The U.S. House of Representatives recently introduced a bill to increase the national minimum wage to $15/hour by 2025. While this is great news for workers, the food service industry remains split on the issue.
Raising the minimum wage during a time when restaurants have lost nearly a half a million jobs, according to Sean Kennedy of the National Restaurant Association — along with eliminating the tip credit for servers — places “an impossible challenge” to the restaurant industry.
Said Kennedy, “While other businesses on Main Street are starting to see a recovery, restaurants across the country are struggling to stay open amidst indoor dining bans or limits that have been in place for ten months. […] during a pandemic is not the time to impose a triple-digit increase in labor costs.”
Prime costs add to the employment dilemma
Buying food supplies and paying people to prepare and serve meals are the unrelenting mathematics faced by an industry on the knife’s edge of economic survival. Those two factors — food supplies and labor — are called prime costs. A 2019 article by Chron describes how prime costs for restaurants must be no higher than about 60% of total sales.
Add a higher minimum wage to the mix, and menu prices have to either go up or hours/jobs have to be cut. In California, for example, large franchises like El Pollo Loco have adjusted to creeping state minimum wage increases by charging their customers more.
Keeping labor costs under control with automation
Regardless of your opinion on the national minimum wage increase, there’s one thing we know for sure — quick service restaurant operators can leverage automation to keep labor costs down.
A TD Bank survey of 254 QSR operators found that nearly two-thirds of respondents believe that “increased automation (34%) and mobile loyalty apps (31%) will strongly impact the industry...” In fact, many big burger franchises, including McDonald's are investing in automated services and have created “mobile-loyalty” apps to reward customers who return.
Other QSR franchises are tapping into both back-of-house employee management automation as well as IoT (internet of things). Here are some examples.
Training new employees
Training can take up managers’ valuable time. Fortunately, onboarding an employee can be automated through virtual reality programs that bring the new employee up to date on company rules and regulations. The software can include testing on the training content and provide an engaging, motivational, and interactive experience off-site.
Monitoring time and work attendance
Automating the old sign-in charts and timecard punching with a digital system connected to a central payroll office stops cheating (e.g., “Buddy clocking”) and eliminates manual errors.
Combating under- and overstaffing
Predictive scheduling as part of back-office automation can eliminate the guesswork and scheduling conflicts of the old paper chart and “stubby-pencil” method. QSR automation tools go beyond intuition by tapping into historical sales data gathered by a point of sales (POS) system where employees submit orders. POS data can then suggest staff scheduling accordingly.
Alerts for unnecessary overtime
Employees must be paid overtime whether or not the employer specifically approves the extra hours. The rule is that when the employer requires or permits an employee to work overtime, the employee must receive overtime pay “for hours worked in excess of 40 in a workweek of at least one- and one-half times their regular rates of pay.”
Automating employee overtime alerts has obvious labor cost-savings benefits and can help shift managers make wise scheduling decisions. The busy manager may not be up to speed on how many hours an employee has accumulated. A back-office automated system tracking of each employee’s time on the clock sends alerts and reduces labor costs.
Shift schedule changes
QSR operators can use automation to reach out to employees about their schedules via text or email notifications. Automated text messaging or smartphone apps allow emergency shift moves or employee shift swaps to be resolved quickly, resulting in minimal downtime and reducing the restaurant’s chances of being under- or over-staffed.
QSR Tech can optimize QSR operations
The McKinsey Global Institute claims that 54% of manual tasks performed in restaurants can be automated. From flipping burgers to the drudgery of labeling expiration dates on supplies in the stockroom, high labor costs can be overcome by smart capital investments in gadgets and machinery that can be networked, are easy to maintain and can help reduce employee turnover by automating menial and time-consuming tasks.
Summary & Takeaways
QSR operators and managed service providers concerned about the national minimum wage increase can lean on QSR tech to cut labor costs and optimize operations without having to drastically lay off employees or sacrifice customer service.
Likewise, installing or upgrading existing QSR tech doesn’t have to be complex or beyond your business’s competency. By outsourcing your QSR projects to a partner like Kinettix, you can quickly vet, hire, and dispatch qualified technicians. By leveraging our robust tech network and integrated Dispatch1Ⓡ platform, we take the complexity out of restaurant IT and can help you or your client cut labor costs. Contact us to learn more.