(Jonathan Maze) Wages are rising in the restaurant industry. There are two reasons for this. Minimum wages are increasing in many states. And it’s tougher for growing concepts to find workers.
Consider TheCompany. On its earnings call earlier this week, executives acknowledged that wage costs are increasing — one of several restaurant chains to admit this in the last couple of quarters.
Part of this is coming from rising minimum wages. But another part is coming from competition for labor.
“There is a war on talent,” CFO Todd Penegor said on the earnings call. As such, the chain has to raise starting wages in some markets “to make sure we’re competitive in certain markets.”
What’s more interesting is what Penegor said the company plans to do about it: Invest in technology. Penegor said the company is looking at initiatives to “offset any impact to future wage inflation through technology initiatives.”
That could be self-order kiosks, which a number of chains have investigated, or automating the back of the house.
“You’ll see a lot more coming on that front later this year from us,” Penegor said.
Wendy’s is hardly the only chain working in this direction. Several restaurant companies are complaining about rising wages recently. Those rising wage costs have lit a fire under many executives to look at technology to improve efficiency after years of avoiding technology like the plague.
Chains are working on speed and efficiency efforts. They’re giving smartphone apps new capabilities. They’re investigating kiosks.
To be sure, such efforts will provide ammo to some who believe that rising minimum wages will force restaurants to cut workers and replace them with robots. But efficiency efforts are necessary even absent any debate over minimum wage or rising costs.
Productivity could enable restaurants to raise pay and benefits without raising menu prices as much, so they can lure higher-quality workers and keep them longer. It would also make restaurants more competitive with industries encroaching on their turf.
At the NRA Show in May, for instance, Hudson Riehle, head of the research and knowledge group at the National Restaurant Association, noted that restaurants average $84,000 in sales per worker. By comparison, grocery stores average $304,000. And gas stations average $855,000.
Quick-service restaurants in particular, which are less service oriented and focused more on price and convenience, and which are competing directly with grocers and c-stores, need to reduce this gap.
It remains to be seen, of course, whether such efforts will work. Kiosks in particular inspire doubters, and NRA Show veterans will recall the periodic years robots would appear on the show floor, only to disappear as the industry avoided them. Restaurants aren’t easy to automate. But the moves are still necessary.