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The Biggest Threat To Minimum Wage Restaurant Workers Everywhere?

Tyler Durden's picture




 

Over the past year, unionized restaurant workers across numerous fast-food chains but mostly at McDonalds, expressed their dissatisfaction with compensation levels by striking at increasingly more frequent intervals - a sentiment that has been facilitated by the president himself and his ever more frequent appeals for a raise in the minimum wage. Unfortunately, as we have pointed out previously, in the context of corporations that have given up on growing the top line (as virtually all free cash goes into stock buybacks and dividends and none into growth capex), and in pursuit of a rising bottom line, employee wages are the one variable cost that corporations will touch last of all. But what's worse, these same unionized employees have zero negotiating leverage.

Perhaps nowhere is this more visible than in the recent strategy of smoothie retailer Jamba Juice, which in order to battle a 4% drop in Q3 same store sales has decided to radically transform its entire retailing strategy by getting rid of labor, cheap, part-time or otherwise, altogether. Presenting the biggest threat to minimum-wage restaurant workers everywhere: the JambaGo self-serve machine that just made the vast majority of Jamba's employees obsolete. Coming soon to a fast-food retailer near you.

Why did Jamba just make its retail sales force obsolete? Part of the problem is heightened competition: McDonald’s has entered the smoothie market, and others like Dairy Queen and Panera spent the summer promoting their rival drinks. Which means even less top-line growth potential. It also means that in order to push more of the top line straight to earnings, and bypass variable costs, a problem that will be faced by increasingly more corporations, Jamba's corner office had no choice but to unleash JambaGo.

Bloomberg reports:

The smoothie chain is hoping to see improvement from something it calls “JambaGo,” a self-serve machine that can be installed in cafeterias, schools, and convenience stores. Jamba Juice makes money by selling the prepackaged, pre-blended smoothie ingredients to JambaGo vendors, like a soda maker selling syrup to the owner of a soda fountain. The advantages: Jamba doesn’t need to build a store and the labor costs are much lower compared with hiring staff to concoct made-to-order drinks.

 

The company expects this model to help expand its brand more quickly and cheaply. Last quarter, however, revenue from the JambaGo program amounted to just about $400,000. But having recently landed a deal with Target (TGT) to put JambaGo machines in 1,000 Target Cafés, the company will soon have installed more than 1,800 machines (up from only 404 at the start of 2013). By contrast, there are currently about 850 Jamba Juice stores.

 

Based on a goal of $2,000 in annual revenue per JambaGo, the rough math for 1,800 machines is $3.6 million—a decent boost for a company that took in $228.8 million in revenue last year. Another 1,000 are planned for 2014, which would bring in another $2 million in annual revenue.

Here's what happens next: Jamba will do what every other company does to demonstrate that its radical strategy is successful - fudge the numbers and beat EPS for several quarters. This will happen even if JambaGo is ultimately yet another loss leader. However, its peers will watch closely and soon decide to roll out their own version of just this: a self-contained dispenser of a la carte prepared fast-food food, either liquid or solid, and in the process let go tens of thousands of their own minimum-wage employees, also known to shareholders as "costs."

What happens after that should be clear to everyone: more unemployment, lower wages for the remaining employees, worse worker morale, but even higher profits to holders of capital. And so on. Because in a world in which technology makes the unqualified worker utterely irrelevant, this is what is known as "progress."

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Tue, 11/12/2013 - 17:36 | 4147513 HedgeAccordingly
HedgeAccordingly's picture

love me some fries.. So does Mary Jo - http://hedge.ly/19hEvMq 

Tue, 11/12/2013 - 17:38 | 4147526 Buckaroo Banzai
Buckaroo Banzai's picture

I'll take that exotic-looking selection on the far right, please. To go.

Tue, 11/12/2013 - 17:41 | 4147540 FieldingMellish
FieldingMellish's picture

Ahhh.... the Thai fish sandwich... good choice.

Tue, 11/12/2013 - 17:51 | 4147557 hedgeless_horseman
hedgeless_horseman's picture

 

 

Consumer's give up any real power to choose when they become consumers.

Grow your own. 

Raise your own. 

Cook your own. 

Eat at home.

Keep your capital near your home; stop shipping your capital to Wall Street, Wal*Mart, and The Great Wall.

Sweet potato pie is back on the menu!

Tue, 11/12/2013 - 17:52 | 4147583 kaiserhoff
kaiserhoff's picture

No one really wants card board food,

  or fat chicks.

Tue, 11/12/2013 - 17:59 | 4147610 ParkAveFlasher
ParkAveFlasher's picture

Those yams are giving me an inferiority complex!

Tue, 11/12/2013 - 18:01 | 4147620 SilverIsKing
SilverIsKing's picture

Train to become a JambaGo self-serve repairman.

Tue, 11/12/2013 - 18:09 | 4147650 ParkAveFlasher
ParkAveFlasher's picture

Do I gets me own uniform?  How is dem benefitz?

