Category Archives: Minimum Wage kiosk

Feature – Serves you right!

Good article by Elliot Maras published last week regarding jobs and the fast food kiosk.

By now you’ve already heard it — the introduction of self-order restaurant kiosks is raising fears that kiosks are killing jobs. News media outlets and websites are perpetuating the story that restaurants want to replace workers with kiosks to protect their bottom lines.

What’s to be done about it? Plenty.

If ever there were a time for the kiosk industry to speak with a collective voice, that time is now.  Let’s start with a reality check.

Restaurants in the fast casual space have deployed tablets on the tables for years now.  Those kiosks have increased the spend and added efficiencies.  They have helped increase business and traffic flow.  Customers complete surveys and provide feedback.  E-Club enrollments.  Customers and businesses are very happy with these kiosks. Notables in this “fast casual” space are Chili’s, Paneras and Red Robin.

The restaurants have grown and prospered. Kitchens have been upgraded for more capacity, and more people have been employed. One industry insider says:

In a dozen years of providing self order kiosks to the restaurant industry, I haven’t seen a reduction in “total labor”. In many cases the order taking (and less frequently payment) is automated, but more orders are processed and the orders are larger. That means more labor is needed in the kitchen and customer service. It really is more of a shift that a reduction.

Drive-thru and outdoor ordering have been mainstays for kiosks/ordering stations, and we are seeing next generation touchscreen ordering from companies like NEXTEP and many others. Tommy Woycik of NEXTEP insight:

When we introduced self order at the drive thru, many restaurants that had closed their drive thrus were able to reopen them. Without the automation, the economics simply didn’t make sense (i.e. the drive thru was losing money). Closing the drive thru eliminated a job. Reopening with a kiosk actually added labor, but just enough to make the drive thru feasible.

As far as the economic circumstance consider what the investment Seeking Alpha site has to say — 

The restaurant industry can be difficult to navigate as food trends shift like the wind. Companies that operate a large number of locations should produce significant margins from size and scale. However, because the consumer can be fickle when it comes to eating out, margins and revenue can quickly turn south as volume slips from over extension, saturation, or just a change in diet. Restaurants need foot traffic, automobile access, or a consistent supply of guests like a hotel or resort. Because of this and other equipment requirements, restaurant leases are amongst some of the highest cost in the country. The reason for this is simple: Location. Location. Location.

Margins in a franchisee business, especially in low-cost fast food like a McDonalds or Burger King or Subway are tough adversaries.

Still, Americans are spending more at bars and restaurants than at grocery stores for the first time ever. $55B versus $53B according to Quartz report.

Click for full size

Fast Food Kiosk Coming Up Fast?

Recently we have seen the McDonalds announcement where, having done most of Europe, it is now looking to introduce self-ordering in the United States.

The CEO of CKE Andy Puzder, who has been a tireless opponent of minimum wage over the years, is now conveying the sense that kiosks are a result of minimum wage coming with a bit of “I told you so” for effect.

We have seen very few deployments in fast food and we won’t see significant minimum wage increases for several years.   The franchisee model and the type of food service may be more relevant factors.

Self-service arrived many years ago and is simply expanding given the increased connectivity and independence of those customers.  And the battle for new customers and most importantly retaining your current customers.

More Jobs – consider the jobs that automation supports. From basic metal fabrication, design, concierge, assistants, service techs, admins and yes, even, salespeople which we sometimes make fun of. They all support families and communities.

Automation creates a ton of jobs all the way across the food chain (so to speak) from metal fabricators, engineers, service techs, salespeople and many many more.  How many jobs does automated checkout at Walmart account for at NCR?  Tens of thousands.  Panera’s is a great example of modern thinking in the food industry.

How many jobs does Amazon and Bezos create, foster and necessitate? Those automation jobs in the warehouses (even with the automation) count.

And before we assign the entire industry to McDonalds/CKE/Darden/YUM/JackintheBox/Wendys, consider this quote from thebalance.com:

Even though it seems like the largest U.S. restaurant chains dominate the retail restaurant niche, only about 30% of America’s restaurants are part of a multi-unit chain, and only a fraction of those restaurant chains are publicly traded restaurant companies. The vast majority of U.S. retail diners are spending $1.9 billion in approximately one million restaurant locations owned by individual culinary entrepreneurs.”

