Wendy’s announced this week that they will launch their biggest expansion of self-serving kiosks to be made available at more than 6,000 restaurants across the country. The restaurant chain has been struggling, with their stock taking a significant dip this week.
Wendy’s President Todd Penegor admitted that restaurants have had to raise prices due to an increase in the minimum wage in many cities and states. Franchises will now have the choice of whether or not to use the technology to save on these labor cost increases.
Investors Business Daily points out:
“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 hasn’t been the only restaurant group to make the shift. Executives and former executives from the industry have been vocal about the coming jobs cuts due to these minimum wage hikes.
In April, Jamie Richardson, a vice president at White Castle, said, “this could create a whole generation of kids who won’t get their first job. We’re in tough neighborhoods — and White Castle hasn’t abandoned those neighborhoods. On the surface, higher pay seems noble, but it’s not — because it denies the reality of the free-enterprise framework that has allowed small businesses like ours to thrive.”
Carls Jr./Hardees CEO Andy Puzder said in March, “With government driving up the cost of labor, it’s driving down the number of jobs. You’re going to see automation not just in airports and grocery stores, but in restaurants.”
Former president and CEO of McDonald’s USA Ed Rensi said, ““it will mean wiping out thousands of entry-level opportunities for people without many other options.”
So, are these executives just heartless corporatists? Or, are they right about the results? In Seattle after they installed their new set of minimum wage hikes, they saw the largest three-month job loss in their recorded history. In California, the minimum wage increase has even cost jobs at America’s most liberal university, UC-Berkeley. We’ve also seen the minimum wage cripple the economy in Puerto Rico.
While many Americans see the restaurant industry as huge publicly traded companies, many forget that most of these restaurants are operated as franchises by small business owners who do not make large profits. They have bills to pay and families to feed, just like everyone else. When costs go up, they have to stay competitive. Almost all of them already offer wages higher than the minimum wage, but many of them cannot afford a massive increase to $15 per hour.
Until activists and politicians realize the consequences of their actions, more jobs will be lost. The minimum wage and low-wage jobs were never intended to be ‘living wage’ positions; they are starter jobs so people can gain experience to move upward in the economy. Fewer entry-level, experience-based jobs means fewer opportunities for people trying to climb out of poverty.