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Kiosks won't save restaurant labor costs, at least not immediately

Consumers are slow to adapt to the new technology, so don’t expect quick improvement, says RB’s The Bottom Line.

The Bottom Line

I have a McDonald’s within 1 mile of my house, which makes me exactly like most Americans. It recently added kiosks, and so I stopped by on Monday when the chain rolled out its fresh-beef quarter-pound burgers nationwide.

For the most part, everything went smoothly: I ordered my meal, took a number, sat down and got my food within four minutes.

I then sat there for a relatively busy, 45-minute lunch and watched a parade of customers completely ignore the giant touchscreens with “ORDER HERE” in big letters, only to stand in line at the one order taker.

At most, people would look at the kiosks, scratch their heads and then do what they’ve done at McDonald’s for 60 years: order from a human being.

This is just one location, and that one location did not have an order helper who could have directed diners to those kiosks. On top of that, the kiosks were new to the restaurant. Customers likely didn’t know what to do with them.

In addition, McDonald’s has a high percentage of cash users, either because they have low incomes or they are kids without credit cards. Cash customers can use the kiosks, but they have to take their order to the counter, anyway.

But the story illustrates the short-term limits of self-order devices: Consumers can be slow to adapt to new technology. And that will limit their benefits.

Rather than help them keep labor costs lower, companies will have to staff as they always did until people see the kiosks’ benefits. Or, if the restaurants want customers to use the technology, they’re going to have to devote staff to helping them use the devices. So that means higher labor costs in the short term.

And this is a common theme. Earlier this year, Subway executives indicated they wouldn’t include kiosks in its new redesign because customers didn’t really use them: They frequently tried the kiosks only to go and order their sandwich they way they always did.

“They’ll play with the kiosk and then just go talk to staff members and order their sandwich, anyway,” Trevor Haynes, who is now interim CEO at the chain, said in January. “We have customers who come in, play with their order and then don’t complete it and go to the counter. It’s like a little gaming.”

Tabletop tablets, meanwhile, haven’t quite saved casual-dining chains, despite allegedly removing a “pain point.”

Coffee chains such as Starbucks, meanwhile, are finding there are limits to mobile ordering—namely, that there are only so many people who will put a restaurant app on their phone, regardless of the convenience it may offer.

Maybe the best example of the limits of technology is in the pizza business, where a tech-savvy chain such as Domino’s Pizza gets nearly two-thirds of its orders from digital channels. That means a third of consumers still order by phone, even though online ordering has been around for literally decades and is easier and less of a hassle.

Simple fact is, a lot of customers still prefer the phone, so Domino’s is taking steps to convert those customers into digital users, too, without converting them to a different system.

Kiosks have been held up as a way for restaurants to save on labor, potentially reducing the need for order takers while eliminating a pain point inside a location.

Slow consumer adoption, however, will mean that those labor savings won’t come anytime soon—if they come at all.

To be sure, consumer adoption should come over time as customers grow more accustomed to the presence of the kiosks. And McDonald’s has never really said they expect the devices to cut labor costs, only to improve efficiency and drive some initial sales inside the locations—in part because customers who do use the kiosks spend more when they are there.

There is little question that the restaurant of the future is changing quickly and adding technology faster than we can track. But that change is anything but swift, as the move to kiosks is proving.

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