Inflation has been hitting many industries hard, but fast-food restaurants have arguably felt more pain. Long regarded as an inexpensive and more convenient alternative to sit-down restaurants, that status is no more, and this industry’s controversial price increases are prompting customers to skip the sides after ordering a sandwich or burger that costs much more than it did a few years ago.
Cue the headlines about one McDonald’s location’s infamous $18 Big Mac meal resulting from rising rents and supplier costs. Across the country, fast-food franchises in California are grappling with an additional hurdle: a historic 25% overnight wage increase.
Ironically, California fast-food workers are now becoming collateral damage of the SEIU-propelled AB 1228, which boosted most fast-food joints’ minimum wage from $16 to $20 on April 1. This swiftly led to mass layoffs, which the California Restaurant Association calls “entirely predictable.”
To stave off those job losses, some franchisees raised their prices by up to 8% to recover increased labor costs. Many franchise owners are also scheduling fewer workers for each shift. One Wendy’s franchisee told the AP that he has unavoidably cut hours and stepped into the kitchen himself to cut costs and avoid laying off workers, but he has still found himself “$20,000 over budget for a two-week pay period” on labor costs.
Franchisees won’t be able to sustain those financial losses, causing restaurants already tiptoeing into automation to lean further into that trend. Inevitably, this will also cause job losses, but these restaurants have been pushed to the brink with soaring labor costs. So, after chains prepared for AB 1228 by toying with AI bots for drive-thru orders, those efforts are ramping up in the kitchen.
Sweetgreen and Chipotle are now choosing to invest millions of dollars in “bespoke” robots that can make salads, peel avocados, flip burgers, fry chips, and perform further tasks via a conveyor belt. This might sound like a drastic move, but considering how the above franchisee loses $20,000 every two weeks, automation seems unavoidable for survival.
Analysts predict that these robots will grow increasingly efficient and less costly over the next decade and that the initial investment in this automation might be the only way to survive bills like AB 1228. And, of course, unions will still throw “greedy” labels at business owners for job cuts.
The true culprits in this scenario would be unions and, more specifically, the SEIU, which lobbied for years for what eventually became AB 1228. The union pulled this stunt after failing to organize fast-food workers through card signing and the NLRB election process. AB 1228, in effect, creates an illusory union through its fast-food council, which will be pushing for even higher hourly wages.
In turn, this will only cause higher prices and more customer pushback. Fast-food employers would undoubtedly prefer not to cut labor, but they are finding that they have no choice lest they risk franchise closures, which would undoubtedly lead to even more significant job losses. It’s a vicious cycle, and make no mistake, unions are fueling it.
