The Cost of Foodservice Labour Going UP!

The Cost of Foodservice Labour Going UP!
By Dwayne Reno

January 1, 2018, signified the start of a new year and another hike in Ontario’s minimum wage. The foodservice industry in Ontario is now under a fine microscope as operators from other Canadian provinces and the U.S. eagerly anticipate the results of our increased labour costs. Ontario’s minimum wage will be $15.00 an hour come January 1, 2019, over the next 11 months the foodservice industry in Ontario will go through some changes while operators adjust to the higher cost of labour.

This month I would like to discuss some changes operators are making to insulate their businesses from the increasing cost of labour.

No Real Changes Yet, Except….
Well, we are only one month into the minimum wage increase and already, there is much to talk about. A recent article by the Canadian Press stated that Canada’s favorite coffee and donut chain, Tim Hortons found themselves in hot water when it was reported that some franchisees cut employee benefits.

The franchisees eliminated paid breaks, fully-covered health and dental plans, and other perks for employees, as a way to offset the minimum wage increase in Ontario.

The decision did not sit well with customers, who have since stage protests at Tim Hortons locations across Ontario sending a message to franchisees and the parent company, Restaurant Brands International (RBI). Restaurant Brands is no stranger to public disagreements with franchisees and has since distance themselves from the actions of the franchisees.

Minimum Wage the Trojan Horse
It seems that Tim Hortons franchisees are not the only ones feeling the need to pinch pennies due to higher labour costs. In a recent article by Business Insider, Jack in The Box CEO Leonard Comma stated that the popular West Coast burger chain would consider replacing some cashiers with self-ordering kiosk in response to the minimum wage hike planned for 2018.

“As we see the rising costs of labor, it just makes sense” to consider adding new automated technology, Comma said at the ICR Conference.

18 U.S. states plan on increasing their minimum wages in 2018, including New York and California, where Jack in the Box is based.

Jack in The Box, joins a growing list of fast food chain operators who have already began to automate their locations, the list includes the likes of Wendy’s and McDonald’s. McDonald’s the industry leader has already outfitted many of their U.S. and Canadian locations with self-ordering kiosk but promises not to replace humans, HERE. Wendy’s committed to outfitting 1000 of their U.S. locations with self-ordering kiosk by the end of 2017 due to growing franchisee demand for the service.

Then there is CaliBurger, who seems to be on a mission to automate the entire foodservice experience at their locations. The chain introduced Flippy the burger flipping robot in 2017 at 50 of their locations world-wide. Also in a recent company press release Cali Group (the parent company of CaliBurger) announced the launch of a face-based payment pilot program. The program, which is now available to the public, enables customers to pay for orders at the self-order kiosks with a simple glance at the camera, HERE.

"The positive customer reaction to face based loyalty login at the kiosks encouraged us to quickly deploy face based payments at the kiosks," said John Miller, CEO of Cali Group. "To our knowledge, this is the first time in America that customers in a retail environment can pay without needing a physical or digital wallet."  

CaliBurger and its parent company are not the only fast food chain operators piloting a facial recognition payment system. Last year a KFC (owned by Yum Brands China) in the eastern Chinese city of Hangzhou debuted a very similar payment system. The service allows customers to process their payment simply by smiling after placing their order at one of the fast food restaurant's self-serve kiosks. The restaurant tech has some similarities to the one now being piloted in the U.S. by CaliBurger and its parent company.

2018 has only just begun and we are already seeing the words of Yum Brands (the parent company of KFC, Pizza Hut and Taco Bell) CEO Greg Creed come to life. Back in March 2017, Creed told CNBC that robots and automation could replace humans in the foodservice industry by the mid-2020s. In my opinion the increase in minimum wage is turning into a Trogan horse (a good thing) one that will help large chain operators implement automation quickly and without loss of foot traffic (revenue).

So is the minimum wage increase a bad thing, or is it a good thing? Well, only time will tell. Will humans lose work to machines? Yes, but that will not be at all foodservice establishments. In the days after the labour costs increases we will see more owner operated eateries but if you ask me those are some of the best establishments to visits. Also, I did an article on the Ontario Minimum wage increase back in June 2017; I also gave some solutions on how foodservice operators can adjust to the coming wage increases, HERE.

Until next time your customers want to know why they should spend money at your restaurant, bar or cafe. So give them the goods!