As restaurant chains pull back in California amid rising labor costs and the state’s $20 fast-food minimum wage, Freddy’s Frozen Custard & Steakburgers CEO Chris Dull is betting bigger on the Golden State, arguing it gets a “bad rap” as a place to do business.
“I feel like California gets a bad rap. It’s hard to find markets that offer you the same level of densities that you see in and around the state of California,” Dull told Fox News Digital.
“It’s a state that has historically been a good state for restaurant brands. Volume is there to be had and lots of guests for you to speak to and turn into raving fans,” he added.
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The CEO’s comments come as one of Carl’s Jr.’s largest franchisees plans to close 10 locations and sell 49 others — affecting 59 restaurants total — after filing for Chapter 11 bankruptcy protection earlier this year.
Separately, longtime California restaurateur Mike Georgopoulos recently warned that the Golden State’s business dream has become a math problem that no longer adds up, previously telling Fox News Digital that businesses are “working for peanuts.”
“They own a business, they’re in a lease, they have no other place to go. So they’re just in a vicious cycle, and there’s just nothing coming out on the other end in terms of profit,” Georgopoulos said. “It’s sticker shock, it really is.”
Dull, who became CEO in 2021, dismissed concerns about California’s business climate, defending the state and arguing that the challenges facing competitors can create opportunities for expanding brands like Freddy’s.
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“Sometimes when you see units that are moving out of markets or shuttering doors, that can actually be a great opportunity for folks like us who are growing. We can go in,” Dull told Fox News Digital.
The Kansas-based burger chain, which operates more than 500 restaurants nationwide, is aggressively recruiting new franchisees and plans to open 60 new locations this year, with a particular emphasis on Northern California.
“California is such a big state. You can focus on regions and still experience pretty tremendous growth, whereas in some of the smaller states, you need the whole state to really make it pan out for you,” Dull said.
Freddy’s already operates a handful of California locations, but the expansion is intended to build “density,” the CEO said, as it looks to win over customers in a state dominated by In-N-Out Burger.
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“We have been making our way further and further west and have restaurants operating in California today. And California offers densities that are hard to find in other parts of the country,” he told Fox News Digital.
Dull explained how Freddy’s adjusts its pricing based on local labor, real estate and operating costs as it expands into new markets.
“Markets where you experience higher real estate costs and higher labor costs, you will also have a higher ticket for your products. It all rolls up,” said the CEO.
Freddy’s is expanding in California, which has a $20 fast-food minimum wage, while also opening locations in Florida, where the statewide minimum wage is $14.
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“If a business is being charged more in rent and more in labor, they simply have to charge more for their product, or they will not be profitable,” Dull said.
“It’s about pricing your product at a value where your operator can still generate a profit given the cost structure that they’re looking at in any given market, which means that you will have variation in your pricing across the United States,” he added.
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