For contrast consider the early theory that ATMs will eliminate bank employees.  Banks became smaller for sure but they built more of them, and more people were employed.

So What Does Kill Jobs  If Anything?

The statements that kiosks are killing jobs are more targeted at killing minimum wage politically.  That’s politics and those issues come and go as it serves someones interests.  You might also say China is killing jobs too, but it’s not really them that is killing jobs.

The tax advantages of imported goods may go away in a new “border adjustable” Republican plan (which companies like Walmart are not happy with).   Incentivising companies to build in the US will create jobs.

A labor shortage for skilled workers and craftsmen (higher middle class) is killing jobs.  People need to be trained. See Profoundly Disconnected and Mike Rowe which we support.

Fact is though Automation and connectivity are killing jobs.

Mr. Maras makes the good point that training and skilled workers is a fundamental issue.  Vocational schools which focus on job skills with computers and automation.  And why not take a page from the German labour playbook? Works for their labour force.

From the Wall Street Journal:

Other countries devote more resources than the U.S. to cushioning and retraining displaced workers. As a share of gross domestic product, Denmark spends 25 times as much, says Dr. Autor.

He offers another historical example. Near the end of the 19th century, America’s agricultural states faced the prospect of mass unemployment as farms automated. 

In response, they created the “high school movement,” which required everyone to stay in school until age 16. It was hugely expensive, both because of the new schools and teachers, but also because these young people could no longer work on the farm. But it better prepared workers for 20th century factory jobs and fueled the explosion in college attendance after World War II.

Self-service automation is energizing the job market and the general economy. The clear benefits will not go away and by implementing them properly businesses will be enabled to indeed grow to the next level, and even more people will be employed.

Amazon says it will create 100,000 jobs in U.S. by 2018

Amazon will create 100,000 full-time jobs in the United States with full benefits over the next 18 months, the tech giant announced in a statement Thursday.

The company says the positions are for workers across the country and across all skill and experience levels. Most of the positions will be at fulfillment centers, including new ones under construction in California, Florida, New Jersey and Texas.

“Innovation is one of our guiding principles at Amazon, and it’s created hundreds of thousands of American jobs,” said Amazon founder and CEO Jeff Bezos in a statement. “These jobs are not just in our Seattle headquarters or in Silicon Valley—they’re in our customer service network, fulfillment centers and other facilities in local communities throughout the country.”

Full article

Kiosk Industry Association

Followup:  One of the KI sponsors (Olea) contributed this — We’ve been following Mike Rowe of Dirty Jobs fame and he’s doing a lot to promote this sort of thing. Our thought was to create a foundation that starts with say a $5k scholarship or money to a school who’s got a great set of shop classes, or one that is building a shop class and is short on funds. We think we could get suppliers and other companies that we work with to also support our efforts to take that number higher over the years. Companies that we buy CNC equipment from or grinder belts those types of vendors.

Comments:

When we purchased a new press brake for $300k Amada the manufacturer told us that it had all sorts of software on it to make running it easier. Then we got it and found out you really needed very qualified operators at +$50k salary. We had to use 3 agencies to find two people and we offered a signing bonus, 1 week vacation and 75% company paid HMO. It took us months to find people.

A year or so later we had a conversation with them and they said it’s not something that is taught anywhere. You get on the job training and build up to it. So, we have a program here to teach anyone that wants to learn. Then Amada said they’ve been forced to figure out how to make the machines smarter so that anyone can run them. In exchange, you’ll get anyone to run the machine for $15 bucks an hour but why??? All because nobody is being trained to do these things. Businesses will adapt. Labor shortages and training is causing higher level middle class jobs to disappear just as fast or faster than innovation or anything else.

Then of course there’s China or other places with low labor costs causing havoc. Everyone pays the same price for a high-end CNC machine no matter where you are in the world. But the guy standing at the machine for a few bucks an hour vs. the guy making $26 per hour makes it tough for America to compete. Hence the US Kiosk industry needing to be very fast with custom designed goods that can be built and delivered before a Chinese box can be put on a boat for a 4-6 week journey.

