What Would a National Minimum Wage Increase Mean for Quick-Service Restaurants?

    In an already-strained labor environment, operators look to automation to increase profitability.
    Sponsored Content | November 29, 2022
    In an already-strained labor environment, operators look to automation to increase profitability.
    RTI

    On September 5, 2022, California Governor Gavin Newsom signed the Fast Food Accountability and Standards Recovery Act (better known as the FAST Recovery Act), into law. California’s minimum wage currently sits at $15 per hour. Under the new law, the minimum wage for California fast-food workers could increase by 41 percent—to $22 per hour—by January 1, 2023, a cap which is subject to yearly increases up to 3.5 percent based on the national Consumer Price Index.

    Operators nationwide are apprehensive about the new law, which would compound the significant challenges they face post-COVID. Commodity inflation, increased labor costs, labor shortages, and supply chain disruptions are already putting pressure on restaurant profitability. Restaurants continue to face difficulty accessing core menu items like chicken strips and fries, so they can’t sell some of their fastest moving, most profitable items.

    “With rising costs, operators have had to hike prices to maintain margins—but there is only so much room left to do that,” says ​​Carlos Benavides, national account manager at Restaurant Technologies. “A combo meal that was five dollars a few years ago might be $7.50 now. For many diners, there simply isn’t much wiggle room left in their budgets to dine out as often as they might like.”

    Staffing issues are also impacting the bottom line. With such competitive wages, there is less staff loyalty and workers are more likely to leave for a similar job at a competitor that pays 50 cents or a dollar per hour more. This can represent a significant loss in terms of hiring and training investment. Without enough workers to staff shifts, chains with extended hours may not be able to staff shifts adequately, forcing them to sacrifice revenues from one or more dayparts.

    As a result of this strained environment, automation is critical. With staffing shortages and labor costs at an all-time high, one of the most strategic and profitable decisions operators can make is to automate manual tasks and reallocate labor to guest-facing, revenue-generating roles. Using automation to maximize the efficiency of the existing labor pool, managers can work with smaller crews. And if operators can kill two birds with one stone—increase profitability and make jobs safer—why wouldn't they?

    “One of the things we’ve done is eliminate manual cooking oil handling, which is truly one of the worst jobs in the kitchen,” Benavides says. “Employees are lifting heavy jugs of oil and moving hot oil from the fryers to rendering tanks—both of which have the potential for slips and falls, burns, and back injuries. Our Total Oil Management automated system eliminates all of that. If employees at your restaurant don’t have to do that really nasty, dangerous job, maybe those extra 50 cents don’t matter as much.”

    Another Restaurant Technologies solution, AutoMist®, keeps hoods and flues clean, eliminating grease buildup—and the potential for a catastrophic fire. It also saves money as there is no need for a third-party cleaning company to disrupt daily operations. When restaurant operators are able to create a safer work environment, they might also qualify for insurance premium credits, since insurers know there will likely be a correlated decrease in injuries and workers’ comp claims.

    “Insurance companies now look at restaurants that have our solutions in place and reward the operator with insurance premium credits,” Benavides says. “With Total Oil Management, it’s around workers’ comp and with AutoMist, it’s around general property liability. Operators can unlock valuable savings—especially in California where a 5 percent reduction in premiums is significant.”

    Automating onerous back-of-house tasks has numerous benefits for restaurant operators. Not only can this labor be reallocated to guest-facing tasks where a human element is needed, it creates a safer environment for both guests and crew. Staff loyalty is boosted by eliminating manual oil handling, which is arguably the worst and most dangerous job in the kitchen. And with Total Oil Management a considerable amount of plastic and cardboard packaging is eliminated from the landfill, which helps operators reach sustainability goals.

    “In the face of a national minimum wage increase, our solutions save operators money,” Benavides says. “With these innovative tools, they can offset labor costs and subsidize any type of incremental spend.”

    To learn more, visit the Restaurant Technologies website.

    By Davina van Buren