We are closing in on an answer.
A couple of questions I get asked the most are “Why has automation not arrived in restaurants?” and “When is it really going to get here?” As I ponder the automated kitchen caricature seen here, my answer is that automation will become more mainstream when the laws of supply and demand take their toll. What I mean is this will become a reality for the restaurant industry when the cost of labor and the cost of automation intersect.
And as the restaurant industry inches closer to paying a $15 per hour minimum wage, this intersection is getting closer.
Recently I read an article about the impact of the minimum wage increase in Seattle. As most articles, there were differing viewpoints about how the so-called fight for 15 will impact businesses.
Perhaps restaurant automation will arrive when the economists agree on the potential long-term economic impact of the minimum wage increase. A consensus could lead to restaurants taking a more proactive stance with respect to automation since business leaders will have more of an incentive to prepare for the future better. In the meantime, the opinions on how these wage increases will impact the restaurant industry remain mixed.
From where we sit, rising costs provide reason for restaurants to continue their quest to improve efficiency. It matters not whether the rising costs take the form of labor or food or any other expense. Anything that helps restaurants operate more efficiently is a good thing.
Can Technology Offset Rising Labor Costs?
Like most everyone else in the industry, though, I would like to have a better idea about the impact a higher minimum wage will have on restaurants over the long-term.
Technology, in this case automation, represents a very alluring option to help offset rising labor costs for a variety of reasons. It’s new. It’s different. It helps create that wow factor that guests love and positions a business as being leading edge. But it’s also important to realize that developing and implementing automation comes with a cost.
And other customer-driven forces continue to work against automation. Chief among these factors is providing guests the ability to customize their orders. Oftentimes, automation favors repeating the same task time and again with very little variation. This remains in stark contrast to what today’s foodservice customer expects. So, for automation to be successful in a foodservice application it must be elastic enough to provide flexibility and variety to guests.
For example, the assembly line worked wonders to facilitate high production of the same (or similar) types of automobiles and other durable goods. But when you add more and more variables into the equation, the assembly line struggles to keep up. One concept that I have worked with, Giardino Gourmet Salads, actually has more than a BILLION possible salad combinations. This number is daunting. This type of diversity reflects what guests want nowadays, so as a concept you have to deliver.
Can Automation Shrink?
Our collective vision of automation and robotics has always been on large-scale basis but with kitchens shrinking, perhaps this will never be the case. Will automation show up on a smaller scale? Well let’s take a look at how automation is already showing up in today’s restaurant industry.
In-store kiosks or smartphone ordering that allows customers to place their orders represents the biggest impact I have seen thus far. This is what I call indirect automation. This type of automation is nice, since aside from the investment in the software, the cost to the stores is small. Commercial foodservice operators that don’t already have this type of technology or are not planning to implement it in the near future are behind the eight ball.
Consider that automating the order taking and handling payment aspects of a transaction in quick-serve and fast-casual restaurants is equivalent to 20 percent to 25 percent of the total labor required to service guests. Do you think automating these tasks could be impactful? Me too.
In fact, two of the most successful companies in foodservice — Panera Bread and Domino’s Pizza— have embraced automation in big ways. Panera Bread reports 26 percent of its first quarter sales came from mobile ordering, the company’s website or an in-store kiosk. On an annualized basis, Panera Bread reports digital sales have hit $1 billion and could double by 2019. Panera Bread customers place 1.2 million digital orders per week, according to a company release. Perhaps this was factor made Panera Bread attractive to the company’s new owners.
And in its annual report to shareholders, Domino’s said more than half of its 2016 sales came via its digital platforms.
The financial success of these two companies in a challenging operating environment speaks for itself.
Automation can take the place of much simpler prep machines, or automated washers, or automated filtering, among many others. I would even consider automation to be value-added food products, where the supplier does the prep work that would otherwise need to be done at the unit level.
In my mind, anything that reduces the labor necessary at the store level can be categorized as automation, since the employee does not have to do it.
In addition, it probably helps the restaurants deliver a more consistent product and perhaps improve food safety, both hallmarks of automation. Yes, ordering pre-prepped ingredients may increase food costs, but as long as it delivers larger cost savings on the labor side, then this step improves unit economics.
Mankind has always been trying to automate. And restaurants are no different. In fact, here’s a link to a fully automated restaurant that was developed in the 60s. This example may make you think that the market may not have made much progress in automation since then. However, it may simply support the notion that the laws of supply and demand have not yet caught up with the need to automate. But as the minimum wage goes up, this gap will close and things will start to get really interesting.