Right Hooks

Automation Comes to Wendy's

That's what minimum wage opponents warned would happen.

Business Review Board · May 13, 2016

It didn’t take long for the fallout from a recent spate of minimum wage laws to affect fast food franchises’ bottom lines. As a result, the situation has manifested into large-scale changes in the form of automation. Lawmakers can’t say they weren’t warned. McDonald’s is already exploring the viability of self-serving kiosks, but this week Wendy’s announced it is voluntarily offering the technology nationwide.

According to Investor’s Business Daily, “Wendy’s said that self-service ordering kiosks will be made available across its 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.” Independent store owners can decide themselves whether or not they want kiosks, “but Wendy’s President Todd Penegor did note that some franchise locations have been raising prices to offset wage hikes.” So it only stands to reason most, if not all, will embrace the technology.

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. Wendy’s plans to cut company-owned stores to just 5% of the total.

It’s an unpopular but nonetheless objective reality that minimum wage increases lead to more scarce jobs. Doesn’t that kind of defeat the purpose?

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