 


Members  involved in Self-Service and this article.

Kiosks in Fast Food Creating Jobs and Increasing Revenues – Counterpoint

fastcasual-mcdonaldsKiosks killing jobs? Current events beg the question, but the facts say otherwise

Reprinted with permission Dec. 12, 2016 | by Elliot Maras

 
We at the Kiosk Industry Association have seen the news media running controversial headlines and opinion pieces by CEOs and ex-CEOs decrying the minimum wage increase and attributing loss of jobs to self-order.  Nothing could be farther from the truth. Here is a very nice piece from Fast Casual and Elliot Maras providing an accurate counterpoint. Thanks Elliot! — Editor

 
President-elect Donald Trump’s nomination of Andrew Pudzer as Secretary of Labor has helped push the “kiosk as restaurant job killer” theme into the nation’s consciousness. Pudzer, CEO of CKE Restaurants, is an advocate of automation.

The high-profile Pudzer nomination directs attention on automation as restaurant chains continue to introduce self-order kiosks to improve customer service. It comes on the heels of the “Fight for $15” wage campaign, which is placing unprecedented pressure on restaurants, particularly limited-service concepts.

Late last month, Ed Rensi, a former president and CEO of McDonald’s USA, penned a column in Forbes reminding readers that businesses in 2013 warned that the labor-union-led “Fight for $15” would force companies to replace full-serve employees with self-service alternatives.

Rensi’s main point was that businesses cannot absorb the higher wages that labor unions are advocating. But for people less familiar with the restaurant industry, the controversy over the $15 wage has muddled the full story about why foodservice chains are introducing self-service kiosks and what impact kiosks really have on restaurant labor.

Shortly after stories broke claiming McDonald’s was planning to roll out self-order kiosks in all of its 14,000 U.S. stores, The Gateway Pundit, a political website, carried the following headline: “Congrats Minimum Wage Protesters! McDonald’s Unveils Job-Replacing Self-Service Kiosks Nationwide.”

Both the restaurant industry and the kiosk industry now find themselves forced to defend their actions, which in reality are not killing jobs.

Kioskmarketplace in May reported that many restaurant chains were deploying kiosks before the $15-minimum wage push had gained steam. The Digital Screenmedia Association in 2011 reported that 21 percent of all QSRs were planning to introduce self-ordering kiosks. Also, in 2011, McDonald’s installed 840 kiosks across Europe with the goal of improving customer service.

Robotics researchers, restaurant executives, industrial engineers, consultants and economists have all said automation in the restaurant and fast-food sectors is not as simple as installing automatic tellers in banks or employing robots to assemble cars, according to Reuters.

Several chains are using kiosks and other technology that allow orders to be placed more rapidly and efficiently. Such efficiencies are serving to reallocate labor from the front to the back of the restaurant and in some cases, add jobs.

Labor moves to the back of the house

During McDonald’s shareholders meeting in May, company CEO Steve Easterbrook was asked if he expected to see kiosks taking the place of workers and causing people to lose their jobs. “It may change the nature of the jobs in the restaurant, because frankly technology is something that our customers are embracing,” Easterbrook said. “We can just reapportion that labor into more service orientated roles that we think the customer will benefit both ways.”

According to Panera Bread’s 2015 second quarter earnings call report, digital utilization efforts reduced order input labor but increased labor hours. Panera’s new business model, introduced in 2014, includes fast lane kiosks for dining in and ordering to go. Under this model, called Panera 2.0, the company actually added labor hours to meet the demand driven by multiple points of digital access and to ensure the ability to serve with greater accuracy in an environment where about 70 percent of orders are customized.

“This extra labor is necessary to drive a better guest experience consistent with operating clarity,” the earnings report said.

CEO Ron Shaich indicated as early as October 2014 that same-store sales from 2.0 stores outpaced traditional cafes, according to FastCasual.com. With 5 percent of all company sales placed through web, mobile or kiosk, Shaich said he was encouraged by the potential for the 2.0 model.