Tue, 11/12/2013 - 18:16 | 4147677 knukles
knukles's picture

Not a problem, actually to the benefit of those poorly paid, no benefits workers...
Form the jobs they hold today, inure no sense of self-esteem.
Better they're put on the dole.
Treated better.
By ObieWorld

to sarc or not to sarc, that is the question, for reality has become so fucked up that misery is our new perpetual companion.

Tue, 11/12/2013 - 18:21 | 4147697 TruthInSunshine
TruthInSunshine's picture

Enjoy your XTRA BIG ASS FRIES!!!

http://www.youtube.com/watch?v=wW-4LU79qbU

Tue, 11/12/2013 - 18:48 | 4147789 ronaldawg
ronaldawg's picture

My wife would give her left nut for those sweet potatoes - how did you get them soooo big?

Tue, 11/12/2013 - 19:18 | 4147908 logicalman
logicalman's picture

I'm thinking it's YOUR left nut she'd be giving.

Sleep with one eye open!

Tue, 11/12/2013 - 22:53 | 4148541 JohnnyBriefcase
JohnnyBriefcase's picture

Where's that vegan douchemonkey who freaks out every time people post home grown food animals?

Tue, 11/12/2013 - 23:23 | 4148638 Tijuana Donkey Show
Tijuana Donkey Show's picture

VD is hiding in his closet eating some beef jerky.

Tue, 11/12/2013 - 19:32 | 4147957 TheFourthStooge-ing
TheFourthStooge-ing's picture

A raised bed with well-forked, uncompacted soil in a sunny location will do wonders for most root crops. I had sweet potatoes that size last year.

What was stunning was that I didn't even put them in the ground until mid-July. I had 4 potted sweet potato plants I'd started from clippings of those I'd grown the previous year, but no space for them outside until I harvested the garlic. I put one in each corner of the 12' by 4' raised bed, encouraged them to vine toward the center, and cleared some straw from the soil every couple of feet so they could send down more roots. I had to dig them up mid-October to plant more garlic, and many were as big as those in HH's picture.

Wed, 11/13/2013 - 00:37 | 4148835 Stuck on Zero
Stuck on Zero's picture

Those aren't sweet potatoes.  Those are garnet Yams.  Yams are potatoes.  Sweet potatoes are not.  Go figure.

 

Wed, 11/13/2013 - 04:17 | 4149069 akak
akak's picture

Actually, they ARE sweet potatoes.  Yams are tropical tubers only superficially similar to, but only distantly related to, sweet potatoes, and are rarely if ever seen, and never grown, in the USA. 

I know a lot of Southerners like to call sweet potatoes "yams", but yams are simply not an American crop.

Tue, 11/12/2013 - 18:51 | 4147792 The Alarmist
The Alarmist's picture

Yeah, but aren't you going to miss the flavour of that extra-special juice mix the barista/juicemaster/whatever-they-call-him makes when he is having a bad day?

Tue, 11/12/2013 - 18:50 | 4147796 MeMadMax
MeMadMax's picture

Machines don't bitch about long hours, no free healthcare, vacation time, raises, someone getting promoted when they should've been promoted, complain about customers, treat customers like shit, talk on the phone when they should be working, complain about their work, walk off the job, etc etc etc...

 

 

Tue, 11/12/2013 - 19:14 | 4147882 Pizza man
Pizza man's picture

Was thinking along those exact lines. Workers used to ..well, work!

But i'm not happy with this new trend, because a job is also training and even of meager, represnets the potential to do better (if we ever have a real economy again) . We don't like the attitude of workers? Wait until they don't work, have zero future, but an ever worth-less government check. We that have anything to ou names will be living like they do in Jakarta and Latin America. Behind walls.

 

Tue, 11/12/2013 - 19:27 | 4147942 MachoMan
MachoMan's picture

True, but the inventors probably didn't expect a material portion of passersby to ask where on the machine they're supposed to insert their dick.

Tue, 11/12/2013 - 18:24 | 4147664 hedgeless_horseman
hedgeless_horseman's picture

 

 

Jamba Juice makes money by selling the prepackaged, pre-blended smoothie ingredients to JambaGo vendors, like a soda maker selling syrup to the owner of a soda fountain.

Sounds interesting.  I think I will pass, thank you. 

I much prefer fresh-picked berries in double-cream from our family cow.  The texture is sublime.  Some may prefer to add a little blackberry liquor as well.  I doubt that machine offers this option.

Tue, 11/12/2013 - 18:41 | 4147720 prains
prains's picture

dang nab it! do you mean to say my revolutionary idea of McShitinYourMouth Drive Thru is gonna get beat to the punch by a damn juicing outfit !!!

 

back to rollin phatties I guess, excuse the pun

 

ask yourself a question folks!.... has somebody washed your Yams today?

Tue, 11/12/2013 - 18:39 | 4147756 ronaldawg
ronaldawg's picture

Don't we already have this?  It is called VENDING MACHINES.

I don't eat out of vending machines cause in my Catholic high school we did not have a cafeteria - only vending machines - I can't do that again.

Thu, 11/28/2013 - 17:52 | 4197704 Glasnost
Glasnost's picture

What I don't understand is.....where does the money to buy those things come from.

The Dutch economy is service based, so if you eliminate all the service workers through automated machines, where does your income for your company come from?  Air?  Idiots. 

