A California-based fast-food franchisee is expediting the implementation of digital order kiosks in response to the state’s recent increase in the minimum wage for fast-food workers to $20. By deploying these automated systems, the franchisee aims to reduce expenses and adapt to the new wage regulations.
“We are unable to act quickly enough on this matter,” stated Harsh Ghai during an interview with Business Insider in early April.
He mentioned that currently, kiosks are available in approximately 25% of our restaurants. However, he added that the remaining 75% of restaurants will have kiosks installed within the next 30 to 60 days.
According to Ghai, he is the proud owner of 180 fast-food restaurants in California. Among these, approximately 140 are Burger King locations, while the rest include a variety of Taco Bell and Popeyes establishments. Ghai confidently claims to be the largest Burger King franchisee on the West Coast, although this statement has not been independently verified by BI.
“We are in the process of installing kiosks in every restaurant,” he stated confidently.
Ghai says he can’t raise prices any more
The new minimum wage, which went into effect on April 1, applies to limited-service restaurant chains with a minimum of 60 locations nationwide. This wage is set at 25% higher than the state’s general minimum wage of $16 per hour. It’s important to note that many cities and counties in California have established their own higher minimum wage rates.
Fast-food workers and the unions that represent them have been advocating for higher wages for quite some time. This is particularly true in California, where the cost of living is significantly high.
Some fast-food franchisees are concerned that the increased payroll expenses could pose challenges to maintaining profitability. They are actively seeking strategies to boost revenue and reduce costs.
According to Ghai, his restaurants have traditionally increased their prices by 2% to 3% each year. However, in the past 12 months, he has raised them by a higher percentage of 8% to 10%.
According to him, most of the increased labor costs resulting from this legislation will be absorbed by the inflation of food costs. Therefore, we won’t be adequately compensating for the labor expenses that we will incur.
And he is determined not to increase prices any further.
Ghai expressed his inability to accept a higher price, stating that it would have a significant impact on their traffic.
He said he is implementing various strategies to counterbalance the increased wage, such as reducing employees’ work hours, eliminating overtime, temporarily halting the expansion of new restaurants, and incorporating kiosks.
Fast-food chains in the US are swiftly implementing additional order kiosks as a means to decrease their labor expenses. With the recent implementation of a $20 wage in California, the urgency to adopt this strategy has become even more pronounced.
Kiosks not only offer increased accuracy but also encourage customers to spend more. Shake Shack, for instance, considers kiosks as its most profitable channel. Burger King is quickly implementing kiosks across its locations, and Taco Bell proudly states that they have kiosks in all of their US restaurants.
According to Ghai, his previous strategy would have taken him between five and 10 years to introduce kiosks to all of his restaurants. This strategy involved adding kiosks to new restaurants and those that were undergoing remodeling.
Ghai explained that they are currently taking proactive measures by installing kiosks in all their restaurants as a response to the legislation. This move is aimed at effectively managing the labor costs that are affecting their business.
According to him, after conducting a thorough financial analysis, it is more logical for them to allocate the capital expenditure towards the technology. Additionally, purchasing a significant amount of hardware would result in a more cost-effective deal.
“We have realized that it would be more logical for us to implement this strategy throughout our entire business.”
