Daily Archives: March 4, 2017

As one of the world's largest employers, McDonald's(NYSE: MCD) often finds itself at the center of debates about wages and the potential effects of automation. Rising labor costs pose a threat to the company and its franchisees, and the scale is starting to tip in favor of developing technology being cost-effective enough to replace human jobs.

The restaurant chain's new automation push is still in its early stages and can be counted on as a source of controversy in the years to come, but the effects of the trend stand to create long-term tailwinds for McDonald's and its investors.

Image source: McDonald's.

McDonald's is in the process of bringing self-order kiosks to all of its locations, and this initiative, along with the rollout of mobile-based ordering and payment, presents a way to improve functions and efficiency throughout the chain. Perceivedquality of service has been an issue for the company, and reducing employee-customer interaction has the potential to relieve friction and free up employees to perform other tasks. Studies and customer feedback have also indicated that a substantial portion of the millennial generation prefers to bypass human interaction when placing orders, so the new initiatives could help to ingratiate Mickey D's with one of its most crucial age demographics.

The surge in kiosk and mobile adoption is occurring industrywide and points to technology that's becoming increasingly attractive. Wendy's (NASDAQ: WEN)recently announced that it will add self-ordering stations at 1,000 of its restaurants by the end of 2017, and Panera Bread plans to have kiosks at all of its locations within the next several years. Other competitors, including Burger King, CKE Restaurants, and Tim Hortons are also transitioning to automated ordering.

McDonald's hasn't given much color on the expenses of adding self-order stations, but comments from Wendy's management could provide some insight. Wendy's Chief Information Officer David Trimm has indicated that franchisees will pay roughly $15,000 for three ordering kiosks, and he anticipates that it will take less than two years for the benefits created by self-ordering kiosks to offset the investment. The timeline to break even is probably similar for McDonald's franchisees, and the benefits of kiosks will likely become more pronounced with time.

Shifting to this new technology requires that stores continue to employ cashiers to assist with the new process and cater to customers who prefer traditional service. But the need for these roles should fall as kiosks become the norm, leaving employees free to take on other roles. Kiosks have already freed up some McDonald's staff to provide table service, and the company is testing curbside delivery in conjunction with mobile ordering and payment.

Automated ordering also means that more workers should be available for the kitchen, helping to address franchisee concerns about increasingly complicated menus and challenges related to customization.CEO Steve Easterbrook believes that the perception of time constraints can make ordering at McDonald's stressful and that this issue can be alleviated through the company's new investments. He has also indicated that the additional time to peruse the menu encourages customization and premium sales, generating higher average spending per consumer.

Payscale lists the median wage for an American fast food worker at $8.24 per hour, a far cry from the $15 per hour benchmark that many groups are calling for. With labor often making up 20% or more of costs for this industry, sizable increases to payroll can reasonably be expected to be passed onto consumers. That presents a major problem for value-focused restaurants like McDonald's.

In the U.S., the fast food chain is struggling with declining traffic but has managed to offset this trend by increasing the average spending per check. The extent to which the company can continue to raise prices is limited, however.McDonald's thrives by offering low-cost food options -- a model that makes it very sensitive to increasing expenses. While food and materials may fall mostly outside the company's control, it will enjoy increasing flexibility with labor thanks to the automation trend.

Easterbrook has been careful when commenting on the likelihood of new technologies that will eliminate jobs, but competitors including Wendy's and CKE Restaurants have directly linked their respective automation efforts to rising labor costs, touting the benefits of smaller in-store headcounts. Talking about replacing workers with technology might not be politically expedient for McDonald's at the moment, but a pared-down workforce is almost certainly a desirable outcome for the company -- and one it is certain to explore going forward.

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McDonald's Automation Push Is Great News for Investors | Business ... - Madison.com

Stakeholders were presented with a comprehensive roadmap of the automation system

State minister for information chairs the stakeholders meeting on Automation System of Audit Bureau circulation in Islamabad. PHOTO: PRESS RELEASE

Collective progress is contingent upon adopting breakthrough technology leading to creating pathways to transparency and efficiency, said State Minister for Information Marriyum Aurangzeb on Friday.

The minister stated this while overseeing the new media initiative in the first consultation session with the stakeholders on Automation System of Audit Bureau of Circulation (ABC) in Islamabad.

She told the participants that media and government are aligned in exploring potential proposals and creative ideas that enable greater progress and prosperity. Marriyum further stated that it was the need of the hour to introduce modern technology which aims for higher automation and computerisation of ABC.

The stakeholders, during the meeting, were presented with a comprehensive roadmap of the automation system of ABC in collaboration with Punjab Information Technology Board.

