Business
Fast food operators rushing to use AI in the wake of minimum wage hikes
It didn’t take long for Harshraj Ghai to respond to the impact of California’s new $20 an hour minimum wage for his 3,700 fast-food employees.
Ghai and his family operate 180 Burger Kings, Taco Bells and Popeyes chicken restaurants across the state, and one of the first things they did after the law took effect April 1 was to start capping workers’ hours to avoid overtime pay. Also, they’re closing some outlets a little earlier, and opening others a bit later to avoid paying workers for less profitable periods.
But the biggest thing Ghai and his family are doing does not directly involve workers at all: They’ve speeded up and expanded their use of technology, especially AI.
Right now, they’ve moved up by several years their plans to install self-service kiosks at all of their locations, including 25 out of state.
But what has Ghai most hopeful about offsetting the higher labor costs is to have AI handle customers’ orders made at the drive-through. He’s testing the machine-learning system this month at a few locations and hopes to roll it out company-wide by this time next year.
Drive-throughs of course are quintessentially California, with its car culture and fast lifestyle. And now, with AI coming on to the scene in a big way, the state is emerging as ground zero for what many analysts see as the next big thing in the world of fast food and drinks.
Not that AI-led drive-through is quite ready for prime time. As it is today, the system can have trouble with people’s accents and ambient noise, making it hard to recognize speech and translate it into text. Pilot programs run by McDonald’s and others thus far often have backed up the AI technology with an employee, like the Wizard of Oz man behind the curtain. The unseen worker from as far away as the Philippines monitors and sometimes intervenes to complete an order if AI falters.
Even so, Ghai thinks that once the kinks are worked out, it’ll be a godsend for fast-food operators like him.
“It has the potential of being the most impactful,” says Ghai, 39, whose Indian immigrant father, Sunny, started the family business in 1998 by buying a failing Burger King in San Jose, where he was an assistant manager.
What pushed the envelope for businesses like the Ghais’ was California’s sudden 25% hike in the minimum wage for the fast-food industry’s half-million or so workers in the state.
To deal with the big increase in labor costs — which average about one-third of a fast-food store’s sales — many of the affected business owners immediately jacked up menu prices.
Ghai said he’s raised prices overall this year by just 2%. But that’s not been the norm. By the middle of last month, at many franchises across the state — from Jack in the Box to Chipotle to Starbucks — consumers on average were paying a mid- to high-single-digit percentage more than just a month or two earlier, according to a survey by BTIG, the investment banking and research firm.
Relatively few appear to have resorted to layoffs, in part because many were already staffed at bare-bones levels. So to hold the line on further price increases, a growing number of fast-food operators are now racing to install as much automation as they can afford.
Perhaps the most visible and soon to be widely adopted are all kinds of kiosks for ordering food. The self-service machines have been around for more than a decade, but franchise owners such as Michaela Mendelsohn resisted the move for many years.
“We just didn’t want to force our customers to use technology. We thought the personal contact was important,” said Mendelsohn, who has six El Pollo Loco restaurants in Los Angeles and Ventura counties.
But when the industry’s basic pay rose to $20 an hour, she said, that amounted to $180,000 in additional labor costs a year per store. Within a month of the wage hike, Mendelsohn bought two standing kiosks for each of her six restaurants. That set her back $25,000 per store, for two screens, installation, software and other related costs. One of the two machines accepts cash, which she said was needed for her blue-collar customers.
An L.A. Carl’s Jr. restaurant. In California, CKE Restaurants, the owner and franchisor of Carl’s Jr. and Hardee’s, appears to be ahead of the pack on the use of AI technology.
(Los Angeles Times)
Mendelsohn figures that the kiosks might save five hours of labor a day. By that estimate, the machines would pay for themselves within a year and shave about 20% of the increased cost from the latest minimum wage increase. “We’re chipping away at it,” she said.
Self-service kiosks are ubiquitous in Western Europe, but they’re in fewer than 20% of fast-food establishments in the U.S., says Perse Faily, chief executive at Los Angeles-based Tillster, one of earliest providers of kiosks and other digital platforms for restaurants.
The COVID-19 pandemic pushed the trend in the U.S., she said, and now in California, “We’re seeing this complete sea change in thinking, ‘How do I address my labor costs?’”
Kiosks may be appealing in that they can not only save on labor, but also drive higher sales. Unlike people, the programmed machines are always trying to “upsell,” never forgetting to ask customers whether they want a drink with their meal or something else to go along with their entree.
