THE FAST-FOOD KIOSKS ARE COMING, THE FAST-FOOD KIOSKS ARE COMING!
Posted by Tim Bryce on March 29, 2017
BRYCE ON TECHNOLOGY
– Get ready for major changes at the fast-food franchises.
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Back in the 1960’s, teens gravitated to drive-in restaurants with “carhops,” who delivered food to your car, sometimes on roller-skates. This all changed with the burger chains, yet young people still showed up for shakes, burgers and fries. When I lived in Chicago, there was a local McDonalds where you went to hang-out and be seen with your friends. It was one of the original McDonalds, complete with the big golden arches out front and the “number served” sign updated regularly. More than anything, it was a social venue which propelled the restaurant.
Such fast-food franchises have changed over the years and I’m not sure young people look upon it as the Baby Boomers did. Whereas such restaurants back then required a crew of people to operate it effectively, it is finally giving way to a hi-tech approach.
Robotic-like kiosks have been in the experimental stage since about 2006, but with the recent push to raise the minimum wage to $15/hour, the fast-food industry has accelerated its plans. Although many people embrace the idea of raising the minimum wage, industry executives realize there is limit to what the public will pay for service, hence the need to automate.
Today, virtually every major fast-food chain is either in the experimental stage or in the process of rolling out automation to speed up the processing of orders while minimizing the need for manual labor. This includes McDonalds, Burger King, Wendy’s, KFC, Taco Bell, Arby’s, Panera Bread, Starbucks, Pizza Hut and many more. Even my beloved white Castle, home of the original “sliders,” is embarking on such automation.
McDonalds recently reported they have implemented automation in nearly 2,600 of their restaurants around the world with hundreds more planned for 2017 in urban areas such as San Francisco, Boston, Chicago, D.C. and Seattle. Approximately 500 have already been implemented in Florida, New York, and Southern California.
Wendy’s has announced they will place kiosks in about 1,000 locations by the end of the year at a cost of about $15,000 for three kiosks, according to the Columbus Dispatch. This is cheap when compared to McDonalds where a single kiosk is said to cost between $50K-$60K. Even at this rate, a franchise can realize their return on investment in as little as two years based on the labor savings.
In China, a KFC restaurant is experimenting with a kiosk featuring facial recognition to predict a customer’s order. The company plans to roll out this technology to 5,000 stores throughout China. If successful, look for it to migrate to America.
Fast-food automation comes primarily in three forms:
1. Self-ordering – using touch screens, the customer can quickly make their selections, and tailor the product to their tastes. After watching a demonstration of this, it appears to be user friendly, but I still believe you can place an order faster with a human-being.
2. Order by App – using smart phones, you can quickly find a local franchise, and place an order ready for pickup.
3. Mobile payments – again, using a smart phone, you can pay by credit or debit card. McDonald’s claims “you can pay with your card at the kiosk or use mobile pay options like Apple or Android Pay. We’re even testing Google Hands Free payment options in the San Francisco Bay area.” I suspect PayPal is another option. The companies will still accept cash, which requires a human to process and make change, but the lion’s share of business will inevitably be conducted by smart phone.
There are two benefits related to fast-food automation, a reduction in labor costs and stimulating sales, particularly by young customers imbued with such technology. Older people may shy away from it.
The point is, through their protests, the “Fight for $15” activists are cutting off their noses to spite their faces. Even if they are successful, the pace of fast-food automation will accelerate, thereby reducing the number of employees. They may get their raise, but at a price of replacing workers with automation.
Like it or not, fast-food automation is here to stay and we will have to adapt to it. One thing is for sure, there won’t be any attractive “carhops.”
Also published in The Huffington Post.
Keep the Faith!
Note: All trademarks both marked and unmarked belong to their respective companies.
Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 40 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com
For Tim’s columns, see: timbryce.com
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Copyright © 2017 by Tim Bryce. All rights reserved.
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Tim Bryce said
A W.H. of Boulder, Colorado wrote…
Goody, I get to make a couple of observations about that article.