Saladworks, a fresh salad franchise chain that is also revamping its stores, does not expect labor hours to decline as it installs self-serve kiosks, according to Pat Sugrue, president and CEO.

“We didn’t do this for labor purposes; we did it for throughput and also capacity,” said Sugrue. “We’re going to have more people making salads. From an hours perspective, hours should go up, not go down.”

Sugrue pointed out that the kiosks could impact labor costs in a positive way for the company that is not synonymous with fewer hours worked.

Self-order kiosks change labor metrics

“If the sales go up faster than the net hours, then our labor as a percentage of sales will come down,” Sugrue said. “I think we’re going to add hours, but we should be able to increase throughput, and therefore, sales, and our labor percentage could come down.”

The objective of the kiosk is recognizing that how you want to be served and how I want to be served can be very different, Sugrue said.

“Increasingly, millennials and millennial-minded people don’t necessarily need that interaction with someone. For those who order off the kiosk, that will shorten the queue for those who don’t order off the kiosk, and it will provide better service to either group,” he said.

Self-Order Kiosks long-term impact not known

This is not to say that some jobs won’t be eliminated in some situations. The long-term ramifications of self-order kiosks are hard to determine, given the newness of self-order restaurant kiosks. Transitioning to kiosks will require companies to continue serving those customers who still want personal service.

“During slower times, brands still need the appropriate number of counter staff because the kiosk is a customer service option, not a requirement,” said Jodi Meryl Wallace, chief marketing officer at Acrelec America, a provider of customer experience technology. The company’s European operation has been involved in numerous restaurant kiosk deployments. “There’s also the need for front-of-house team members to assist customers who are new to using the kiosks,” Wallace said. “Because of kiosks, brands have begun to offer table service delivery of orders so staff is redirected to that task as well.

Because kiosks increase the speed at which orders are taken, brands have found that there’s an increased need for back-of-house/kitchen staff during peak periods when kiosks are used, Wallace said.

“Kiosks grow revenue by increasing throughput and by providing consumers with ‘order privacy’ which results in customers adding more side items, beverages and desserts, and more frequent upsizing of menu items,” she said.

Meeting customer needs

Ultimately, restaurants must meet expectations of all their customers, and 64 percent of millennials prefer self-service, according to an MHI Global report.

“Add to that kiosks can present a menu in multiple languages…and they’re fun to use,” Wallace said. “In France, 90 percent of consumers will use the kiosk option when it’s available. “Brands have reported that the average check size at the kiosk is 30 percent higher than at the counter.”

Reducing restaurant labor has a little bit to do with it, but it’s not the driving force, said Tom Radtke, vice president of sales at Keyser Retail Solutions, a retail technology integrator.

“You’re going to continue to have that kid at the counter,” he said. “There’s a group of people who won’t go to the kiosk.”

Radtke agrees with those who predict self-order kiosks will improve restaurant sales.

“The kiosk can lead you through the process and do suggestive selling, and that kiosk does it better than a 13-year old crew kid,” said Radtke. “Typically that (kiosk) order is a higher ring than it is at the counter.”

Another factor is that consumers today, especially millennials, are more appreciative of businesses that use technology. Hence, there is a customer perception factor involved.

Is a groundswell underway?

The controversy won’t be going away soon. If McDonald’s deploys kiosks nationally, it marks one of the country’s most significant restaurant kiosk developments.

Given how long limited-service chains have been testing kiosks, one can’t assume that McDonald’s action — regardless of what’s motivating it — signals a groundswell movement, however.

“If your customer doesn’t embrace it, you’ve got a huge expenditure for something that doesn’t have much of a payback,” said Radtke. “How do you incorporate another layer of ordering, transaction processing into the inside of the restaurant?”

He noted that it took a long time for bank customers to embrace ATMs.

Some observers do think a groundswell is in the making, however.

“The QSRs are starting to understand the ROI on this,” said Charles Lewis, director of business development at Elite Manufacturing, a kiosk hardware manufacturer.

The speed and order accuracy that kiosks deliver are creating higher profit margins, Lewis said.