Faily, Tillster’s CEO since late 2007, wouldn’t disclose the company’s sales increase, but said its new customers include Burger King and Popeyes, and that employment at the firm is up 75 from a year ago, to 340 currently. “The minimum wage increase has completely changed the landscape,” she said.
Other computer-guided upgrades are also aimed at cutting labor costs, from automatic avocado peelers and dishwashers to robotic arms that flip burgers and turn over fryer baskets.
But return on investments, while helpful for the bottom line, don’t do enough to offset burgeoning payroll expenses. So relatively few fast-food operators, for now, are making major investments in robotics and similar mechanical devices.
AI, on the other hand, looks like it could be a game-changer.
The pandemic boosted drive-through traffic at fast-food places to about 80% of sales from two-thirds pre-COVID, said Peter Selah, a restaurant industry analyst at BTIG. And AI order-taking opens the possibility of speeding up the drive-through process, increasing sales and reducing significant labor overhead.
But analysts say it’s likely to be at least a year or two, maybe longer, before AI-led drive-through reaches a consistent and high enough level of accuracy where companies are comfortable with it. Tests have often left frustrated customers demanding to talk to a live person rather than a bot, according to various accounts.
Major fast-food brands were reluctant to discuss their AI drive-through efforts. Nationally, McDonald’s has been out in front, using an IBM-developed system. A spokesperson would only say that McDonald’s “continues to gather learnings from the roughly 100 pilot restaurants testing automated order taking technology in the U.S. We expect to share more later this year.”
In California, CKE Restaurants, the owner and franchisor of Carl’s Jr. and Hardee’s, appears to be ahead of the pack on the technology, but like other chains, including Taco Bell, Burger King and El Pollo Loco, CKE declined to comment.
Analysts, however, say none of the AI platforms have reached more than 85% success in which human intervention isn’t needed.
“The hardest part is when you have people with accents, from different states and immigrants. It’s challenging,” said Danilo Gargiulo, senior analyst covering restaurants for Bernstein, an investment and research firm.
Still, Gargiulo sees the day when AI will speed up the drive-through line, boosting sales and consumer satisfaction. “Right now the drive-through time is slowed by repeated orders,” he said. With accurate AI speech recognition and faster, clearer communication to the kitchen staff, he said, you can cut as much as 90 seconds off what typically takes 5½ minutes for a customer to complete a drive-through purchase.
That’s what Ghai is betting on.
He says his initial investment for the AI drive-through technology, purchased from San Carlos-based Presto, is about $10,000 per store. Ghai estimates that if he can get it to perform at 90%, a store employee might have to step in to take over an order just three times every hour, freeing up the worker to do other tasks.
The AI system is getting better as it gathers more data, he said, and it’ll soon be able to communicate in Spanish. Add in mobile apps and loyalty programs, and AI has the potential to give fast-food customers a faster and more personalized service. And of course there’s the labor saving part: Ghai thinks the AI drive-through could reduce 10 to 15 hours of wages a day, and double that where he has two human order takers.
“Our goal isn’t to get rid of people. We’re in the people business at the end of the day,” he said. At the same time, Ghai added, over the long haul, “we’ll have fewer people.”
The Trump administration has been making headlines for taking steps to loosen restrictions around cannabis, including legalizing it for medical use. Now it is beginning an experiment that places cannabis even more squarely into mainstream health care: thousands of Medicare patients soon will be able to get CBD, a nonintoxicating component, for free.
“ONE in FIVE adults used it in the past year, and many say it improved their chronic pain enormously,” President Trump wrote on social media last month in a post cheering the program.
The aim is to gather real-life evidence showing whether CBD can improve patients’ quality of life and, by extension, reduce health care costs, administration officials say.
CBD products are already popular with some Medicare-age patients. A 2024 study in Clinical Gerontologist found that 14.3 percent of patients 65 and older had used them in the past year. Patients usually purchase over-the-counter gummies and tinctures to ease anxiety, insomnia and chemo-related nausea.
“Millions of older adults are already integrating cannabinoid products into their health care routines, yet the health care system has almost no infrastructure to understand what they are spending, why they are using these products, or whether these expenditures reduce other health care costs,” said Sasha Kalcheff-Korn, the executive director of Realm of Caring, a nonprofit group that conducts research and promotes cannabinoid therapies.
