Fast food restaurants are having to find creative ways to deal with the minimum wage increase put into effect on April 1 of this year. Already, there have mass layoffs, menu price hikes, and more unexpected fallout from Newsom’s new minimum wage requirement.
At the start of April, Governor Gavin Newsom and his fellow lawmakers passed a bill that increased California’s minimum wage requirement to $20 per hour. This is a 25% increase from the previous $16, making it the highest in the country.
The bill was highly contested as businesses feared they would not be able to afford the labor cost. Already, in the few weeks that the increase has been in effect, restaurant chains have had to respond in a multitude of ways to keep business running.
Popular chains such as Pizza Hut, McDonald’s, Burger King, and more had to lay off some of their staff in order to keep the franchises afloat. Not to mention, menu prices quickly shot up, to the great dismay of consumers. A Big Mac meal at McDonald’s used to be an affordable meal, but it now costs $18!
The newest way to save and counteract the huge impact of the minimum wage hike on fast food chains is to implement the self-ordering kiosks to save on labor costs. These kiosks allow for customers to enter the store and order their own meal as opposed to ordering from a worker at the front.
Harsh Ghai, a Burger King franchisee in California explained that he can’t roll out the kiosks fast enough: “We have kiosks in probably 25% of our restaurants today. However, the other 75% are going to have kiosks in the next probably 30 to 60 days”.
Ghai owns 180 fast food restaurants in the Golden State, including 140 Burger King locations and some Taco Bell and Popeyes as well. He went on to explain that he needs to implement the kiosks in order to keep the restaurants afloat.
According to the franchisee, he would normally increase menu prices by a modest 2-3% in a normal given year. But this year, he had to raise prices by an unprecedented 8-10% and he refuses to raise them higher than that. Ghai stated, “I can’t take more prices than that. Anything more than that is going to result in a significant impact to our traffic”.
Kiosks work as an ideal alternative because it helps to save the franchise on labor costs. The self-ordering kiosks also encourage customers to spend more. Shake Shack has been using them as a profitable method for a number of years. Even Taco Bell has them implemented into every U.S. location.
While the food industry has already been well on its way towards implementing technology and automation into the ordering process, the minimum wage hike has expedited the process significantly. According to Ghai, it would have take him between 5 and 10 years to implement kiosks in all his restaurants. But now, “It’s making more sense for us to just roll that across the business in its entirety” and other chains are sure to follow.
