California's FAST Act legislation is going into effect on Monday, April 1, mandating fast-food chains with over 60 locations nationwide to increase their minimum wage to $20 per hour within the state. Major names like Starbucks (SBUX), McDonald's (MCD), and Chipotle (CMG) will be significantly impacted by this new law.

Yahoo Finance's Brooke DiPalma breaks down the details, providing insights into how these affected chains may attempt to offset the substantial wage increases.

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Editor's note: This article was written by Angel Smith

Video Transcript

JARED BLIKRE: California fast food company is facing a new obstacle today as the FAST Act takes effect. Now, fast food chains that have at least 60 locations nationwide now need to raise their minimum wage for restaurant employees to $20 per hour. That's up from $16 per hour. Yahoo Finance's Brooke DiPalma has all the details. Brooke.

BROOKE DIPALMA: Good morning to you both. I mean, certainly, this is just impacting fast food companies that have a nationwide presence more than 60 locations. But they will only be raising their minimum wages based upon this legislation in California. Does go into effect in that state today, raising that minimum wage to $20 an hour. But this has been looming for so many restaurants that have a big presence in California.

And those with the largest include names that we go to, that we visit, that we talk about almost every day like Starbucks, like McDonald's, Jack in the Box, Taco Bell, Subway, among so many others. And companies really here had two options. They could either absorb that wage increase like Cava did. Or they could pass along higher prices like Chipotle suggested that they would choose to do.

But companies that are better positioned to withstand this latest headwind include companies that have strong branding power, strong value proposition, and a diverse geographic footprint. And some of those companies you could see that we're flying through now, Wendy's, McDonald's, Burger King, they tend to have a better position to withstand this latest wage increase in California because of their sheer scale. That's a plus with national and international locations.

Chipotle has this strong value proposition where you can get a $9 burrito bowl with chicken in it across the country. And they also have good traffic. As of late, Wingstop has really been ramping up their brand awareness. This will put them in a better position. And Domino's, they have what one analyst calls an unbeatable low price pizza deal that will ultimately help them with this latest wage increase.