Despite Mr. Trump’s ebullient endorsement, many doctors worry about encouraging the use of unapproved supplements to geriatric patients, who typically have multiple medical conditions and already take many medications, some of which could interact with CBD products to detrimental effect. Still, their concerns would be eased somewhat, they say, if patients collaborated with doctors on appropriate dosing, which is another goal of the government initiative.
”I believe that CBD should be available to all seniors as part of their health care, recommended by a provider with knowledge of cannabinoid medicine,” said Dr. Melanie Bone, the director of medical cannabinoid therapies at MorseLife, a senior residence in West Palm Beach, Fla. “It may help with a number of ailments of aging, and has almost no downside. But CBD is not a panacea. The only way to know if it works is to try.”
What does research show about CBD for older patients?
CBD, or cannabidiol, one of the most prominent compounds in the cannabis sativa plant, is nonintoxicating and known for its soothing effects on the central nervous system. Many CBD products are made from hemp, a legal strain of cannabis that is rich in CBD and has only small amounts of the intoxicating compound, THC. The Medicare program restricts the amount of THC that can be in hemp-derived CBD to 3 milligrams per serving.
In recent years, CBD has become increasingly attractive to older patients. Results from studies are mixed to positive. But many of the doses evaluated contained more THC than those allowed by the Medicare guidelines. Most researchers have noted the need for more rigorous gold-standard trials.
Mr. Trump’s assertion that one in five adults use CBD products, many for chronic pain, which was also included in supporting documents for an executive order announcing the program, appears to conflate self-reported surveys and polls that broadly address adult use of medical cannabis or CBD.
But a chief benefit of CBD that some studies do underscore is that many seniors use the products to replace opioids for pain and benzodiazepines for anxiety and insomnia, which can have troubling side effects.
The new Medicare program mandates that the CBD be given to patients only by doctors, who regularly review their medical history and reactions to the products.
How does the program work?
One of the main goals is to learn whether CBD can help older people feel better enough to get off, or avoid starting, prescriptions for pain, nausea, sleep and anxiety. The hope is that CBD could help prevent more expensive medical interventions that those drugs can lead to. Opioids, for example, can prompt dizziness, constipation, overdoses and trips to the emergency department.
Only a small subset of Medicare recipients — those who participate in a type of health care network called an Accountable Care Organization — will initially be eligible for the benefit. So far, just five large groups have been approved to offer CBD. By January, 2027, CBD will be offered to patients in all 74 ACO groups.
The participating organizations have providers across an array of states, including Oklahoma, Texas, Wisconsin, West Virginia and Arizona. Currently, only patients affiliated with programs in New York and Florida patients have begun receiving CBD products, according to a spokesperson for the Centers for Medicare and Medicaid Services.
Those doctors must buy the CBD products up front, spending up to $500 per patient a year. They must agree to screen patients and products carefully, and collect real-time data on how the CBD affects patients.
They will not be directly reimbursed for the CBD. In the incentive-based structure, these groups receive a budget from Medicare. Those that come in under budget by improving patient quality of life and reducing costs, now additionally equipped with CBD as a tool, will receive a percentage of those savings.
Are there any obstacles?
Yes.
Late last year, Congress passed a measure that could remove from the U.S. market most CBD products, including those that doctors suggest for patients.
That is because many CBD products contain far more THC and other synthetic, intoxicating compounds than Congress intended in 2018, when it created the legal definition of hemp, to distinguish it from marijuana. Many of those amped-up CBD items, packaged to look like candy, have led to calls to poison centers.
In reaction, Congress placed severe limits on hemp last year that are set to take place in November. Under those restrictions, Cornbread Hemp, a Kentucky-based company with a contract to supply CBD for the new program, will not be able to do so, because its products’ THC content is above the new limits. A patchwork of bills introduced in the Senate and the House are trying to slow or rewrite what amounts to a looming hemp ban.
In his social media post last month, Mr. Trump urged Congress to act.
“Please get it done, and SOON,” he wrote.
Michele Hanisee has been doing everything in her power to expedite the arduous process of rebuilding her Altadena home.
But after navigating permitting delays, insurance stalemates and design flaws, there’s still one big unresolved issue that’s complicating her progress: sewage.
Hanisee owns one of nearly 700 properties in Altadena that’s never had sewer lines, instead operating for decades on now-outdated septic tanks or even more archaic and environmentally hazardous cesspools.
L.A. County officials — and many residents, included Hanisee — would like to connect these pockets of Altadena to the county sewage system.
But the cash-strapped county government said it simply cannot afford the estimated $70 million the new lines would cost. And although officials hope the county can eventually acquire state and federal funding for the project, the lack of certainty on the issue has left hundreds of fire survivors in a stalemate.
