Reference no: EM131872850

Question: Fast Food may seem like a decidedly "low-tech" industry. However, some of the leading fast food companies are experimenting with automation, and more may be on the way.

Change is rapidly occurring in the fast food industry due to a combination of higher labor costs, increased technological capabilities, and other factors.

Protesters across the world are calling for fast food restaurants to raise their wages, arguing that the current wages paid to workers are not enough to survive on. Various states and cities have passed, or are considering, legislation to require higher minimum wages.

In the meantime, some restaurants have begun experimenting with technology to reduce the number of restaurant workers needed. For example, Panera Bread just spent millions to develop self-service ordering kiosks for all of its restaurants within the next few years. Chili's has invested in tableside tablets for customers to use for ordering food and making payment. In restaurant delivery (e.g., pizza) self-driving cars or drones could be used in the future to make deliveries, replacing delivery drivers.

1. The hourly wages of a typical fast food worker would be considered what type of cost (fixed or variable)?

2. How will increased labor costs impact a restaurant's break-even point?

3. The costs of self-service ordering kiosks or tablets would be considered what type of cost (fixed or variable)?

4. How does a shift in cost structure to greater automation and fewer employees impact a typical fast food restaurant's break-even point in sales dollars?

5. How would this shift in cost structure impact a typical fast food restaurant's degree of operating leverage?

6. What factors do you think that a fast food restaurant chain should consider before making the decision to replace some of its workers with more automated processes?