A California Burger King franchisee is rapidly installing digital kiosks to cut costs due to the state's new $20 minimum wage for fast-food workers. The franchisee says he can't raise prices further and sees kiosks as a more cost-effective solution than reducing staff hours or delaying new restaurants.
This trend of kiosk adoption is likely to accelerate in California's fast-food industry due to the higher labor costs.
"We can't move fast enough on this," Harsh Ghai told Business Insider in an interview in early April.
"We have kiosks in probably about 25% of our restaurants today," he said. "However, the other 75% are going to have kiosks in the next probably 30 to 60 days."
Ghai claims to be the biggest Burger King franchisee on the West Coast, overseeing a California empire of 180 fast-food restaurants. This includes roughly 140 Burger King locations alongside various Taco Bell and Popeyes restaurants. While Business Insider couldn't independently verify the top franchisee claim, the scale of Ghai's operations is undeniable.
"We are installing kiosks in every single restaurant," he said.
Ghai fears additional price increases would hurt customer traffic.
California's new $20 minimum wage for fast-food workers, applying to large chains with at least 60 locations nationwide, took effect on April 1st. This significant increase, 25% above the state's general minimum wage of $16, reflects years of advocacy by fast-food workers and their unions, particularly in California's high-cost-of-living environment.
The increase in labor costs due to the minimum wage hike is squeezing profits for fast-food franchisees. In response, many are scrambling to find solutions, from raising prices to cutting expenses, in order to stay afloat.
Previously, Ghai's restaurants implemented annual price increases of 2-3%. However, in the past year, they've been forced to raise prices more steeply, ranging from 8% to 10%.
"The majority of that is going to get absorbed in the inflation of our food costs," he said. "So we're not even compensating for most of the labor costs that we're going to be experiencing with this legislation."
Further price hikes are out of the question for Ghai.
"I can't take more price than that," Ghai said. "Anything more than that is going to result in [a] significant impact to our traffic."
Facing the higher labor costs, Ghai is implementing a multi-pronged approach. This includes reducing employee hours, eliminating overtime pay, and putting a hold on new restaurant openings. However, the most significant shift is the rapid rollout of digital kiosks across his restaurants.
This strategy aligns with a national trend in the fast-food industry, but California's $20 minimum wage has significantly accelerated the adoption of kiosks for Ghai's operations.
Beyond cost savings, kiosks offer additional benefits. They can improve order accuracy and encourage customers to spend more, as seen with Shake Shack's experience of kiosks being their most profitable channel. This efficiency boost is driving national adoption – Burger King is rapidly deploying them, and Taco Bell boasts kiosks in all US restaurants.
Previously, Ghai planned a slower rollout, focusing on new and remodeled locations. This approach meant waiting 5-10 years to equip all his restaurants.
"But now we are just going ahead and installing the kiosks in every single restaurant in response to the legislation to be able to balance some of these labor costs that are hitting us," Ghai said.
"We've done the financial analysis and it makes more sense for us to spend the capital expenditure on the technology, and obviously when you're buying large amounts of the hardware, you obviously get it for a cheaper price as well," he continued.
"So it's making more sense for us to just roll that across the business in its entirety."
