The Coming Robot Invasion in Fast Food

102277923-IMG_3958.530x298I was driving up Woodside Road last week and the KFC store had a huge “Hiring!” banner hanging on the front of the outlet. This caught my attention for two reasons.

It’s well established that cost of living on the Peninsula is not amenable to the income generated by low skilled, fast food work. It just isn’t and raising the minimum wage or whatever you want to call it isn’t going to make a difference. As a result, few people want to work these jobs. How can you blame them if flipping burgers and banging on a cash register all day isn’t providing an income that makes it possible to cover the basics?

It used to be that fast food was a job that kids filled in their off hours or during summer, it is not a career. Today’s young people have many competing demands on their time, from school to sports to activities that they are expected to participate in order to make them competitive for college admissions. There is also a youth entitlement factor that comes into play in wealthy communities. However, in my conversations with small business owners the number one problem with hiring teens is that they cannot commit to the time that is required to hold down a job.

Today I read an interesting piece on McDonald’s:

“For example, labor needed to run stores during lunch hour,” one franchisee wrote. “Our competitors have 6-8 people to run close to the same volume that we need 20-25 people.

It’s a perfect storm of changing consumer tastes, poor brand management, and food quality hitting McDonald’s at the moment. If we throw in labor efficiency, we may have hit the tipping point that results in an unsalvagable business. It is this last issue that is most interesting to me.

robot-fast-food.0.0There is no reason at all why fast food restaurants could not be staffed primarily by robots. I’m not talking about cute humanoids delivering food to tables but rather the heavy lifting part of fast food… the kitchen.

Fast food is designed to be repeatable in preparation and presentation, a perfect scenario for robotics. Fast, efficient, and consistent preparation of food can be accomplished with sensor heavy automation that manages food quality, consistency, and safety far better than humans can at the pace that is required in a fast food process. The novelty factor of automation would soon give way to a preference in much the same way that other businesses have used automation for competitive advantage.

robot-restaurant-3.0If you carry this forward, the interesting thing to consider is how automation informs the fast/casual dining user experience from a design standpoint. Automation completely changes how a kitchen would be laid out, how logistics are managed and even how we use technology to interface with the front end processes as a customer. A maps interface on your phone could now include order entry while driving and beacons could interact with me while en route and in the restaurant itself. It’s pretty exciting to think how everything changes as a result of robotics in the fast food process.

I will close by saying that for McDonald’s these issues cannot be tinkered with. Re-establishing leadership will require bold strategies that remake the entire fast food experience, not just the McDonald’s brand experience. Automation won’t address the menu issues they have, but it will address the labor issues that are plaguing the franchise model. They could start incrementally and insert automation in the kitchen but they also need to lay out a vision for the total experience they are designing to.

Put Down the #Hashtag Campaign

McDonald’s recently had to endure the ignominy of a Twitter hashtag campaign that was hijacked for the purpose of highlighting what people don’t like about the Golden Arches. The #McDStories campaign blew up and even after McDonald’s tried to shut it down the hashtag lived on for days.

Today we have RIM, the company that can do no right… #BeBold is proving to be yet another lesson in why your company should not try to co-opt Twitter in an organized fashion unless you are absolutely certain that people love your brand.

RIM has denied that this is an ad campaign in a blog post that features a string of less than encouraging comments… which will be my next blog post, titled “turn off commenting if people don’t love your brand and you don’t care”.

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A Tale of Two Companies

McDonald’s kicked ass last year and all indicators are pointing to another solid performance this year. The analysis that people just want cheap food is wrong though, people want value, which is a lot more complex than just having a low price tag, and McDonald’s delivers it in spades. The Mini Meals menu items that they are running right now are about as good as it gets for a full meal in a reduced portion size for $3.

US fast-food giant McDonald’s said Monday its 2008 net profit soared 80 percent from a year, lifted by growing demand from consumers seeking low-cost meals in a deepening global recession.

[From McDonald’s posts sizzling 80% profit rise in 2008]

The team at McDonald’s read the cards correctly and put in place several initiatives that are paying returns, the value menu being just one of them. They embarked on an ambitious program to renovate retail stores, which feature comfortable sitting areas, televisions, and a new color palette that is pleasing and warm. New menu items like salads and chicken sandwiches satisfy a broad range of tastes and desires.

On the coffee front they, like Dunkin Donuts, doubled down on plain old drip coffee while adding espresso drinks, which put them squarely in competition with Starbucks, although with a far better array of assets to compete with then Starbucks could muster. In retrospect I think it’s fair to say that drip coffee is a bigger sales driver than many observers would suggest and it is most certainly the case that the quality of the coffee is far more important than other attributes… my purchase decision is not based on whether it’s fair trade or not, but how it tastes and Starbucks drip coffee just doesn’t taste that good.

Starbucks announced that they are making another 1,000 job cuts. This is a classic example of a company that lost it’s way by forgetting that the core competency they had to deliver on was good coffee and not just a lifestyle brand. Starbucks rather spectacularly miscalculated that people went to Starbucks for the atmosphere and the lifestyle brand could be leveraged for (bad) food, music, hardware and appliances, and even extended to the grocery store shelves. As it turned out, Starbucks is one of those disposable brands that you can do without.

On top of the dilution that occurred as they expanded into (bad) food and mediocre baked goods, the retail stores started to look dated and tired. As I wrote above, Starbucks lost their way and with so many things going wrong for them at the moment it is difficult to imagine a scenario where they emerge intact.

Their stock has lost $21b of market cap in a few short years, which puts massive pressure on employee morale, among other things, and their balance sheet is not particularly strong. What is most troubling is their cash flow, which is negative and largely driven by necessary capital expenditures. It’s hard to speculate on whether or not they would be an acquisition target; while the vast majority of the stock is held by institutional investors it really comes down to who would acquire them in this environment with the problems they are confronting.

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