Wendy’s adds automation to the fast-food menu

Wendy’s Co., home of the old-fashioned burger, is serving up something cutting-edge: self-service ordering kiosks.

The Dublin, Ohio-based fast-food company is adding machines to at least 1,000 restaurants, or about 15% of its stores, by the end of the year. Wendy’s began installing these kiosks last year, enabling diners to order without help from behind-the-counter workers.

Wendy’s is joining other eateries that are marching toward automation for at least some of the dining experience.

Panera Bread has said it plans to add touch-screen kiosks to all its restaurants within a few years. McDonald’s also aims to roll out kiosks where diners can customize their burgers at all its U.S. locations. One cafe in San Francisco serves coffee brewed up by a robotic barista.

These kinds of self-serve machines and related technology could drastically change the way the $230-billion fast-food industry operates, analysts said. With minimum wages rising — to $15 in some parts of the country, including California — many chains are looking at ways to slash labor costs.

“Lots of restaurants, not just fast-food chains, are really trying to mitigate the costs of higher wages,” said Lauren Hallow, concepts analyst at Technomic, a restaurant market research firm.

Some eateries, for instance, are offering incentives to encourage mobile ordering so that lines are shorter — with apps with special discounts and the chance to jump the line when picking up orders.

At Wendy’s, Chief Information Officer David Trimm said that customers and franchisees have taken a liking to the kiosks.

“You will see customers deliberately going to those kiosks directly, bypassing lines,” Trimm said during the company’s investor day Feb. 16. “Some customers clearly prefer to use the kiosks.”

There’s “a huge amount” of demand among franchisees, who will shell out about $15,000 for three kiosks, Trimm said. Wendy’s has estimated that the cost will be recouped in less than two years, he said.

These kinds of kiosks are not new but are gaining traction in restaurants because diners have finally been groomed by the rise of online and mobile ordering to embrace the technology.

Young diners, especially, find interacting with a machine often easier than dealing with human workers. More than 40% of millennials said they would use kiosks in a restaurant, compared with nearly 30% of all customers, a recent Technomic survey found.

“Young customers … like to control the whole ordering process,” Hallow said. “They have the chance to go quickly if they want to, or they can linger and see what the choices are without a cashier waiting.”

In the long term, many chains are looking toward kiosks as a way to reduce their employee headcount, especially as wages rise.

Worker advocates have long been skeptical of automation in the fast-food industry.

“If fast-food companies could replace us with machines, they would have done it already,” Anggie Godoy, a leader in the Fight for $15 movement in Los Angeles, said in a statement last November. “The fact is, we are in the service business and fast-food restaurants are always going to need good workers.”

But not every restaurant is looking to replace the workforce with machines — at least not immediately.

Panera Bread, for example, has increased hours for employees at some locations to service the higher number of orders that come in through self-serve kiosks, said Nick Setyan, senior vice president of restaurants equity research at Wedbush Securities.

“They just had too many people in line and they felt they were losing transactions because they just didn’t have enough room to process orders in a reasonable amount of time,” Setyan said. With the uptick in orders after the kiosks were installed, Panera Bread “upped man hours in the kitchen to deal with the backlog.”

For Wendy’s, kiosks are part of an overall move into automation that could cut labor costs, said Robert Wright, chief operations officer. He called 2016 a “tough” year, with wages rising 5% compared with 2015.

Supervisors could use automation to take food temperatures and do other duties, Wright said.

“There are repetitive production tasks that are in Wendy’s restaurants that aren’t core to the things that customer loves the most,” he said.

That would give a boost to Wendy’s, which has proved more adept than many fast-food rivals at navigating changing consumer tastes.

In mid-February, the chain reported its 16th straight quarter of increasing sales for restaurants open at least 15 months. It reported falling sales and profit overall, but that was mostly due to a strategic decision to sell off the vast majority of its company-owned stores — a plan Wendy’s completed in the fourth quarter.

The company’s stock is up nearly 46% in the last year, and it recently announced the shareholder-pleasing moves of boosting its quarterly dividend to 7 cents a share, up half a penny, and authorizing a $150-million stock buyback.

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