California's fast food chains are swapping staff for digital kiosks. This shift is driven by the recent minimum wage increase to $20 per hour.
Restaurant owners are unable to hike prices further after two years of continuous increases due to rising food costs. They are now reducing their biggest expense: labor costs.
The irony is sharp for the workers and unions who fought for the wage increase. Critics had warned that such hikes could lead to job cuts.
Harsh Ghai, who owns 140 Burger King outlets, is accelerating the deployment of digital kiosks. Originally planned over five to ten years, the rollout will now complete in just two months.
California's Governor Gavin Newsom introduced a $4 increase over the standard minimum wage at large chains. This has led to reduced hours and layoffs since it took effect on April 1.
Several Pizza Hut and Round Table employees have already been dismissed. Meanwhile, companies like McDonald's, Chipotle, and Starbucks are transferring the extra costs to customers.
Ghai has raised his prices by 8-10% over the last year, a significant jump from the usual 2-3%. "The majority of that is going to get absorbed in the inflation of our food costs," Ghai explained to Business Insider.
He emphasized that further price increases would drive away customers. Thus, he's focusing on reducing wage costs by other means.
Currently, about 25% of his restaurants have kiosks. "However, the other 75 percent are going to have kiosks in the next probably 30 to 60 days," Ghai said.
His previous strategy was a slow rollout of kiosks, only installing them in new or remodeled restaurants. But current economic pressures have pushed him to expedite this process.
Ghai concluded, "But now we are just going ahead and installing the kiosks in every single restaurant in response to the legislation to be able to balance some of these labor costs that are hitting us."
Self-service kiosks were already making their way into major fast food outlets before the pandemic, and their introduction has only accelerated since.
