Fast food businesses in California are taking a technological turn by implementing digital ordering kiosks—a strategic move prompted by the recent increase in minimum wage to $20 per hour.
Adapting to Rising Labor Costs
These chains are adapting to avoid soaring labor costs, which have become unsustainable in light of continuous price hikes over the past two years due to rising food expenses.
Economic Pressures on Restaurant Owners
Restaurant owners argue that further raising prices is no longer viable.As a result, they’re exploring different methods to reduce expenses. With payroll often being the heftiest burden, reducing staff numbers presents a straightforward solution.
Digital Kiosks Take Over Fast Food
Digital kiosks are becoming increasingly common in fast food chains, a shift driven by the urgent need to manage labor expenses. In a typical Burger King restaurant, for example, customers are greeted by two digital kiosks where they can place their orders.
Trying to Survive
These kiosks, located strategically in front of the counter with clear menu displays, are set against the backdrop of a busy kitchen, illustrating the industry’s rapid move toward automation. This transition is essential for the survival of these businesses as operational costs rise and menu prices reach a ceiling.
Adapting Quickly to Wage Changes
Harsh Ghai, who operates 140 Burger King locations on the West Coast, exemplifies this trend. Originally planning a gradual introduction of digital kiosks over the next decade, the recent wage adjustments have accelerated his timeline, aiming for full implementation within just two months. This rapid deployment highlights the pressing financial pressures faced by the industry.
California’s Bold Wage Increase
California’s Governor Gavin Newsom recently enacted a significant wage increase, setting fast food workers’ minimum pay at $4 above the standard for other jobs within the state.
Are Wage Hikes Beneficial for Workers?
This policy targets chains operating over 60 locations across the U.S. Since its implementation on April 1, the impact has been immediate and profound, with workers reporting reduced hours and, in some cases, job cuts.
The Trade-Offs of Higher Wages
Although higher wages are designed to improve employee welfare, they have ironically led to job cuts across the fast food sector. Inside a typical fast food venue, you might notice a concession stand offering an array of combos—from popcorn to ICEEs and Nathan’s Famous hot dogs—all prepared in an open kitchen.
This setting highlights the challenging balance between providing fair wages and sustaining adequate employment levels.
Job Losses in the Fast Food Sector
Employees at Pizza Hut and Round Table were among the first to feel the pinch, losing their positions as their employers struggled to meet the new wage demands.
Will the Wage Hikes Backfire?
The front of a Pizza Hut, with its distinctive red roof and large windows framed by red shutters, symbolizes the iconic presence these establishments have in communities—now under threat by economic pressures.
These cuts starkly challenge the intended benefits of wage hikes, adversely affecting the very employees meant to be helped.
Minimal Human Contact in Fast Food
The image of a Chick-fil-A meal—a chicken sandwich, waffle fries, and a drink, all branded and neatly presented on a restaurant table—may soon become a scene with minimal human interaction.
This push towards automation is poised to redefine how consumers engage with quick-service restaurants and reshape the entire sector, setting a new standard for future operations.
Big Chains React to Higher Costs
Major players like McDonald’s, Chipotle, and Starbucks have signaled plans to offset these higher labor costs by increasing prices.
However, Harsh Ghai, a prominent Burger King franchisee, has expressed concerns that raising prices could significantly deter customers.
Burger King’s Pricing Strategy
Over the past year, Ghai has already raised his prices by 8-10%, a sharp increase from the typical annual rise of 2-3%. Despite these adjustments, he mentioned in a Business Insider interview that these increments barely cover the inflation in food costs, let alone the upcoming surge in labor expenses due to the new legislation.
Wider Deployment of Ordering Kiosks
To avoid further price hikes which could alienate more customers, Ghai has sought alternative solutions to manage wage costs.
Currently, about 25% of his Burger King restaurants have adopted ordering kiosks, and he plans to expand this to the remaining 75% within the next 30 to 60 days, aiming to streamline operations and maintain customer flow.
Adjusted Plans for Kiosk Expansion
Originally, Harsh Ghai planned a gradual integration of self-service kiosks, adding them primarily to new or renovated restaurants—a process projected to span five to ten years.
However, the recent labor cost legislation has drastically altered this timeline. Ghai now intends to install kiosks in all his Burger King outlets swiftly to help balance rising labor costs.
Kiosk Adoption Before and After Pandemic
Self-service kiosks have been making their way into major fast food chains for some time, slowly integrating before and notably accelerating during the pandemic.
Panera Bread was a pioneer in this arena, introducing kiosks across all its locations back in 2014. McDonald’s followed three years later, embracing this technology widely.
Are Kiosks Here to Stay in Fast Food?
By the end of last year, Shake Shack had equipped all its locations with self-service ordering kiosks. The company noticed a significant trend: customers tend to order more substantial meals via kiosks than they do from human cashiers.
Consumer Behavior and Kiosk Orders
According to Katie Fogerty, Shake Shack’s chief financial officer, the kiosk’s visual presentation of the menu prompts customers to add more premium items to their orders, thus enhancing sales margins significantly.
Chick-fil-A Innovates with Grab and Go
Last month, Chick-fil-A unveiled a novel concept with its first ‘grab and go’ restaurant, a futuristic setup where there are no cashiers at all. Customers must pre-order via phone and pick up their meals, with no provision for eating inside the facility, emphasizing efficiency and perhaps setting a new standard in the industry.
Legislative Changes in Labor Regulation
Assembly Bill 1228, signed into law by California Governor Gavin Newsom on September 28, 2023, marked a significant shift in the state’s approach to fast food industry labor regulations. This legislation raises the hourly minimum wage for many fast food workers in California to $20, though there are some exceptions to this rule.
A Voice for Workers in Fast Food
The bill has also led to the establishment of a Fast Food Council within the state’s Department of Industrial Relations (DIR). This council, comprising fast food workers, industry representatives, and government officials, is tasked with developing new health and safety standards for the industry.
Importantly, it offers workers a formal platform to voice their concerns and suggestions.
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Kate Smith, a self-proclaimed word nerd who relishes the power of language to inform, entertain, and inspire. Kate's passion for sharing knowledge and sparking meaningful conversations fuels her every word.