On Monday (Sept. 5), California’s Governor Gavin Newsom signed into law Bill AB-257, which will set higher wage requirements for fast food workers as well as enact standards related to “health, safety, and welfare.” Fast food restaurants have been pushing back against this bill since it was first proposed, and the effects of these changes on the state’s quick-service restaurants (QSRs) will likely be significant.
“Today’s action gives hardworking fast-food workers a stronger voice and seat at the table to set fair wages and critical health and safety standards across the industry,” Newsom said in a statement accompanying his announcement that he had signed the bill into law. “I’m proud to sign this legislation on Labor Day when we pay tribute to the workers who keep our state running as we build a stronger, more inclusive economy for all Californians.”
The law, which among other measures, may raise the minimum wage up to $22 next year, affects brands that have 100 or more locations nationwide, have “limited or no table service,” require customers pay before receiving their meals and that primarily serve food that was prepared in advance of customer’s orders.
Some foresight into the eventual consequences of the bill may be gleaned from efforts major chains have already undertaken in response to existing hiring and retention challenges and wage inflation, turning to automation to mitigate their labor needs altogether. Take, for instance, artificial intelligence (AI) order-taking software across voice channels such as call-in and drive-thru as well as orders placed via consumers’ smart device voice assistants.
Most recently, for instance, fast-casual brand Panera Bread, which has more than 2,100 bakery-cafes in the United States and Canada, announced last week (Aug. 29) that it is testing artificial intelligence (AI) voice ordering technology at two of its upstate New York locations.
“The potential of AI drive-thru technology is incredibly exciting for us — we are eager to evaluate the performance of these tests and the possibility of expanding this technology in additional bakery-cafes,”
Plus, automation can go even further than that, as California has already seen. For instance, Jamba (formerly Jamba Juice), which has 850 locations across six countries, has a fully autonomous kiosk inside a kiosk in Dixon, California where consumers place their orders and the robo-restaurant prepares them.
On the flip side, some restaurant brands have been limiting stores’ hours and shutting down dining room service in response to these labor challenges, suggesting that perhaps, as the cost of running a restaurant in California rises, some locations may close altogether. Additionally, franchisees will likely look for expansion opportunities outside of California, meaning that there may be fewer fast food restaurants in the state within a few years.
Major restaurant companies have been vocal in their opposition to the new law, arguing that it hurts small franchisees and that it will raise menu prices for consumers. Quick service restaurant (QSR) giant McDonald’s, for one, has been especially outspoken.
“If you are a small business owner running two restaurants that are part of a national chain, like McDonald’s, you can be targeted by the bill. But if you own 20 restaurants that are not part of a large chain, the bill does not apply to you,” Joe Erlinger, president of McDonald’s USA, said in an open letter arguing that the bill unfairly targets major chains. He later added, “This lopsided, hypocritical and ill-considered legislation hurts everyone.”
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