The Bloomberg story published this week alleged that Greg Flynn, a billionaire CEO of a restaurant group that operate Panera locations, lobbied Newsom’s top aides “to reconsider whether fast-casual chains such as Panera should be classified as fast food.”
The story alleged that Service Employees International Union California State Council agreed to exclude restaurants that operate bakeries “as a means of winning the governor’s support for the legislation.” The story said “the rationale was the governor’s longstanding relationship with a Panera franchisee.”
“The governor never met with Flynn about this bill and this story is absurd,” said Alex Stack, a spokesperson for Newsom. “Our legal team has reviewed and it appears Panera is not exempt from the law.”
Bloomberg did not immediately respond to a request for comment in response to the statement from the governor’s office.
The governor’s office said the legislation was the result of countless hours of negotiations over two years and Newsom administration officials met with dozens of business owners as well as union representatives.
Panera’s inclusion in the law comes down to whether the company produces its bread on site, or brings in dough made at a central facility, said a source involved in the discussions.
The law says bakeries are exempt from being required to pay the higher wages.
“This exemption applies only where the establishment produces for sale bread as a stand-alone menu item, and does not apply if the bread is available for sale solely as part of another menu item,” the law states.
Flynn Holdings is a restaurant group and real estate investment company that claims to be the largest restaurant franchisee in the nation. The company’s portfolio of restaurants is vast and includes more than 444 Applebee’s restaurants, over 280 Taco Bell locations, over 133 Panera Bread cafes, 367 Arby’s restaurants, 937 Pizza Huts and and 194 Wendy’s restaurants, according to its website.
Flynn has been a generous donor to Newsom’s political campaigns, including contributing $100,000 to fight a failed recall effort against the governor.
Newsom’s statement comes after California Senate Republican Leader Brian Jones called for an investigation into the allegations on Thursday.
“Put simply, campaign contributions should not buy you carve-outs in legislation,” Jones said. “That’s crony capitalism. It’s corrupt and unacceptable.”
Labor unions successfully pushed Assembly Bill 257, also known as the Fast Food Accountability and Standards Recovery Act, through the state Legislature in 2022. At the time, bakeries were exempted from the law as unions, the governor’s office and other groups sought to define what restaurants the bill applied to.
The initial fast-food law, which Newsom signed last September, created a statewide 10-member fast-food council and regional councils composed of labor and employer representatives to set minimum wage, employee hours and working condition standards in California. Under the law, the council could have increased the minimum wage up to $22 an hour in 2024 for employees of chains with more than 100 restaurants.
Fast-food companies quickly launched a successful campaign to qualify a referendum on the ballot to reverse AB 257, which paused the law from taking effect until a statewide vote in November 2024.
Under a new agreement reached between fast-food companies and labor last year, the referendum will be removed from the ballot and workers will receive a pay bump to $20 per hour beginning this year. Bakeries remain exempt from the law.