The stakeholder meeting was attended by the principal information officer of the press information department, director general internal publicity wing at the information ministry, director audit bureau of circulation, secretary information Sindh, Secretary Information Coordination Gilgit-Baltistan, Secretary Information K-P, Director Headquarter Information Department,Punjab and President APNS, General Secretary CPNE Aijaz ul Haq and senior officials of the ministry.

Published in The Express Tribune, March 4th, 2017.

Excerpt from:

New media initiative: Marriyum attends session on ABC automation - The Express Tribune

Wendy's Co., home of the old-fashioned burger, is serving up something cutting-edge: self-service ordering kiosks.

The Dublin, Ohio-based fast-food company is adding machines to at least 1,000 restaurants, or about 15% of its stores, by the end of the year. Wendy's began installing these kiosks last year, enabling diners to order without help from behind-the-counter workers.

Wendys is joining other eateries that are marching toward automation for at least someof the dining experience.

Panera Bread has said it plans to add touch-screen kiosks to all its restaurants within a few years. McDonald's also aims to roll out kiosks where diners can customize their burgers at all its U.S. locations. One cafe in San Francisco serves coffee brewed up by a robotic barista.

These kinds of self-serve machines and related technology could drastically change the way the $230-billion fast-food industry operates, analysts said. With minimum wages rising to $15 in some parts of the country, including California many chains are looking at ways to slash labor costs.

Lots of restaurants, not just fast-food chains, are really trying to mitigate the costs of higher wages, said Lauren Hallow, concepts analyst at Technomic, a restaurant market research firm.

Some eateries, for instance, are offering incentives to encourage mobile ordering so that lines are shorter with apps with special discounts and the chance to jump the line when picking up orders.

At Wendy's, Chief Information Officer David Trimm said that customers and franchisees have taken a liking to the kiosks.

You will see customers deliberately going to those kiosks directly, bypassing lines," Trimm said during the companys investor day Feb. 16. Some customers clearly prefer to use the kiosks.

Theres a huge amount of demand among franchisees, who will shell out about $15,000 for three kiosks, Trimm said. Wendys has estimated that the cost will be recouped in less than two years, he said.

These kinds of kiosks are not new but are gaining traction in restaurants becausediners have finally been groomed by the rise of online and mobile ordering to embrace the technology.

Young diners, especially, find interacting with a machine often easier than dealing with human workers. More than40% of millennials said they would use kiosks in a restaurant, compared with nearly 30% of all customers, a recent Technomic survey found.

Young customers like to control the whole ordering process," Hallow said. They have the chance to go quickly if they want to, or they can linger and see what the choices are without a cashier waiting.

In the long term, many chains are looking toward kiosks as a way to reduce their employee headcount, especially as wages rise.

Worker advocates have long been skeptical of automation in the fast-food industry.

If fast-food companies could replace us with machines, they would have done it already, Anggie Godoy, a leader in the Fight for $15 movement in Los Angeles, said in a statement last November. The fact is, we are in the service business and fast-food restaurants are always going to need good workers.

But not every restaurantis looking to replace theworkforce with machines at least not immediately.

Panera Bread, for example, has increased hours for employees at some locations to service the higher number of orders that come in through self-serve kiosks, said Nick Setyan, senior vice president of restaurants equity research at Wedbush Securities.

They just had too many people in line and they felt they were losing transactions because they just didn't have enough room to process orders in a reasonable amount of time, Setyan said. With the uptick in orders after the kiosks were installed, Panera Bread upped man hours in the kitchen to deal with the backlog.

For Wendys, kiosks are part of an overall move into automation that could cut labor costs, said Robert Wright, chief operations officer. He called 2016 a tough" year, with wages rising 5% compared with 2015.

Supervisors could use automation to take food temperatures and do other duties, Wright said.

There are repetitive production tasks that are in Wendy's restaurants that aren't core to the things that customer loves the most, he said.

That would give a boost to Wendy's, which has proved more adept than many fast-food rivals at navigating changing consumer tastes.

In mid-February, the chain reported its 16th straight quarter of increasing sales for restaurants open at least 15 months. It reported falling sales and profit overall, but that was mostly due to a strategic decision to sell off the vast majority of its company-owned stores a plan Wendy's completed in the fourth quarter.

The companys stock is up nearly 46% in the last year, and it recently announced the shareholder-pleasing moves of boosting its quarterly dividend to 7 cents a share, up half a penny, and authorizing a $150-million stock buyback.

shan.li@latimes.com

Follow Shan on Twitter @ByShanLi

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