“Do I build [with] septic or wait for a sewer line?” said Hanisee, 59. She said this issue has been particularly frustrating as the county promised expedited rebuilding permits; “It doesn’t help much if they don’t expedite the infrastructure work,” she said.
It’s also a major financial concern. Several fire survivors in this situation told The Times that they feel torn between planning for an upgrade to county-run sewers, or just moving ahead with rebuilding and improving their onsite wastewater systems. Either option could bring hefty costs, particularly if the county doesn’t end up paying for the sewer line upgrade and it falls on residents. The worst-case scenario, many said, would be fixing up their septic system to meet current requirements, and subsequently having to pay for the sewer line installation and connection later on.
“How do you move forward when you don’t know how much money you have to spend on the build?” Hanisee said.
On Alpine Villa Drive, shown May 1, 2026, homes have mostly operated on now-outdated cesspool systems for sewage.
County officials say they are aware of the quagmire facing these residents, yet they have no timeline for — or guarantee of — a resolution on the issue.
“Everything comes back to money,” said Anish Saraiya, the Altadena recovery director for L.A. County Supervisor Kathryn Barger. “We have more than $2.5 billion worth of public infrastructure we have to rebuild, including these sewers.”
He said the county remains hopeful that Congress will come through with $16 billion requested in federal aid for the region’s recovery from the Eaton and Palisades fires, which could be used on the sewer project — but that hasn’t yet been allocated or even promised. His team also is exploring potential state funding or other outside money, he said.
But even if the cash were available tomorrow, Saraiya noted that the engineering and construction could be lengthy, and the project could be completed after homes that need it are otherwise ready to be occupied.
“There are a lot of uncertainties,” Saraiya said. “We feel confident we can secure the funding necessary to make sure that it’s not an obligation on homeowners, but that is a bit of a timing challenge.”
Michele Hanisee is trying to rebuild her home on Gaywood Drive as fast as possible. But she said it’s hard to move forward with looming uncertainty around her home’s sewage system.
Timing, however, is of the essence for fire survivors. Many say they can’t afford to lose momentum on their rebuild, concerned about losing contractors, rising construction costs or how additional delays could further shrink their already-dwindling insurance payouts for temporary housing.
Others feel completely stymied by this latest headache, which only builds on other unexpected costs and hurdles in an already complicated process.
“Will we be forced to go onto the sewer?” said Patricia Anderson, Hanisee’s neighbor, who still hasn’t decided whether she can or will rebuild. “And will we have a big expense for that? Those kind of issues are a concern.”
Patricia Anderson, 83, would love to rebuild her Altadena lot on Gaywood Drive, but the lack of clarity around potential sewage upgrades for her street has exacerbated the already overwhelming process.
About half of the 682 lots with on-site sewage systems — most of which are septic tanks — experienced fire damage or total destruction, according to county records. These systems, scattered across Altadena, “pose significant risks of groundwater contamination, surface water pollution and potential public health hazards,” according to a statement from the L.A. County Department of Public Works. But the department noted that replacing all of them at once is a large-scale project that “requires a level of cross-departmental integration that has historically been difficult to achieve in disaster recovery settings.”
So far, the county has funded technical planning for the sewer expansion, but environmental reviews, feasibility studies and securing resident permissions — as many of the affected streets are private — have not been completed.
Even though county officials hope to find a way to pay for a widespread sewer upgrade, they’ve also presented residents with an option to form small community improvement districts, or property tax assessment groups, to finance small portions of municipal sewer lines. About a dozen neighborhood groups are considering that option, but many fire survivors worry it only adds to their already-squeezed budgets; estimates of up to $70,000 per lot have been circling neighborhood group chats, if not more. The county’s estimate of the cost by parcel is actually higher: between $85,000 and $134,000, depending on a property’s location and topography.
But the idea of a fragmented sewer installation and residents footing the bill misses the context of this moment, said Morgan Whirledge, a new representative on the Altadena Town Council, which can pass along concerns or recommendations to Los Angeles County leaders, but holds no real governing power or spending authority. He is a fire survivor whose home previously ran on a cesspool system.
“This work presents an opportunity to coordinate,” Whirledge said, noting ongoing undergrounding of power lines by Southern California Edison and other widescale construction. “You don’t want to come rip a street up twice.”
