Major Burger King Franchisee Adds Digital Kiosks, Cuts Staff


This article originally appeared on Business Insider.

A major fast-food franchise in California says it's in a rush to get out digital ordering kiosk as part of the plans for it reduce costs on the new state $20 minimum wage for fast food workers.

“We can't move fast enough on this,” Harsh Ghai told Business Insider in an interview in early April.

“We have kiosks in probably about 25% of our restaurants today,” he said. “However, the other 75% will have kiosks in the next 30 to 60 days.”

Ghai said he owns 180 fast-food restaurants in California, including about 140 Burger King locations and numerous Taco Bell and Popeyes restaurants. Ghai said it was the largest Burger King franchisee on the West Coast, although BI was unable to independently verify this.

“We are installing kiosks in every restaurant,” he said.

Ghai says he can no longer raise prices

The new minimum wage, which applies to limited-service restaurant chains with at least 60 locations nationwide, took effect April 1. It's 25% higher than the state's overall minimum wage of $16 an hour, although many cities and counties in California have set theirs higher.

Fast-food workers and the unions that represent them have long campaigned for higher wages — especially in California, a state with high costs of living.

Some fast-food franchisees say higher payrolls can make it difficult to stay profitable. Many are desperately looking for ways to bring in more income and reduce costs.

Ghai said that in a typical year, his restaurants would raise their prices between 2% and 3% but that he has raised them by between 8% and 10% in the past 12 months.

“Most of that will be absorbed into the inflation of our food costs,” he said. “So we're not even making up for most of the labor costs that we're going to experience with this legislation.”

And he doesn't want to raise prices further.

“I can't get any higher price than that,” Ghai said. “Anything more than that will result in (a) significant impact on our traffic.”

Instead, he is taking a variety of measures to help offset the higher wage, including cutting workers' hours, eliminating overtime, halting new restaurant development and adding kiosks. he said.

Fast food chains are rapidly deploying more ordering kiosks in the US to lower their labor costs. California's new $20 wage has added to the urgency.

Kiosks are also more accurate and drive customers to spend more — Shake Shack says they're its most profitable channel. Burger King is rapidly rolling out the kiosks while Taco Bell says it has them in all its US restaurants.

Ghai said that under his previous strategy, which included adding kiosks to new restaurants and those he was remodeling, it would take him five to 10 years to introduce kiosks to all his restaurants.

“But now we're just going ahead and installing the kiosks in every single restaurant in response to the legislation to be able to offset some of these labor costs that are hitting us,” Ghai said.

“We've done the financial analysis and it makes more sense for us to spend capital expenditures on the technology, and obviously when you buy large amounts of hardware, you obviously get it for a cheaper price,” he continued.

“So it makes more sense for us to roll it out across the business as a whole.”



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