McDonald's (NYSE:MCD) CEO Steve Easterbrook has said that the chain's automation efforts won't lead to it eliminating human workers.
That might be true in the short term, but ultimately, it makes no sense for the company to pay people to do what robots do better and -- after a big capital investment -- cheaper. That does not mean McDonald's will be eliminating all humans in its restaurants, but eventually, there will be fewer of them.
"It's cheaper to buy a $35,000 robotic arm than it is to hire an employee who's inefficient making $15 an hour bagging french fries," former McDonald's USA CEO Ed Rensi said in May on Fox Business Network's Mornings with Maria.
That sounds like a dire prediction, and it could be, but pretty much all of recorded history suggests it's going to happen. What Rensi said simply makes sense. A tablet can take your order better, faster, and with more accuracy than a human. The same is almost certainly true of producing fries, burgers, and the rest of the chain's fare.
While Easterbrook said at the McDonald's annual meeting in May that robots won't replace humans -- saying that McDonald's is a service business and "we will always have an important human element" -- that might not be out of benevolence or a commitment to maintaining a human workforce. Instead, he knows that the change won't be immediate, or even quick, so there's no point in riling up workers who may well not work for his company (or will be in non-menial jobs) by the time they do.
Job markets change
Technology replacing people has been a fact of life since humanity moved beyond living in caves. A man with a hammer can do the work of multiple men with rocks while a man with a nail gun can replace a whole bunch of hammer users. We no longer have phone operators, elevator operators, and even most of our frozen yogurt dispensing has been turned over to machines. We've limited the amount of human toll takers, replaced some bank tellers with ATMs, and have cut human labor everywhere from factories to kitchens.
Changes in some of those fields were lamented, even fought, but the reality is that progress happens. Easterbrook even noted in the company's Q3 earnings call, which was transcribed by Seeking Alpha (registration required), that McDonald's has modernized many of its stores outside the U.S.
"In Canada, we're engaging with customers in simpler, less stressful ways, offering them more choices in how they order or pay," he said. "We now have dual-point service and self-order kiosks in almost 90% of our traditional restaurants. In addition, we're taking steps to redefine hospitality on both sides of the counter with dedicated guest experience leaders in all of Canada's traditional restaurants."
But self-ordering kiosks will mean a need for fewer employees, just like the automated checkout lines in a grocery store, where technology allows one employee to oversee many stations, arguably while offering better service.
The robots are coming
Starbucks (NASDAQ: SBUX) has shown that the first wave of adding technology -- in its case mobile order-taking and payment -- does not always mean fewer workers. The coffee chain has been able to shift labor from order-taking into production, allowing stores to become more efficient given the limited space behind its counters.
It's possible that a faster, more efficient McDonald's will, at first, let the company grow demand. That would simply shift worker demand rather than eliminate it. Ultimately though, a robot can likely make McNuggets, fries, and Big Macs better and cheaper than a person.
That's bad for the people doing those jobs, but you can't protect fast-food workers from technology any more than you could phone operators or toll takers. While it's reasonable to think McDonald's will have humans in customer-facing jobs, it's also logical to expect the chain -- and many others -- to use robots or other technology in areas where that makes sense.
Automation, after the initial capital investment, can lower costs and raise profits for McDonald's. It can also let one location serve more people, allowing for rises in same-store sales that would be difficult when relying on human workers solely. The robots are coming, and they will take jobs, just as new technologies have since pretty much the day the wheel was invented.
Daniel Kline has no position in any stocks mentioned. He has never had a Big Mac or a Whopper. The Motley Fool owns shares of and recommends SBUX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.