The county’s Department of Public Works has said that residents rebuilding like-for-like, without major changes to the size or setup of their home, can continue to use on-site septic systems, if they’re in good condition. But any other rebuild requires additional testing and potential upgrades or expansions.
Morgan Whirledge surveys the initial stages of rebuilding at his Altadena lot on May 1, 2026, including where his outdated cesspool system still sits underground.
If residents are willing to take a gamble on the unfunded sewer expansion project, rebuilds can be approved “with the intent to connect later, even if the sewer installation isn’t yet scheduled,” the Public Works Department statement said.
Barger, Altadena’s most direct governmental representative, said she understands this is an issue “that can slow recovery if we don’t get it right.”
“My focus is on finding a path forward that gives residents clarity, avoids unnecessary costs, and ensures we’re rebuilding Altadena in a way that is sustainable for decades to come — not just patching together short-term fixes,” Barger said in a statement.
Some worry that 16 months after the fire, it’s already too late for that.
Hanisee is still waiting on her permits, which if approved, include plans to connect to a new county-run sewer, which she hopes isn’t too optimistic.
“There’s this huge unknown liability for people whose streets didn’t have a sewer line,” Hanisee said. “We just want to go home and also not be forced to sell and leave because of all these issues that are creating obstacles to rebuilding.”
Because she’s not building like-for-like, if she ends up needing to rely on her old septic tank, it will require additional testing and possibly an expansion or update, both of which would add more costs to her rebuild. She also worries that she’ll end up having to pay for the new sewage lines.
What once felt like quirks of their Altadena neighborhood — helping upkeep the road, running on a cesspool — “all these things … have turned into nightmares,” Whirledge said. “It’s this cumulative effect of these incremental cost increases and complicating factors. That can be a huge blow at a time when you’re already really vulnerable.”
He and his family transitioned from the cesspool to septic for their rebuild, while also building for the possibility of a future sewer line connection — a plan he realizes is cost-prohibitive for many fire survivors, especially when there’s still a real chance that residents have to fund the new sewer line.
Decommissioning his old cesspool and buying the new septic tank already cost almost $10,000, he said, and installation and testing could easily triple that. His insurance policy does provide some reimbursement for code upgrades, but he said it won’t come close to the costs the family is facing.
“It’s a lot of money,” Whirledge said, “especially for something you want to never have to think about.”
A worker pumps sewage from a portable toilet on the property of Morgan Whirledge, who is in the initial stages of rebuilding at his Altadena lot.
When Jensen Huang, Nvidia’s chief executive, joined the group of American business leaders traveling with President Trump to Beijing at the last minute this week, many took it as a sign that progress was in store for the company’s long-stalled sales in China.
But as the summit between Mr. Trump and Xi Jinping, China’s top leader, wrapped up on Friday, the fate of Nvidia’s artificial intelligence chips in China was no clearer than it had been before.
Even Jamieson Greer, the U.S. trade representative, seemed uncertain about Nvidia’s future in China, saying in an interview with Bloomberg News on Friday that it was up to Beijing whether Chinese companies would make more purchases from the American chip giant.
Last December, President Trump approved Nvidia, the world’s leading chip maker, to sell one of its most powerful A.I. chips, the H200, to China. But since then, the Chinese government has yet to greenlight any purchases, and no H200s have been sold.
Instead, Beijing has pushed Chinese companies to rely on homegrown technology from chipmakers such as Huawei.
Just before Mr. Trump met with Mr. Xi, China reached a milestone in its long-running quest for technological self-sufficiency. The Chinese start-up DeepSeek said for the first time that its latest artificial intelligence model had been optimized to run on Huawei chips.
Mr. Huang had long warned that this shift was coming. Soon, China’s A.I. companies will rely on Chinese hardware rather than American technology, eroding U.S. influence over A.I. development in China, he has predicted.
U.S. officials did not seem to push the issue during their trip to China this week.
The decision on whether to buy the H200 “is going to be a sovereign decision for China,” Mr. Greer said in the interview. “Obviously we think it could be helpful to them in the long run, but they’ll just have to make their decision on that.”
For years, Washington has used export controls to slow China’s progress in advanced technologies like A.I., and analysts had expected Chinese officials to air their frustration with those restrictions this week.
Despite Mr. Huang’s presence in Beijing, Mr. Greer said, the two sides had not discussed chip export controls at the meeting.
China was firmly committed to producing advanced chips at home and views the U.S. tech industry as a threat to that effort, he said.
“If we are ahead of the game, like we are on A.I. chips, sometimes they feel that can stop their own growth,” he said.
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