(Bill Peters) McDonald’s (MCD) CEO Steve Easterbrook said Thursday that self-ordering kiosks and other technology were unlikely to result in job cuts and were not “meant as a labor replacement,” even as higher wages prompt fast-food rival Wendy’s (WEN) to aggressively seek labor-saving technology.
Easterbrook’s response came at an occasionally tense company shareholder meeting, before which protesters staged demonstrations and demanded McDonald’s pay its employees more. He was addressing an attendee who asked the following question:
“With all the talk and all the protesters and the $15-an-hour wage, if that is mandated, if the government does raise the minimum wage, do you see McDonald’s substituting capital — having kiosks where people order, automatic pancake machines and things like that taking the place of workers where people will end up losing jobs because of the higher wages?”
Easterbrook said that he saw that technology complementing labor more than replacing it.
“If we were able to alternate certain non-value-added processes in the restaurant we’ll do that because it’s a smart thing to do,” he said. “But then that gives us more opportunity to bring that manpower front-of-house — we can offer better dining area experience and service experience. So I don’t see it being a risk to job elimination.”
Still, he said, the jobs themselves could be different.
“It may change the nature of the jobs in the restaurant, because frankly technology is something that our customers are embracing, whether it’s through their phone or whether through self-order kiosks — that is a societal trend,” he said. “We want to adapt to that, but it’s not actually meant as a labor replacement. We can just re-apportion that labor into more service-orientated roles.”
Easterbrook’s announcement follows Wendy’s plans to make kiosks available across its restaurants in the second half of this year, although franchisees don’t have to use them. Minimum wage hikes in some areas as well as efforts to attract stronger talent have pushed up Wendy’s labor costs, the company said this month on its first-quarter earnings call.
President Todd Penegor said then that “we’ll continue to invest in technology with things in the front of the house and consumer facing, like customer self-order kiosk, mobile order, mobile pay.”
McDonald’s is testing mobile ordering apps, something thatYum Brands‘ (YUM) Taco Bell, Starbucks (SBUX), Domino’s Pizza (DPZ) and others and others already are doing. New mobile payment services such as Apple (AAPL) Pay, Samsung Pay also are fueling the shift. Such mobile services also substitute for labor, though workers could be shifted elsewhere.
Along with higher wages, fast-food restaurants have been squeezed by competition both on value offerings and chains advertising better ingredients. April was a slow month for the restaurant business, possibly due to bad weather in some areas, the discounting and more tepid consumer sentiment, analysts suggest.
“In addition, we wonder if declining food at home prices have begun to weigh on restaurant demand,” RBC analyst David Palmer wrote in a research note last week. “For fast food, we believe recent weakness is increasing resolve to deploy value marketing this summer, which may increase risk of market share losses by those chains with limited marketing scale.”
McDonald’s shares closed up 0.4% on the stock market today. Starbucks edged up 0.25%, Domino’s added 1.4% and Apple added 0.8%. Wendy’s dipped 0.6% and Yum Brands fell 0.2%.