California Gov. Gavin Newsom fought to exempt fast-food chains from the new minimum wage increase if the company baked its own bread and sold it as a standalone item.

The minimum wage will increase to $20.

But why? The first and only restaurant you think of is Panera Bread. From Bloomberg:

The specificity of the exemption has puzzled observers for months, especially after the governor told reporters last year that it came about as “part of the sausage-making” of politics. In response to detailed questions, Newsom’s office said the wage law 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.

[Panera Bread owner Greg] Flynn, who has been involved in business dealings with Newsom in addition to contributing to the governor’s political campaigns, said in a brief conversation that he didn’t play a role in crafting the bread exemption. He didn’t respond to requests for comment about his connections to Newsom.

Flynn criticized the California bill once it came out. He claimed, “it would all but kill the franchising business model in the state.”

Someone told Bloomberg News that Flynn worked behind closed doors with Newsom’s aides to “reconsider” not classifying places like Panera as fast food.

The Service Employees International Union, the ones behind the bill, accepted a narrow scope that would leave out places that operate bakeries.

Someone (I don’t know if it is the same person as above) explained to Bloomberg News that the narrow scope happened due to the “governor’s longstanding relationship with a Panera Franchisee.”

The decision confused everyone, including the National Restaurant Association:

Michelle Korsmo, the head of the National Restaurant Association, told an industry conference last year that “everyone’s scratching their head” about the bread exemption. She described the provision as an example of why her organization’s members should develop political connections to seek better legislative outcomes.

“You may be celebrating or you may be lamenting the bakery exemption,” she said. “But remember, all of that comes through relationships.”

In December, Pizza Hut franchises announced layoffs of 1,200 delivery drivers across the state because of the new law.

I wonder if California would exempt Pizza Hut if it sold its dough.

Pizza Hut, owned by Taco Bell’s parent company Yum!, told Business Insider: “Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations while continuing to provide quality service and food to our customers via carryout and delivery.”

Flynn and Newsom went to the same high school, with the former three grades ahead.

Their business relationship starts in 2014:

A business connection goes back to 2014, when Flynn acquired a Napa Valley resort managed by Newsom’s hospitality company. Newsom, who was then serving as California’s lieutenant governor, reported an undisclosed amount of income from Flynn’s company that year. The management contract began under the previous owners, the Getty family trust, and Flynn decided not to renew it about a year into his ownership, said a person familiar with the decision.

Flynn is a regular donator to Newsom. He gave $100,000 to fight against the recall. Newsom got another $64,800 during his 2022 reelection campaign.

People close to Flynn told Bloomberg News he “has been known to tout his relationship with Newsom” and bragged “he can reach the governor via text.”

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