McDonald’s has made a number of investments in automation and looked at robotics. CEO Chris Kempczinski said the economics of automation “don’t pencil out.”/Photo by Jonathan Maze.
Chris Kempczinski, the CEO of McDonald’s, has bad news for restaurant operators who believe automation will be their labor savior.
“There’s a lot of interest around what you can do from an automation standpoint,” he said on the company’s second-quarter earnings call on Tuesday. “We’ve spent a lot of money, effort, looking at this. There is not going to be a silver bullet that goes and addresses this for the industry.”
Robotics, he said, are good at “garnering headlines,” but “it’s not practical in the vast majority of restaurants.”
“The economics don’t pencil out,” he said.
Automating restaurants is easier said than done and isn’t simply a matter of buying a few robots and some artificial intelligence software.
What’s more, many restaurants weren’t built for that sort of thing. “You don’t necessarily have the footprint,” Kempczinski said. “And there’s a lot of infrastructure investments that you need to do around your utilities, around your HVAC systems. You’re not going to see that as a broad-based solution anytime soon.”
Add those costs in, and there aren’t enough labor savings to justify the investment.
Robotics and artificial intelligence have been all the rage in the industry over the past couple of years, as operators see them as a potential solution to their labor woes. Restaurants’ wage rates are up in the double digits this year. And many operators can’t find enough workers to staff their locations.
More restaurants are adding technology such as AI voice ordering in drive-thrus, robotic french fry makers and even robot waiters.
And yet, the delivery service DoorDash shut down the automated Sally the salad robot.
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McDonald’s, meanwhile, made substantial investments in various technologies, only to later sell them off. The company sold Dynamic Yield to MasterCard for $271 million this year, just two years after buying the Israeli company. Dynamic Yield hasn’t quite had the sales impact the company had hoped from a business that automates suggestive selling.
That deal followed an earlier sale of Apprente, an automated voice ordering company, to IBM—similarly, two years after acquiring the business.
McDonald’s has a lot of restaurants and a lot of customers at each one of the restaurants, along with resources to invest in ideas like the aforementioned technology companies. It also has considerable incentive to add this kind of technology, as it would potentially enable franchisees to get by with fewer workers, which could reduce store closures or service reductions due to labor challenges, which could increase sales.
It is therefore notable that the chief executive of the world’s largest restaurant brand doesn’t believe the economics for such technologies “pencil out,” at least not yet.
To be sure, Kempczinski does believe there are some things companies can do to save on labor, such as with the use of data and scheduling software, for instance.
“You’re not going to see robots in the restaurant,” he said. “We’ve got to get after this the old-fashioned way, which is just making sure we’re a great employer and offering our crew a great experience when they come into the restaurant.”
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