June 21, 2004

McDonalds Kiosks

McDonald's making fast-food faster?

McDonald's making fast-food faster?

No. 1 burger chain tests self-serve kiosks in effort to improve service, lift revenue per customer.
June 18, 2004: 4:44 PM EDT

CHICAGO (Reuters) - McDonald's has eliminated the middle man standing between the fast food lover and his burger, with an advanced test of technology that promises to shorten lines and give consumers more control over ordering.

Outside Chicago in St. Charles, Illinois, longtime McDonald's Corp. (MCD: up $0.20 to $26.92, Research, Estimates) franchisee John Lardas has reconfigured his restaurant, replacing three ordering stations manned by employees at the front counter with one traditional station and four stand-alone computers, or kiosks.

"You see no lines because people are spreading themselves out," said Lardas, who estimates that 70 percent of customers now opt to use the technology.

McDonald's, which only recently admitted its service problems and vowed to fix them, is ironing the kinks out of technology some believe will transform fast food the way similar systems have revolutionized bank transactions and airport check-ins.

Each kiosk allows a customer to place an order directly with the kitchen, using a touch screen with pictures of food, English or Spanish text and verbal prompts.

Have a Big Mac the regular way with special sauce; customize it without cheese or pickles; or, if feeling particularly Atkins-friendly, lose the bun.

"Order accuracy is a common complaint in the fast-food industry -- people getting the wrong order or with something missing," said Robert Sandelman, an industry consultant in Orange County, California. The issue remains a top consumer concern in his firm's yearly industry survey, along with food taste and restaurant cleanliness.

That's partly because staffing restaurants with well-trained employees willing to work for low wages remains an increasing challenge for fast-food operators who run on tight margins and have seen the price of commodities like beef move steadily higher.

Once perfected, the technology will likely lead to shorter wait times, labor cost savings, and ultimately, higher average checks, analysts said.

"It's about time and lines," said Harry Balzer, vice president with food market research firm NPD Group Inc. "We are looking for the easiest way to feed ourselves."

Five other U.S. McDonald's in the Denver area are operating self-ordering kiosks. An earlier phase of the test included stores in Raleigh, North Carolina. Meanwhile, overseas McDonald's is testing similar systems in France, Australia and Japan.

"The customer perception is that it's a better experience," said Christa Small, the McDonald's director heading the test. "It's the perception that you have control over the process."

Small declined to discuss when the Oak Brook, Illinois, company would make a decision about implementing kiosks on a permanent basis, or how much they cost.

But the competition is heating up. Privately held Burger King Corp., McDonald's largest hamburger-making rival, is also testing kiosks in a handful of stores. A representative for the Miami company declined to provide additional details.

Ordering kiosks have already found a permanent home in convenience stores such as WaWa, an East Coast chain that lets customers use them to order deli sandwiches. Many groceries use similar technology to let customers handle their own checkout.

Having a machine consistently remember if you want french fries with your sandwich, as the McDonald's kiosks do, can boost the value of a transaction by 10 to 20 percent, said Kate Delhagen, a Forrester Research analyst who has studied kiosk technology.

She estimates that installing stations in a typical restaurant costs between $10,000 to $20,000 for the hardware -- with software, training and maintenance an additional expense.

Within a few years, benefits will outweigh those costs, Delhagen said. For instance, before an order is sent to the kitchen at the St. Charles' McDonald's, the computer verifies that it's correct, providing a rolling total, so virtually nothing is lost in translation.

Inserting a bill or credit card into the machine completes the process, and in about a minute, a server appears with food and change.

In the kid-friendly Play Place at the rear of the St. Charles store, where there are two additional kiosks, the process is slightly different. There the customer takes a number after placing an order; soon Happy Meals are delivered directly to the table, eliminating the burden of watching children while standing in line.

Lardas said he's not worried about the loss of the personal touch; he hasn't reduced the number of employees in his store, just reassigned them to other tasks such as delivering food. And they are trained to assist if someone struggles with the technology.

Customers like Tom Schwagart, a 61-year-old grandfather visiting the McDonald's with his granddaughter, said he's been converted. "I like it because I don't like to stand in line," he said.

McDonald's aims to make fast food faster - Jun. 18, 2004

Posted by Craig at June 21, 2004 02:13 PM