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McDonald's DIY Plan to Boost Sales

By Rich Duprey - Jun 22, 2018 at 3:00PM

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Increased automation should help the burger chain's long-term growth plans.

McDonald's (MCD 2.14%) is hastening the rollout of self-ordering kiosks to its U.S. restaurants in a bid to quickly boost sales and profits. Having discovered that when customers take responsibility for their own orders they tend to order more, the fast-food chain is quickly upgrading 1,000 restaurants every quarter for the next two years to add the kiosks to the stores.

Rise of the machines

The burger shop has toyed with self-serve before when it introduced the "Create Your Taste" kiosks that allowed customers to make high-end burgers, back when the chain thought it could remake itself into a fast-casual restaurant. It ended the experiment after a year, but the labor-saving devices were never fully abandoned.

McDonald's self-serve kiosks in a restaurant

Image source: Zivelo.

Many of McDonald's international restaurants have them, with Canada, the U.K., and Australia fully converted to the new system, and the chain is finally bringing them to its U.S. stores. The self-service kiosks let customers view the menu, customize their order, and even ask for table service. McDonald's expects over half of its 14,000 U.S. restaurants to have the kiosks installed by the end of 2018.

Earlier this year, CEO Steve Easterbrook said customers prefer the new McDonald's and have rewarded them "with more frequent visits and they're spending more on average when they do." Its earnings results seem to bear this out.

Come in and sit awhile

McDonald's first-quarter earnings showed that while U.S. restaurants saw a 2.9% rise in comparable-store sales, everywhere else enjoyed much higher growth. International lead markets, which includes countries like the U.K. and Germany, saw a 7.8% gain, while high-growth markets such as China, Russia, and Italy saw comps rise 4.7%. Foundational markets like Japan and Brazil witnessed a jump of 8.7%. Moreover, global store traffic was 0.8% higher, whereas U.S. traffic fell.

As Easterbrook said recently, "What we're finding is when people dwell more, they select more."

That, of course, is the reason the burger chain is installing the kiosks at such a rapid pace. It has committed to spending $2.4 billion this year on capital improvements, $1.5 billion of which will be spent in the U.S.

It needs to get its U.S. stores growing sales more quickly and bringing in more customers, though it also makes some of its current workforce more superfluous. McDonald's hasn't said how many cashiers the kiosks are replacing, but notes that some of them are being transitioned to new roles, like table service.

Man-made situation

Although McDonald's has said labor costs are a secondary consideration in its decision, restaurant margins in the first quarter slipped in the U.S. due to higher labor and commodity costs. A push for a $15 federal minimum wage along with states raising their minimums will only accelerate the introduction of these devices into restaurants.

Wendy's, for example, is committed to rolling out more self-serve kiosks to its restaurants beyond the few hundred it currently has installed, with CEO Todd Penegor agreeing they increase sales as well as customer satisfaction. Burger King has added them as well.

With additional technology enhancements that McDonald's is introducing like mobile ordering, the future of the burger giant looks more like one that you will be able to take into your own hands.

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