Tue, 11/12/2013 - 17:56 | 4147592 Rock On Roger
Rock On Roger's picture

Amen. That machine dispenses poison.

I like your tubers.

 

Stack On

Tue, 11/12/2013 - 18:10 | 4147655 Ignatius
Ignatius's picture

Fuck factory food.

Fuck the complete dissassociation of people from the economy.

Tue, 11/12/2013 - 19:49 | 4148021 TheFourthStooge-ing
TheFourthStooge-ing's picture

Coming soon to McDonald's: the Vend-O-McMatic® Drive Thru, where you can order the new Shamrock Quarter-Pounder McSmoothie® and other new Happy McSmoothie Meal-Equivalent Drinks®.

You're lovin' it, dammit!

Tue, 11/12/2013 - 19:53 | 4148039 akak
akak's picture

I can't wait for the Mcdrive-thru bathrooms too.

 

Tue, 11/12/2013 - 20:18 | 4148135 Intoxicologist
Intoxicologist's picture

Where they wash all the potatoes?

Tue, 11/12/2013 - 20:45 | 4148225 akak
akak's picture

... of their US 'american' citizenism taint.

After that, why, they taste just like kitten!

Tue, 11/12/2013 - 21:00 | 4148273 TheFourthStooge-ing
TheFourthStooge-ing's picture

Alas, alas, plus another alas, facing choice of that durianity, somehow taste of kitten intrinsicately seems mildly less disgustingular than taste of taint. Still would need providement offuscationary tastings application the hot sauce judiciously.

Tue, 11/12/2013 - 18:12 | 4147662 Bangin7GramRocks
Bangin7GramRocks's picture

2000 whole dollars per machine per year! Give this CEO a big ass raise! He really does deserve to make a 1000 times his average workers salary. What a fucking genius! 

Tue, 11/12/2013 - 21:46 | 4148385 spdrdr
spdrdr's picture

'xactly what I was wondering.

How much do these machines cost, to manufacture and service?  (I'm not even talking about power or re-stocking, just the basic operation)

$2,000 net per year is fucking crazy!  

You'd get much more than that from a Space Invaders console - today, let alone 40 years ago!

What the fuck is the ROI??

 

 

 

Tue, 11/12/2013 - 18:14 | 4147673 El Vaquero
El Vaquero's picture

I'm not sure if it is a good idea to tell a married man that you like his tubers in a public forum.

Tue, 11/12/2013 - 19:50 | 4148032 A Nanny Moose
A Nanny Moose's picture

Jane, get me off this crazy thing!!

Tue, 11/12/2013 - 20:56 | 4148262 sgorem
sgorem's picture

you've got that right hedgeless. ain't technology great! Jamba's got a new app for that, "Fire Their Minimum Wage Asses!"...free download at ou812.com

Tue, 11/12/2013 - 23:11 | 4148591 sgorem
sgorem's picture

AND....................wtf! they'll be makin' moar money and bennies on welfare. that's the permanent New Normal!

Tue, 11/12/2013 - 18:20 | 4147695 Larry Dallas
Larry Dallas's picture

At least the machines won't give you attitude and look at you like your racist when you order. No judgment shopping.

"Let me axed you a question. Do you want Fries wid tat?"

Tue, 11/12/2013 - 21:45 | 4148378 mikeadamson
mikeadamson's picture

Gee, why on earth would they think you're racist?

Tue, 11/12/2013 - 17:47 | 4147562 NewAmericaNow
NewAmericaNow's picture

To Go? Don't let her get caught driving in Saudi Arabia or you'll have to bring her back for a full refund

Tue, 11/12/2013 - 17:48 | 4147565 LongBalls
LongBalls's picture

And those machines will accept food stamps I'm sure....

Tue, 11/12/2013 - 18:54 | 4147808 The Alarmist
The Alarmist's picture

No problemo!  Food Stamps became so much more universal when they morphed into the SNAP card.  Coincidence that Coke vending machines take "debit" cards these days?  

Tue, 11/12/2013 - 18:41 | 4147762 doctor10
doctor10's picture

Peasants are expensive to keep. In fact they might even blow up the central banks derivative house of cards.

Tue, 11/12/2013 - 17:39 | 4147528 Mike Hunt Hurts
Mike Hunt Hurts's picture

Stupid machine fucked up my order

Tue, 11/12/2013 - 17:42 | 4147543 TeamDepends
TeamDepends's picture

Just wait 'til the JambaGo self-serve machines form a union...

Tue, 11/12/2013 - 17:48 | 4147564 johnQpublic
johnQpublic's picture

and demand healthcare

 

seriously reminds me of the early star trek episodes though

funnier still...never have had a smothie made by someone who isnt me

didnt even know i could

still wont....no way they can use the fresh fruit i grow

Wed, 11/13/2013 - 00:02 | 4148759 Decolat
Decolat's picture

Does it spit in your food?

 

It better...

Tue, 11/12/2013 - 17:52 | 4147581 Mike Hunt Hurts
Mike Hunt Hurts's picture

Skynet Local 254 - on strike

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