Filed under: Company News, McDonald’s, Market News, Restaurants, Investing
McDonald’s (MCD) is not in a good place these days, with sales slumping, quality concerns rising, and activists pushing for it to start paying its employees a living wage. It’s against this backdrop of McDespair that a radical tech-fueled test may be the ticket to giving customers and some — but not all — employees what they want.
The world’s largest burger chain is expanding a test that started in two stores in California’s Orange County where patrons could build customized gourmet burgers using tablets — but still heading to the cashier to ring up the sale. The test is expanding this month in geography — to two stores in San Diego — and in scope.
According to U-T San Diego, the new experience is upscale and convenient. Customers use the touch-screen devices to assemble gourmet burgers with 20 toppings like guacamole and garlic aioli and two roll choices (artisan or brioche). The cost? $5.49 plus tax. “Bacon, the only extra that costs extra, adds 80 cents,” U-T San Diego reported. But, wait, there’s more:
- The tablets now allow customers to scan credit and debit cards so orders are processed right away.
- Guests don’t have to wait by the counter. Employees bring orders to the table on metal baskets.
- Employees bus the table afterward.
In short, this tablet test finds McDonald’s behaving more like a fast-casual chain or gourmet burger shop than the struggling fast-food behemoth that it is today.
Take Two Tablets and Call Me in the Morning
Folks who want to order meals outside of the custom-built upscale sandwiches still have to hit up a cashier. However, it’s not much of a stretch to see these tablets eventually being able to handle the entire menu. A single person troubleshooting questions or tech issues can replace an army of cashiers. If McDonald’s is able to run efficiently with fewer employees, couldn’t it take these savings and give “Fight for $15” activists what they want: better wages for the folks whom they do keep around?
In its present state, McDonald’s can’t afford to pay $15 an hour without dramatically boosting its prices. However, the one-two punch of tablets that can give the chain the flexibility to reduce its staff while also encouraging customers to spend more could make McDonald’s the darling instead of the dog that it is in the eyes of the public.
McDonald’s would get some grief from the unions pushing for higher wages by scaling back on its staffing requirements, but automation is already taking place. McCafe smoothie orders are fulfilled at the touch of a button. Cups are put into a carousel that are filled with drive-thru soft drink orders. If McDonald’s could do more with less — and pay more along the way — the public would likely approve and applaud the process.
However, even if the automation push falls flat, it’s easy to see how tablets could get customers to spend more — another result that could give McDonald’s franchisees the leeway to reward their front lines without the potentially negative backlash of trimming its headcount.
McTech the Future
McDonald’s has become ground zero in the battle to increase wages in the fast-food industry. It’s the country’s largest burger chain, making it a logical poster child. It’s not entirely fair. As rich as McDonald’s may be, 80 percent of its restaurants are owned by independent franchisees that don’t have the legal flexibility in their current operations to roughly double starting wages.
However, if the tablets get folks to spend more and provide the means to lower optimal staff counts, it would be a real game changer for a company that needs to reinvent the rules. This will likely be the first year in over a decade that McDonald’s comparable-restaurant sales decline. Consumer polls are unflattering to the quality of McDonald’s food and its brand. If McDonald’s can lead the way to $15 at a time when competitors can’t, won’t it also help draw the industry’s best workers to McDonald’s? Won’t it help with retention? Won’t this buzz generate a more positive opinion of a company that’s already taking steps to improve the quality of its menu?
McDonald’s may not be a tech giant now, but a fleet of tablets can change that in some pretty dramatic ways.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends McDonald’s. Try any of our Foolish newsletter services free for 30 days. For a list of high-yielding dividend stocks like the 3.4 percent that McDonald’s is presently yielding, check out our free report.
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Source: Investing