1. $15/hr for fast-food employees as a MINIMUM wage. There was a FORBES article recently which surveyed like 25 metropolitan areas for salary and attempted to define what “middle class” meant. They broke it down by a household of ONE, THREE, and FIVE (not sure why they didn’t do two – a married couple without children – or 4 – a married couple with the demographic standard two children, but hey, we can interpolate easily enough).
Denver, Colorado
Household of one: $25,196 to $75,587 (which, by the way, says that I – as a retiree – will be considered to be in the UPPER class based on income because I was able to save enough in my 401k to augment my social security income)
Household of two: $34,418 to $103,253
Household of three: $43,640 to $130,920
Household of four: $49,990 to $149,969 (this would apply to my daughter and son-in-law with their two children. And, he is a police officer, she is a medical assistant, and they struggle to pay for day care to allow my daughter to work. The cost for daycare is almost what her salary is, and they are hoping this next year when the oldest starts kindergarten, it will help. But, they also found out it will cost $300/month for full-day kindergarten – which is a bargain compared with the cost of day care.)
Household of five: $56,339 to $169,017
Now, what’s important about these particular numbers is that Denver is NOT the most expensive place to live on that list. It’s not the least expensive either. It’s somewhere near the middle of the range. But look what those numbers mean. If you use the industry standard (40 hours/week x 52 weeks per year = 2080 hours), you find that translates to like $12.11/hour for a single person at the bottom of the “middle class” ladder. At $75,587 – that would be $36.34/hour before you hit the “top” of that same ladder.
If you go to the household of four but then take into account that TWO people will be working (now you have to divide the income by 4160 instead), you get the lower rung of middle class earning $12.01/hr – recognizing that both probably aren’t making the same salary – that says one of them is making a lot more, the other isn’t even making minimum wage in a lot of places.
When you realize that fast food places (and a few other examples) are the STARTING point for people to work or they are places where people work PART-TIME in retirement or to supplement their incomes, it doesn’t really make much sense to pay them $15/hour to put them further up the “middle-class” ladder (basically, removing anyone below that level and compressing the “class” structure into two parts – middle and upper class.
$15/hr x 2080 hours/year = $31,200/yr – and of course, that doesn’t include benefits, insurance, taxes (but for the most part, people in the lower income brackets pay little if any income tax when all is said and done).
2. When I was in the navy, I used to design and field systems intended to replace a sailor who had to sit at a screen 8 hours a day in a darkened room. I was once told by a professor of mine that if I could design and field a system that would replace an E5 operator (middle level of experience) on a watch station (24/7/365 manning), and the cost for the system was less than 3x the cost of staffing that same position with a person, the navy would buy it. Why? Because, 3x meant they would amortize the cost in 3 years. But, here’s where people forget how much it really costs to man that position with a person. It’s not just ONE sailor. It’s really FIVE sailors. To work a 24 hour a day shift, you need 4 watch sections. 3 of the sections are working 8 hour days. The other section is “off duty” – meaning, it’s the equivalent of our “weekend” off from work. And you constantly rotate those sections so that no one person stays on days, no one on eves, no one on mids ALL the time. Oh, and you need a FIFTH body as “supernumerary” – in case of sickness, accident, or leave. That person is normally put on a day watch in an administrative capacity and fills in when needed. So, what we have is 5 E-5’s for 3 years. Back then, a typical junior E5 would make about $15,000/year. That’s $75k per year to staff the position with the lowest acceptable level of experience to keep things optimumly running. Then, multiply that by 3 years, and it’s $225k per system. Back in the 70’s, that was a pretty easy goal to hit. Oh, and we haven’t even talked about the need to have maintenance people available on that system either…which means basically, in the 1970’s and 1980’s if I could field a system to replace a single operator, I only needed to keep the costs PER SYSTEM to around $500k (remember, more experienced E5’s cost more). It was easy enough to do that. BUT, you also have to remember that there are SOME tasks that simply can’t be automated. I would not particularly want to see fast food robots preparing the food and kiosks ordering the food with NO human interaction as a safeguard. And, what do you do WHEN (not IF) a computer failure occurs?
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