The establishment press has given an open mic to proponents of raising the minimum wage nationally, and has cheered $15-per-hour legislation passed in California and New York earlier this year as "historic."
The silence from those same quarters, e.g., the Associated Press, the New York Times and others, is deafening now that one of the predictions of those who have criticized such sharp increases, which take the minimum to double the current federal level of $7.25 and triple the $5.15 seen in early 2007, is beginning to come true. Critics have contended that employers would mechanize key processes to control their labor costs faster than they otherwise would have. That is exactly what The Wendy's Company, "the world's third-largest quick-service hamburger company," is about to start doing.
In response to an earnings conference call statement which appeared to point in the direction of mechanization, Wendy's issued the following press release cited at Eater.com (bolds are mine throughout this post):
The majority of Wendy's restaurants are franchise-operated. We are in pilot now with self-service order kiosks, which we expect to make available for installation by our franchisees later in 2016. Whether they choose to do so will be up to them. Earlier news reports were not quite accurate. We did not say kiosks would be available at every restaurant by end of year. We do continue to invest in technology to help mitigate the inflation we are seeing on the wage front.
Thus, while not every Wendy's store will have kiosks by the end of the year, every U.S. restaurant will have the chance to consider taking the dive.
In hindsight, something which happened in the Greater Cincinnati earlier this year may have hinted at what was to come.
Local stores suddenly raised their prices by roughly 30 percent across the board and kept them there for about a month. The guess here is the company was conducting a mini-experiment to see how much customer count and total revenues would suffer if a store had to raise its prices to cover the worst-case national minimum-wage increase scenario. Speaking as just one customer, I can say that I significantly reduced my number of visits and went elsewhere for more quick-service meals. To no one's suprise, it also seemed that whenever I did visit a Wendy's store, customer traffic was significantly lower.
That results of that experiment probably provided all the confirmation management needed to make its announcement this week.
Jed Graham at Investor's Business Daily was among the first to note what the AP, the New York Times, and so many other news outlets have chosen to ignore:
Wendy’s Serves Up Big Kiosk Expansion As Wage Hikes Hit Fast Food
Wendy’s (WEN) said that self-service ordering kiosks will be made available across its 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.
It will be up to franchisees whether to deploy the labor-saving technology, but Wendy’s President Todd Penegor did note that some franchise locations have been raising prices to offset wage hikes.
McDonald’s (MCD) has been testing self-service kiosks. But Wendy’s, which has been vocal about embracing labor-saving technology, is launching the biggest potential expansion.
Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”
It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15.
... the company is wary about both wage hikes and a possible recovery in commodity prices and is “working so hard to find efficiencies” so it can deliver “a new QSR experience but at traditional QSR prices.”
In addition to self-order kiosks, the company is also getting ready to move beyond the testing phase with labor-saving mobile ordering and mobile payment available systemwide by the end of the year. Yum Brands and McDonald’s already have mobile ordering apps.
As seen in previous NewsBusters posts, the establishment press has seemingly had a hard time finding businesspeople who oppose minimum-wage increases, even though thousands of them are out there. Instead, we've seen the amusing spectacle of writers from different news outlets "somehow" talking to the same pair of business owners in San Francisco who just so happen to support such laws.
So it shouldn't surprise anyone that the press has virtually ignored a significant indication that the moves toward huge minimum-wage increases are going to backfire on many of the people who were supposed to benefit. Busting the narrative isn't allowed, even when reality intervenes.
Cross-posted at BizzyBlog.com.
