Also, those inside the limits might well decide to engage in labor saving devices such as self-service ordering kiosks and of course self-service soda fountains. Of course those devices tend to work better at larger places, so instead of two smaller McDonalds, replace it with one. (Or more likely replace three with two, since location is of some importance.) Not only does that give the economies of scale to make those labor saving devices pay, it also means fewer managers at above line crew wages.
Going to butt in here and say I was never convinced by this argument. The question is not that these stores go all labour or all capital, but at a certain point they stop. Every fast food place I've been to has a self-service soda fountain; maybe three tops have self-service ordering kiosks. Networks beam orders from the cashiers into the kitchen, but no more. So what's going on here?
My theories in order of decreasing plausibility:
- Installing machines take time. They're not cheap, and new ones are always rolled out slowly. Fast food work, in the common perception, is not intensive in any way. So there is no advantage to wasting time installing a capital-intensive system compared to a labour-intensive one.
- Risk aversion. Machines are complicated and managers may not know how to fix them. What if one breaks? Then the whole queue of the store gets messed up and the manager has to deal with the wrath of angry consumers.
- Experience is taken into account. Teenagers don't work at restaurants these days compared to long-term lower-class workers. Bonds get formed. Every member of the franchise has more confidence in their abilities to understand each other than they do with an opaque, automated system.
But I guess my whole point is that there are significant sunk costs in even the simplest of such stores, and if a wage hike can boost demand before a manager thinks the wage increase loss outweighs the sunk costs then everything works. This is likelier to take place in an urban area, where consumers comes in fast waves, some of whom have eccentricities requiring a human response.
