Automation arrives at restaurants (but don’t blame rising minimum wages)

McDonald's has joined the list of food chains looking to put more machines to work

McDonald's in Encinitas, Calif.
REUTERS/Mike Blake

McDonald's this week told financial analysts of its plans to install self-ordering kiosks and mobile ordering at its restaurants. It isn't the only food chain doing this.

The company that owns Chili's Grill & Bar also said this week it will complete a tablet ordering system rollout next month at its U.S. restaurants. Applebee's announced last December that it would deliver tablets to 1,800 restaurants this year.

The pace of self-ordering system deployments appears to be gaining speed. But there's a political element to this and it's best to address it quickly.

The move toward more automation comes at the same time pressure to raise minimum wages is growing. A Wall Street Journal editorial this week, "Minimum Wage Backfire," said that while it may be true for McDonald's to say that its tech plans will improve customer experience, the move is also "a convenient justify a reduction in the chain's global workforce."

The Journal faulted those who believe that raising fast food wages will boost stagnant incomes. "The result of their agitation will be more jobs for machines and fewer for the least skilled workers," it wrote.

The elimination of jobs because of automation will happen anyway. Gartner says software and robots will replace one third of all workers by 2025, and that includes many high-skilled jobs, too.

Automation is hardly new to retail. Banks rely on ATMs, and grocery stores, including Walmart, have deployed self-service checkouts. But McDonald's hasn't changed its basic system of taking orders since its founding in the 1950s, said Darren Tristano, executive vice president of Technomic, a research group focused on the restaurant industry.

The move to kiosk and mobile ordering, said Tristano, is happening because it will improve order accuracy, speed up service and has the potential of reducing labor cost, which can account for about 30% of costs. But automated self-service is a convenience that's now expected, particularly among younger customers, he said.

"It's keeping up with the times, and the (McDonald's) franchises are going to clamor for it," said Tristano, who said any labor savings is actually at the bottom of the list of reasons restaurants are putting in these self-service systems.

McDonald's is already deploying mobile ordering in other countries. In France, you can order a McDonald's hamburger from a mobile device, tablet or desktop and pick it up later at a restaurant, said Thomas Husson, a Forrester analyst in a report.

"By reducing the stress of the ordering, McDonald's has significantly increased the average revenue per order," wrote Husson of the experience in France.

Chili's has deployed some 45,000 tablets from Ziosk, which makes the system. Ziosk CEO Austen Mulinder says the tablets are used for ordering drinks, appetizers and desserts and for making payments, but they remain optional for customers. The waitstaff will take the first drink and entrée orders, which are often modified by people at the table.

Mulinder said there's no capital cost to installation, and the multi-year subscription price for the system is more than offset by increased revenues it generates.

The tablet also includes games and an opportunity for people to give feedback, and to join a loyalty program. That creates the potential for increased sales, because customers aren't necessarily waiting to catch an employee's attention to refill a drink. It also avoids the frustration of waiting for the check, said Mulinder.

"Restaurants want to speak the language of the millennials and the language of millennials is digital," said Mulinder.

Wyman Roberts, the CEO of Chili's parent company, Brinker International, spoke to financial analysts this week in a conference call about the new system. "We're excited about the potential this has to create a stronger connection and smarter interactivity between us and our guests," said Roberts, according to a transcript by Seeking Alpha.

Copyright © 2014 IDG Communications, Inc.

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