When labor is one of (if not the) biggest costs that a fast food restaurant bears, it should come to no surprise that increases to the minimum wage would naturally create efforts to reduce the amount of physical labor they employ.
As the trend nationally has been for higher minimum wages among states and cities, the job market has been booming for a robots. As the minimum wage rises, the initial fixed cost of automating becomes a much more appealing deal. You only have to “pay” them for installation and maintenance, they never show up for work late, and they work 24/7 without complaining.
Among those being forced to automate is fast food chain Wendy’s. Back in May of last year they announced that they’d be launching self-serving kiosks in over 6,000 of their restaurants nationwide. President Todd Penegor acknowledged that franchises had to raise prices due to increases in minimum wages nationwide, and had to choose whether or not to use technology to counteract it.
Now just less than a year later, they’re doing much of the same. According to Zero Hedge:
In yet another awkwardly rational response to government intervention in deciding what’s “fair,” the blowback from minimum wage demanding fast food workers has struck again. Wendy’s plans to install self-ordering kiosks in 1,000 of its stores — 16% of its locations nationwide.
“Last year was tough — 5 percent wage inflation,” said Bob Wright, Wendy’s chief operating officer, during his presentation to investors and analysts last week. He added that the company expects wages to rise 4 percent in 2017. “But the real question is what are we doing about it?”
Wright noted that over the past two years, Wendy’s has figured out how to eliminate 31 hours of labor per week from its restaurants and is now working to use technology, such as kiosks, to increase efficiency.
Wendy’s chief information officer, David Trimm, said the kiosks are intended to appeal to younger customers and reduce labor costs. Kiosks also allow customers of the fast food giant to circumvent long lines during peak dining hours while increasing kitchen production.
“There is a huge amount of pull from (franchisees) in order to get them,” David Trimm, Wendy’s chief information officer, said last week during the company’s investors’ day. “With the demand we are seeing … we can absolutely see our way to having 1,000 or more restaurants live with kiosks by the end of the year.”
A typical store would get three kiosks for about $15,000. Trimm estimated the payback on those machines would be less than two years, thanks to labor savings and increased sales. Customers still could order at the counter.
As there were “at least 40 cities and states” nationwide that recently hiked their minimum wages, Wendy’s is hardly the only fast food chain in this situation:
> In April, Jamie Richardson, a vice president at White Castle, said, “this could create a whole generation of kids who won’t get their first job. We’re in tough neighborhoods — and White Castle hasn’t abandoned those neighborhoods. On the surface, higher pay seems noble, but it’s not — because it denies the reality of the free-enterprise framework that has allowed small businesses like ours to thrive.”
> Carls Jr./Hardees CEO Andy Puzder said in March, “With government driving up the cost of labor, it’s driving down the number of jobs. You’re going to see automation not just in airports and grocery stores, but in restaurants.”
> Former president and CEO of McDonald’s USA Ed Rensi said, “It will mean wiping out thousands of entry-level opportunities for people without many other options.”
Well, at least robots are enjoying job security.
[Note: This post was authored by Matt Palumbo. Follow him on Twitter @MattPalumbo12]