The New $20/Hour Minimum Wage in CA (and How MULO Brands are Coping)
As if fast-casual restaurants didn’t have enough labor challenges lately, the latest sting for them is the boost to $20/hour as the minimum wage in California.
These MULO (multi-location) brands have had to deal with the pandemic, supply chain and labor shortages, lack of brand loyalty, food safety and health, the impact of technology on worker and customer perception, and maintaining profitability in the face of delivery companies’ policies. (The last challenge was the topic of a recent “Last Week Tonight” episode with John Oliver).
But, for now, let’s talk about the hourly minimum wage rate issue.
MULO food brands like Jack in the Box and Shake Shack have a high concentration of locations in California, and according to Retail Dive, operating costs can escalate as much as 12 percent.
Many QSRs (quick-serve restaurants) have already been looking at ways to automate food preparation and service to reduce labor costs. But can they move quickly enough to cover the increased $20/hour expense?
Brands must be much more diligent in understanding all aspects of their P&Ls and look for ways to manage expenses without compromising food quality, marketing, or the consumer experience.
Some brands have already been exploring more DIY technologies to remove their dependence on human workers.
But all of the potential solutions are bound to have a downside, especially as consumers and employees see these changes’ impact.
No matter how great a loyalty app or new burger is, consumers are bound to push back when they aren’t served quickly, can’t find a person to speak to when they have issues, or discover that their french fries now cost 20 percent more than they did on the last visit.
On the bright side, workers who want jobs in this sector will benefit from increased wages.
Employers must work harder to bring in the right people because their roles and customer service skills (especially in light of price increases and the need to learn new technologies) may present new challenges.
