Strategy: America's fast-food chains are contemplating replacing minimum wage workers with robots — and it could lead to a crisis

Minimum wage increases are sending shock waves across the fast-food industry.

• Jack in the Box is considering swapping some cashiers with robots to save money as minimum wage rises.
• Red Robin is also cutting positions, with plans to save $8 million in 2018 by eliminating bus boys.
• "As we see the rising costs of labor, it just makes sense" to consider adding new automated technology, Jack in the Box's CEO said.

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Minimum wage increases are sending shock waves across the fast-food industry.

On Tuesday, Jack in the Box's CEO said the fast-food chain is considering swapping some cashiers with robots as the minimum wage rises in California.

"As we see the rising costs of labor, it just makes sense" to consider adding new automated technology, CEO Leonard Comma said Tuesday at the ICR Conference.

Jack in the Box previously tested technology such as kiosks, and found they resulted in a higher average check and helped with efficiency. However, Comma said, installing the kiosks was too great of a financial investment — at least until now, as minimum wages are rising.

Jack in the Box wasn't the only fast-food chain to announce it was considering cutting employees as minimum wages increase.

Burger chain Red Robin announced on Monday that the chain estimates it will save $8 million this year by eliminating bus boys from restaurants. The West Coast-centric chain said it already saved almost $10 million by cutting expediters, the people who plate the food in the kitchen, The New York Post reported.

"Probably the most challenging thing we're facing in the industry right now is labor costs," Red Robin CFO Guy Constant said.

Minimum wages are increasing in 18 states in 2018, including California and Washington, where Jack in the Box and Red Robin are respectively based.

Robots on the rise

In 2017, Wendy's announced plans to install self-ordering kiosks within a year. McDonald's is adding kiosks to 2,500 stores, though it pledged not to replace cashiers with kiosks. Walmart — which announced Thursday it is giving workers a pay raise — has been testing automation in the form of shelf-scanning and floor-cleaning robots.

Smaller chains such as Eatsa and CaliBurger have been working on automating the entire restaurant experience.

"With government driving up the cost of labor, it's driving down the number of jobs," then-Carl's Jr. and Hardee's CEO Andy Puzder told Business Insider in 2016. "You're going to see automation not just in airports and grocery stores, but in restaurants."

Other executives say that the trend towards automation isn't purely a money saving play.

"The way history goes, automation is a natural. If you look at your phone, that's a form of automation," Dunkin' Brands CEO Nigel Travis told Business Insider.

If all Dunkin' Donuts customers ordered and paid using their mobile phones, Travis says the chain would be able to cut 30% of labor in stores. However, he says, Dunkin' Donuts biggest challenge in 2018 is finding enough workers who are good at their jobs, which can result in understaffing.

Automation "doesn't have to be a replacement" for human workers, Travis said. "It can be a natural support for running the business."

Automation has the potential to radically shrink the number of restaurant industry jobs, especially entry-level positions. Currently, the restaurant industry makes up roughly 10% of the American workforce.

Automation is a threat to 800 million jobs, according to a study by McKinsey Global Institute.

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