The automated restaurant with minimal need for human interaction is quickly approaching, and McDonald's (NYSE:MCD) is increasingly at the forefront of the revolution, though it maintains that its technology investments are to help workers do their jobs, not get rid of them.
The latest innovations the burger giant is testing in its kitchens are robots to dunk fries, chicken nuggets, and fish patties into vats of oil, and voice-activated order-taking at its drive-thru windows. This technology joins self-order kiosks and mobile pay technology, as well as machine learning at the drive-thru to make order suggestions based on factors like time of day, weather, or menu items that are trending. About the only things left for humans to do may be handing over the orders to customers when they are done.
The robots are coming
As the economy has improved, unemployment remains at historic lows, and finding workers is more difficult. So supplanting them with automated systems becomes expedient. Moreover, with fast-food workers agitating for substantial hikes in pay for performing menial tasks, the human side of the equation becomes an expensive liability that a machine can quickly eliminate.
McDonald's isn't the only restaurant looking to supplement its human workforce. Wendy's is adding kiosks to its restaurants at a rate of 1,000 per quarter for the next two years, while Denny's, Domino's, and Dunkin' are all testing Alexa-style order-taking over the phone.
Independent chain CaliBurger, with locations in over a dozen countries, has even installed Flippy, a robot that can flip 2,000 burgers per day, in its Pasadena, California, store. Yum! Brands (NYSE:YUM) installed a robot to greet customers at one of its Pizza Huts in China.
Yum CEO Greg Creed has said he believes robots, technology, and artificial intelligence will eventually replace people in the restaurant industry, perhaps as soon as the mid-2020s.
Technology improves the bottom line
McDonald's and much of the remainder of the restaurant industry -- whether fast food or casual chains -- are confronting the challenge of fewer people eating out. Although McDonald's recorded higher same-store sales in the first quarter, it was from customers ordering more or paying higher prices, not from more people coming to its restaurants.
CEO Steve Easterbrook credited the automation at McDonald's with increasing average ticket order, noting that when people order their own food at a kiosk, they spend more. He said McDonald's has "created an ecosystem that more and more of our customers are using to order, pay, and receive" their food.
Moreover, it has suffered from lower profit margins over the past two years primarily because of lower productivity. Having given its employees big raises and after lifting the minimum wage, McDonald's is not getting the return it had hoped for from its workers.
It's downplaying the potential for needing fewer workers as it adds more technology. Mason Smoot, a senior executive for McDonald's strategic alignment, told The Wall Street Journal that automation wasn't intended to replace employees, saying, "The idea of technology is to help our crew -- to make it easier and better for them."
Automation is likely playing a role in menu simplification, too, as McDonald's recently eliminated a number of items from the late-night menu and did away with its premium Signature Crafted burgers. Items that require a lot of personalization and take more time to prepare result in slower order delivery at the drive-thru window. Automating the order-taking, and now also the cooking process, streamlines the workflow.
Want fries with your future?
McDonald's isn't going to completely eliminate its employees anytime soon; even the mid-2020s timetable Creed talked about seems a bit accelerated. But if nothing else, the rise of robots in the kitchen indicates machines will increasingly replace unskilled workers performing repetitive tasks.
As the chain that has relied upon such labor the most over its history, it is perhaps fitting for McDonald's to lead the industry by showing how technology can create the restaurant of the future.