Carl’s Jr. CEO looks to automation as minimum wage hikes drive up labor costs

posted at 9:21 am on March 18, 2016 by Jazz Shaw

We recently looked at how the “Fight for 15” had impacted employment in Seattle, with job numbers inside the affected zone plummeting as hiring spiked in the suburbs where wages and associated labor costs remained at relatively normal levels. So what can the employers who are hit with these higher costs do when their prices are driven to above competitive levels? One unfortunate but completely predictable choice for lower skill positions is to replace them with high tech, automated options. That’s the path that Andy Puzder, CEO of Carl’s Jr. and Hardee’s, is considering after a recent visit to a business which has already moved in that direction. (Yahoo Finance)

The CEO of Carl’s Jr. and Hardee’s has visited the fully automated restaurant Eatsa — and it’s given him some ideas on how to deal with rising minimum wages.

“I want to try it,” CEO Andy Puzder told Business Insider of his automated restaurant plans. “We could have a restaurant that’s focused on all-natural products and is much like an Eatsa, where you order on a kiosk, you pay with a credit or debit card, your order pops up, and you never see a person.”

Puzder’s interest in an employee-free restaurant, which he says would be possible only if the company found time as Hardee’s works on its northeastern expansion, has been driven by rising minimum wages across the US.

“With government driving up the cost of labor, it’s driving down the number of jobs,” he says. “You’re going to see automation not just in airports and grocery stores, but in restaurants.”

Puzder is pointing out some businesses which fell in line with this idea long before the current minimum wage fight on the campaign trail. Anyone who ever travels by plane already knows what’s happened in the nation’s airports. When you showed up at the terminal as little as ten years ago there were a lot more agents checking people in, printing their boarding passes and processing their baggage fees. Today the number of such workers has been reduced (and to be honest, the process has become quicker) with the advent of computerized kiosks where we enter our confirmation number or ID or credit card and the machine does the rest, including printing out boarding passes and receipts. The same has happened at the local grocery store, albeit to a lesser extent. Most of the major chains now have automated checkout lines where you scan your own purchases, swipe your card, bag your goods and leave the store without having to talk to anyone. (I can’t believe that losses by theft haven’t gone up in those lines, but perhaps it’s negligible.)

Shifting fast food joints away from living employees will require less effort than airport automation in the ordering process, but the actual assembly and delivery of the product would be much more complicated. Still, it’s already being done to a certain extent. Eatsa (the chain referenced in the linked article) may look like something new, but it’s not all that different from the old automats which were popular so long ago (more than a century) that they’re actually enshrined in the Smithsonian Museum.

It was once the world’s largest restaurant chain, serving 800,000 people a day. It was Horn & Hardart, and its cavernous, waiterless establishments represented a combination of fast-food, vending and cafeteria-style eateries. These restaurants, with their chrome-and-glass coin-operated machines, brought high-tech, inexpensive eating to a low-tech era. Making their debut in Philadelphia in 1902, just up the street from Independence Hall, and reaching Manhattan in 1912, Horn & Hardart Automats became an American icon, celebrated in song and humor. With their uniform recipes and centralized commissary system of supplying their restaurants, the Automats were America’s first major fast-food chain.

The Eatsa model is clearly more high tech and flashy, with the customer’s name almost magically appearing on the door where their food appears, but the operating model is the same. Cooks read the kiosk orders in the back room, prepare the food and place it in the cubicle where it’s picked up by the customer. The real question is if any of the food preparation can be automated. That sounds like a big challenge, but if you asked anyone a century ago they probably would have told you that robots couldn’t possibly weld a car body together.

All of this was not only predictable, but actually has been predicted over and over again. When you drive labor costs up too fast and too high, employers will invest in the increasingly affordable technology required to replace workers with automation. For Carl’s Jr. to look at such an option is neither shocking nor a sign of some malice in their leadership. In fact, not doing it would be a nearly criminal failure in management. But when the minimum wage is determined on the local level by prevailing market forces, wages can remain manageable enough that people are cheaper than the next generation of robots. Seattle learned that lesson the hard way. Carl’s Jr. seems to be an early indicator that we’ll all be getting a taste of Isaac Asimov’s future if the Fight for 15 movement wins on a national level.


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