via text."
Moreover, Flynn – who has a net worth valued at $1.1 billion as per the Bloomberg Billionaires Index – has also donated to Newsom's political campaigns. Such donations include $100,000 to fight off a conservative-led recall effort and $64,800 to support the governor’s reelection in 2022.
Flynn a vocal critic of the FAST Act
In a brief conversation, Flynn denied playing a role in the new law's exemption. Meanwhile, Newsom's office said the FAST Act was the "result of countless hours of negotiations with dozens of stakeholders over two years" and will make a real difference for hundreds of thousands of Californians. Last year, the Democratic governor told reporters that the law came about as "part of the sausage-making" of politics."
However, Bloomberg News revealed that Flynn was a vocal critic of the FAST Act. In a 2022 op-ed for the Capitol Weekly, he warned that the measure would all but kill the franchising business model in California.
But Flynn's criticism of the law wasn't just limited to his opinion piece. Anonymous tipsters shared with Bloomberg News that behind closed doors, the CEO of FRG urged Newsom's top aides "to reconsider whether Panera should be classified as fast food."
"While the plan wasn't adopted, the Service Employees International Union (SEIU), a labor group that was the driving force behind the bill, decided to accept a narrower carve-out as the talks progressed — one that would only apply to restaurants operating bakeries," the outlet stated.
"That position was adopted as a means of winning the governor's support for the legislation, said a person with knowledge of the discussions. The rationale was the governor's longstanding relationship with a Panera franchisee."
But former California Assemblywoman Lorena Gonzalez remarked that despite this exemption, Panera will likely have to raise wages to keep up with other chains. The erstwhile Democratic member of the California State Assembly introduced the first iteration of the FAST Act in 2021.
"It's kind of a silly exemption," said Gonzalez, who stepped down as state lawmaker in 2022 to lead the California Labor Federation. "If you look at where Paneras are located and their clientele, it’s not as if they’re going to be able to hire people for less.
Head over to NewsomWatch.com for more stories about the California governor.
Watch this clip of a man arrested at a New York City Panera Bread branch for entering without a vaccine passport.
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