Hey, We're Not Carl's Jr -- Yet -- So, Two Trainwrecks To Hit Fast Food This Year And Next: ObamaCare AND $15 Minimmum Wage -- May 13, 2016

Updates

Later, like just one minute later: The story below regarding Wendy's and kiosk ordering is a pretty good story. But this is even more interesting: Starbucks is way ahead of the game. They don't use kiosks. They use those 6-inch, hand-held, personal assistant, mobile devices called iPhones. Yup. That's right. You've seen them. Really thin.

I could not believe the number of folks who now purchase their pineapple-infused, triple-sugar, double-caffeine, guano gluten-free, chocolate lattes off their iPhones.

Seriously. The drive-through lines at Starbucks here in north Texas are so long, folks are now ordering ahead on their iPhones, and then going in to pick up their drink. It's actually faster for the baristas and the customers. First of all, the stuff is already paid for; no messy handling of gooey Starbucks cards or Hamiltons (or Tubmans in the future). Second, you don't end up behind the office gopher who was sent to order 23 coffee drinks for the office.

And if folks are willing to do this for a cup of coffee, they will have no trouble doing this at Wendy's. I have no idea why Wendy's, et al, would go to the expense of putting in kiosks when iPhones work just as well.

And don't tell me "well, not everyone has an iPhone." LOL. Maybe not in Tibet, but here in the good ol' USA even a two-year-old, like Sophia, has her own iPhone. [She doesn't know, that it's a fake.]

Original Post

Investor's Business Daily is reporting that self-service ordering kiosks will be made available across Wendy's 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.

It will be up to franchisees whether to deploy the labor-saving technology, but Wendy’s President Todd Penegor did note that some franchise locations have been raising prices to offset wage hikes.

McDonald’s (MCD) has been testing self-service kiosks. But Wendy’s, which has been vocal about embracing labor-saving technology, is launching the biggest potential expansion.

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”

It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15.

Carl's Jr CEO wrote this just a few weeks ago:

So why the increased use of technology? The major reason is consumer preference. 

Research shows that many appreciate the speed, order accuracy, and convenience of touch screens. This is particularly so among millennials who already do so much on smartphones and tablets. I’ve watched people—young and old—waiting in line to use the touch screens while employees stand idle at the counter.

The other reason is costs. While the technology is becoming much cheaper, government mandates have been making labor much more expensive.

In 2015, 14 cities and states approved $15 minimum wages—double the current federal minimum. Additionally, four states, 20 cities and one county now have mandatory paid-sick-leave laws generally requiring a paid week of time off each year per covered employee. And then there’s the Affordable Care Act, which further raises employer costs.

Dramatic increases in labor costs have a significant effect on the restaurant industry, where profit margins are pennies on the dollar and labor makes up about a third of total expenses. As a result, restaurants are looking to reduce costs while maintaining service and food quality.

Highly automated models have limited applicability for restaurants with more complex menus. For example, at CKE Restaurants, the company I lead, our Carl’s Jr. and Hardee’s employees make biscuits from scratch. They bread chicken tenders by hand, prepare complex burger orders, hand-scoop the ice cream for milkshakes, and the restaurants offer table service. None of these tasks can be effectively automated, and we wouldn’t want them to be.

So, we got two trainwrecks hitting the fast food restaurant this year and next: ObamaCare and the $15 minimum wage.

Actually, there will be a third trainwreck to hit the fast food restaurants this year: restaurants are going to have to install two more restrooms, make a total of four with the following signs: men, women, LGBT, and confused. ["Confused" will be found to be "inflammatory" by the courts, and will be replaced with something more descriptive, perhaps, "still deciding."]

In Tennessee, the restroom signage will have to be in 120 languages. 

A lot of publicly-educated millennials will probably stand in the LGBT line to order a bacon, lettuce, and tomato sandwich because the line will be much shorter than the one out front.