California just raised the minimum wage for the state’s fast food sector workers by $4 to $20. As if on cue, it raised a familiar refrain that those workers would be replaced by technology, such as self-service kiosks.
That’s likely to happen in some instances where business who haven’t yet done so will look to technology to help offset higher labor costs, industry experts said.
But the reality is that automation in the services industry is already on a roll, and the restaurant industry has been embracing it for a while now, even in states where the minimum wage hasn’t increased.
“There are two things in play. One, already in motion for a while is robotics and automation at the store level,” said Rob Dongoski, global lead for food and agribusiness at Kearney, a strategy and management consulting firm. Examples in what is known in the industry as the “quick service restaurant” space include auto-refill technology and automated frying machines.
And, although many casual observers disagree, higher wages for fast food workers could actually help fast food owners, Dongoski said.
Female customer handing payment to waiter over counter – stock photo Raphye Alexius/Image Source/Getty Images
The employment level in fast food restaurants still hasn’t reached pre-pandemic levels. “So, wage increases are a way to attract workers into that environment,” Dongoski said. “Businesses will already have to automate and use robotics to offset lack of labor to begin with, and and then, the wage increase to attract the labor that they do need.”
The new wage took effect in California on April 1, and applies to restaurant chains with more than 60 nationwide locations.
The law also creates a fast food council, a first of its kind in the US, with representatives from both the restaurant industry and workers, who can increase the wage annually for the rest of the decade, in pace with inflation or up to 3.5%, whichever is higher. This council can also recommend standards for fast food worker safety, as well as work with existing state agencies to investigate issues like wage theft.
Automation is catching on
Self-service kiosks are fairly commonplace in large fast food chains. The trend predates the pandemic, and its popularity picked up steam through it.
Panera Bread launched its Panera 2.0 strategy back in 2014, which overhauled the customer experience by putting self-service kiosks in all locations.
Fast food king McDonald’s brought in self-service kiosks in 2017, acknowledging at the time that the business of food was changing as consumers were showing a greater preference for convenience and personalized eating.
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Burger chain Shake Shack signaled last year that all of its locations would have self-serve ordering kiosks by the end of 2023. Company executives noted in an earnings call with analysts last May that people order a much larger — and much more profitable — amount of food when they don’t have to place that order with a human being.
“When a guest goes to our kiosk and they see the visual merchandising of our menu, we see that they have higher [value] order than a traditional cashier order,” Shake Shack’s chief financial officer Katie Fogerty told analysts during the call.
“We see that they add on more premium and higher margin items. And so that together really makes that our highest margin channel,” she said. “We still have a portion of guests that come in and they want to have that face-to-face human transaction communication connection with the cashier. But we have a ton of guests who come in and they want to just go right to the kiosk.”