Restaurant Chains Won Big on Election Night
Trump is expected to undo most of the Biden Labor Department’s changes that improved conditions for American workers.
by Eric Gardner, More Perfect Union
Last week, Yum Brands, the $7 billion fast food giant behind KFC, Taco Bell, and Pizza Hut, missed sales expectations amid what executives described as a “challenged U.S. environment.” Despite the news, the company’s stock jumped to $137, an increase of nearly four percent in four days.
The Cheesy Gordita Crunch maker isn’t alone. Last week, eight of the ten largest publicly traded U.S. restaurant companies saw their shares climb even as most of them posted disappointing quarterly results.
One reason for the good fortune in the restaurant industry may be the election of Donald Trump, which threatens to transfer billions of dollars from workers to larger restaurant operators through Department of Labor rule changes.
“Working people in the restaurant industry and beyond sent a clear message to all politicians on November 5 that they don’t feel their needs and interests are being heard. Trump will roll back their protections.” Saru Jayaraman, president of the labor advocacy group One Fair Wage, told More Perfect Union in a telephone interview after Trump won a second term in office. “Blue state Democrats need to hear the call and pass protections.”
What Trump campaigned on for hospitality workers was no taxes on tips, a proposal aimed squarely at the Culinary Union’s political machine in Nevada that Sen. Ted Cruz quickly introduced in Congress. Harris quickly cosigned the proposal while coupling it with an elimination of the tipped minimum wage. Exit polling shows that Trump heavily cut into Harris’ margin with union workers from four years ago, and Trump became the first Republican since George W. Bush to win Nevada.
This explicit appeal to hospitality workers is very different than what Trump actually did during his first term in office. In 2017, the Trump administration proposed a rule that would allow restaurant owners to confiscate worker tips and distribute them across the workforce, a rule the Economic Policy Insitute estimated would have been a $5.8 billion windfall for operators. The change did not include a provision that required distributing the tips back to workers and was ultimately scuttled after a bipartisan bill defined tips as the property of workers.
The Biden Labor Department implemented a series of labor rule changes aimed at boosting worker pay. One of the provisions was a revision to overtime rules, which was estimated to shift $1.2 billion into employee paychecks. The other was resurrecting the 80/20 standard, which mandates that employees can only make less than minimum wage if they interact with customers 80% of the time. The first Trump administration eliminated the policy, and an appeals judge blocked Biden’s resurrection attempt in August.
The Wall Street Journal reported last week on the National Restaurant Association's lobbying priorities under the Trump administration, which include rolling back Biden-era worker protections and broader immigration reform. The group has deep connections to the Trump administration.
In 2016, Trump selected NRA member Andy Puzder for Secretary of Labor. Puzder, who was the CEO of Hardees, is skeptical of minimum wage, overtime and worker protections. Puzder’s candidacy was ultimately withdrawn when it became apparent he would not receive confirmation at the Senate.
But there are already rumors swirling that Trump may try the appointment again. “That is the most horrific person you can imagine protecting workers’ rights,” Jayaraman said. “Trump is a card-carrying member of the Restaurant Association with all of his restaurants. And he's planning to put one of his chums from the NRA in charge of the Department of Labor.”
Other big winners
As a whole, the stock market soared in the wake of Trump’s election. The Dow Jones Industrial Average, which tracks 30 of the largest American companies, rose 3.6 percent, the biggest post-election bump since William McKinley in 1896. Analysts argue that some gains can be attributed to the certainty of knowing the next president. “We were going to have a positive reaction today, agnostic of who won,” a financial analyst told CNN.
Based on early reactions, both cryptocurrency companies and banks had outsized optimism, likely for regulatory reasons.
The Biden administration took a tough approach to crypto, regulating the technology as a traditional investment. Both Trump and Vice President Kamala Harris courted support from crypto interests, which spent heavily to elect pro-crypto candidates to Congress, so it’s expected that Trump will back the industry’s efforts to create a new and friendlier regulatory regime. Coinbase, a cryptocurrency trading platform accused of running an unregistered securities exchange by the Biden administration, rose 42 percent; Robinhood, which allows users to buy and sell traditional investments and crypto, increased 25%.
U.S. bank stocks ignited in the aftermath as well. JP Morgan, the largest American bank by assets, jumped 11 percent, while Wells Fargo rose by 13 percent. In April, Reuters reported that Trump promised he would unravel the regulations imposed after the 2008 financial crisis.
On Thursday, BloombergLaw said the administration was looking to roll back Biden-era rules like capping credit card late fees, though Trump proposed a temporary cap on credit card interest during the campaign.