Freshii’s ‘virtual tellers’ earn $3.75 an hour and have been called ‘outrageous’; now the founder of the chain wants to go global.

It started as an experiment, designed to solve the staffing shortage at Freshii.

Last year, amid the harsh business restrictions of COVID-19, core members of Freshii’s management team, including founder and then-CEO Matthew Corrin, began quietly testing software called “Percy,” a device of video calls connected to cash registers in selected franchise locations. .

The software was created to connect Freshii users with cheap outsourced workers in countries thousands of miles away. The idea, the creators said, was to help franchise owners reduce labor costs and keep their doors open in case local staff get sick.

The pilot project went relatively unnoticed until April, when Percy’s business model drew intense criticism from labor organizers and top politicians after the Star revealed that some of those “virtual ATMs,” based in countries like Nicaragua, earn $ 3.75 (US) per hour. to perform the same tasks as Ontario workers who earn a minimum wage of $15 (CAD) per hour.

But now, despite the backlash, Percy’s founders say they hope to grow their startup into a multinational company with offices around the world, entirely independent of Freshii.

Corrin, one of Percy’s initial investors, officially became CEO of Percy after stepping down as CEO of Freshii in May. Angela Argo, former vice president of Freshii, left the fast food chain in June to join Percy along with Ali Aqueel, former senior product manager for Freshii, who left to join Percy in January.

In a recent interview with the Star, the co-founders said that Percy already has more than a dozen customers in North America, including several fast-food chains, and employs nearly 100 workers in Nicaragua, Pakistan and Bolivia.

“We are growing rapidly,” Argo said.

Addressing criticism leveled at Percy’s business model, Argo told Star that the software is meant to offer a solution to the chronic labor shortage facing Canada’s service industry without resorting entirely to automation.

“The pandemic created this mass exodus of workers in the restaurant industry…it got us to start thinking about what roles in a restaurant can be done without the physical presence of a human being. How can a restaurant owner capitalize on the virtual world? she said.

“We tried (Percy) at a few Freshii locations, and the response from restaurant owners, over and over again, was ‘this is a life saver.'”

The latest data from Statistics Canada shows that the food and hospitality sectors have lost approximately 171,300 workers since the pandemic began. In search of higher incomes, job security and a change of scenery, many shift workers took on new jobs in new industries and job openings in restaurants and fast food chains increased.

While many Canadian restaurants raised wages to attract workers during the pandemic, Argo says that Freshii’s franchise owners have struggled to raise wages while remaining profitable. With Percy’s software, franchise owners can count on a cheap and constant turnover of virtual tellers to take customer orders, regardless of the state of the national job market.

“Demand for fast food workers far outstrips supply right now. You can search Indeed.ca and you’ll see for yourself that everyone is offering more than minimum wage for restaurant workers, and they still can’t get staff,” Argo said.

For a restaurant owner in Ontario, the difference between paying the local minimum wage and $3.75 an hour in Nicaragua equates to hundreds of dollars in savings every day.

While those wages have drawn criticism, Argo notes that they are considerably higher than minimum wage standards in the countries where its workers are based. In Nicaragua, for example, the minimum wage is estimated at around $0.64 (US) per hour.

“This is not about replacing people or jobs. This is not about lower wages or working conditions. This is a labor shortage in the restaurant industry,” the company statement read. websitewhich was released around the time Star first reported on Percy.

But can the business withstand the backlash?

In April, Ontario Labor Minister Monte McNaughton called Percy’s virtual teller program “outrageous.”

“This… is completely moving in the wrong direction. I expect better from a Toronto-based company and I know customers will vote with their feet,” McNaughton said at the time.

in a tweetBritish Columbia Labor Minister Harry Bains said the company should “keep its pilot project outsourcing jobs outside of our province.”

Despite the resistance, most consumers eventually adjust to outsourcing and automation, says David Soberman, professor of marketing at the University of Toronto’s Rotman School of Management.

“If you want to know whether people will care in the long run, all you need to do is look at other sectors, whether it’s self-checkout systems in supermarkets, which have reduced the number of tellers; if it’s automated online ordering for takeout, which has reduced the number of people answering calls; whether it’s technical support centers in other parts of the world that we call on a daily basis,” Soberman said.

“While there will always be initial resistance to these innovations, times are changing. We don’t build cars by hand anymore, but I don’t see the Canadian Labor Congress protesting in front of every car plant because companies used to employ 10,000 workers and now they only need 1,500.”

Even before the pandemic began, Canadian retailers were experimenting with automation to help cut labor costs. Sobeys introduced “smart carts”: shopping carts that scan shoppers’ items, track bill totals, accept payments and let shoppers skip the checkout line. Late last year, Dark Horse Espresso opened a chain of “robo-cafes” in Toronto: stand-alone, touchless machines that occupy street-facing retail space and spit out lattes.

But some companies have relied heavily on outsourcing, rather than automation, to cut labor costs.

Wage differences between Canada and countries in the Global South are stark, making outsourced labor a difficult prospect to resist. While a call center worker in Ontario earns a minimum of $15 per hour, a worker in India earns an average of $0.35 (CAD) per hour, while a worker in the Philippines earns $1.65 per hour.

Retail analyst and author Bruce Winder said customers may resist facing this type of outsourcing while ordering lunch.

“It’s direct capitalism,” Winder said. “It reminds the customer, while ordering food, that the business is taking a living person and replacing it with a video of someone making much less money. As a customer, what do I get in return for this kind of efficiency?”

Percy’s founders also considered this. While testing the software, they placed virtual ATMs in a mix of Freshii locations: some in residential areas, some in office buildings, and some on college campuses. After the show sparked controversy in April, Argo said they also tested the software in the US, “one in a red state and one in a blue state,” to gauge differences in public reaction.

Finding none, the founders decided to go public in June.

“As of today, (Percy) is officially out of ‘stealth mode’ and already growing like crazy,” Argo announced. on LinkedIn last month.

“Oh yeah, and there has also been no shortage of media drama while we were in stealth mode. But we are ready to share our story head on.”

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