They’re popping the champagne over at McDonald’s HQ this month and they have every reason to do so. Wall Street analysts have increased their projections for the fast food giant’s performance on the stock market this year in a big way. Their estimated target share price has been bumped up by nearly 20% and the current stock price is surging in response. And what was the cause of this optimism? Some new secret sauce recipe for the Big Mac? Making the McRib permanent?
Nope. It was all because of their next round of automation being announced, with ordering kiosks and mobile ordering coming to thousands of stores over the summer. (CNBC)
McDonald’s shares rallied 26 percent this year through Monday compared to the S&P 500’s 10 percent return.
Andrew Charles from Cowen cited plans for the restaurant chain to roll out mobile ordering across 14,000 U.S. locations by the end of 2017. The technology upgrades, part of what McDonald’s calls “Experience of the Future,” includes digital ordering kiosks that will be offered in 2,500 restaurants by the end of the year and table delivery.
“MCD is cultivating a digital platform through mobile ordering and Experience of the Future (EOTF), an in-store technological overhaul most conspicuous through kiosk ordering and table delivery,” Charles wrote in a note to clients Tuesday. “Our analysis suggests efforts should bear fruit in 2018 with a combined 130 bps [basis points] contribution to U.S. comps [comparable sales].”
He raised his 2018 U.S. same store sales growth estimate for the fast-food chain to 3 percent from 2 percent.
Of course, reports such as these prefer to focus on the positive (at least in the eyes of investors) while leaving the other half of the story untold for the most part. Those kiosks are taking the place of entry level workers at the cash registers. Mobil ordering options also allow an app to load up the orders for the cooks in the back. One person can bring most of the orders to the tables or the pick-up window, cutting out the need for several workers in each store.
There was a time when such automation was pretty much impossible or at least prohibitively expensive to implement. Not so anymore. It’s still not cheap to do on the front end, but managers have to weigh those costs against what human workers would cost in the long run. Even in places where cities and states haven’t already raised the minimum wage massively they’ve been threatening to. One of our major political parties is pushing to do it on the national level. If you scare these employers enough over a sufficient period of time they’ll eventually begin to believe you.
Fight for 15, meet Robby the Robot. He’ll be taking your place now and you can fight for a spot in the unemployment line.