Down Angle Symbol A symbol in the form of an angle pointing downwards. Gov. Gavin Newsom is under fire over his ties to restaurant owner Panera. Gado/Getty
- Panera was excluded from California's new minimum wage increase for fast food chains in September.
- Gov. Gavin Newsom is in turmoil because Panera franchise owner Greg Flynn is a campaign donor.
- Fast food chains that sell bread as a single item are exempt from the clause.
California's increase in the minimum wage from $16 to $20 an hour for fast-food restaurant workers, set to take effect in April, caused a stir at fast-food chains – but not at Panera.
Now California Gov. Gavin Newsom is in turmoil after his connection to billionaire restaurant owner Greg Flynn — who happens to be a campaign donor — was revealed.
Flynn is the founder and CEO of Flynn Group, which has 2,600 U.S. locations for Applebee's, Taco Bell, Panera, Arby's, Pizza Hut and Wendy's.
He owns 12 Panera locations in California. According to Panera's website, there are 188 locations in the state.
The Flynn Group also owns Applebee's locations in California, but the law does not apply to full-service restaurants.
The news, first reported by Bloomberg on Wednesday, has already led to calls for an investigation from leading Republicans in the state and many angry posts on social media, according to the San Francisco Chronicle.
The two have known each other for years and apparently attended the same high school, Bloomberg reported.
Flynn has donated to Newsom's campaigns since 2014, and Flynn Properties Inc. donated about $164,800 to Newsom's charitable causes in 2021 and 2022, campaign finance records show. This includes $64,000 for his re-election and $100,000 for the “Stop Republicans’ recall of Governor Newsom” campaign.
Flynn's Panera locations enjoy a narrow exemption from California's wage increase in September because of a clause that excludes any establishments that sell bread as a stand-alone menu item — not bagels, not croissants, just bread as defined by the U.S. Food and Drug Administration.
The exception also does not apply if the bread is offered for sale as part of another menu item, such as a foot-long Subway sandwich.
Sub shops are also not allowed to start selling bread or burger joints are allowed to bake their own buns to reduce their labor costs – the rule only applies to restaurants that have been doing this since September 15 last year.
When asked last year about the bread exemption that stunned many, Newsom said, “It's part of making sausage,” but wouldn't elaborate.
In a response to Bloomberg, Newsom's office said the legislation was the “result of countless hours of negotiations with dozens of stakeholders over two years.”
In an interview with Bloomberg, Flynn denied having been involved in the bread liberation.
Newsom's office, Flynn Group and Panera did not immediately respond to a request for comment from Business Insider.
In short, this basically rules out many major fast food chains other than Panera. Some smaller brands appear to benefit from the spinoff, including Paris Baguette and Great Harvest Bread Co, Bloomberg reported.
The new minimum wage for fast food workers in California is set to increase to $20 an hour in April. Restaurants with 60 or more locations must adopt the new tariff, and chains including McDonald's, Chipotle and Jack In the Box have already budgeted for an additional $250,000 in annual costs and say they will raise menu prices at their California stores.