McDonald's fast-food ordering kiosks will boost sales, according to analyst

McDonald's could save on labor costs over time because of the kiosks but likely not initially. Instead, it allows workers to bring food to the table and complete other tasks. Image: McDonald's Canada

McDonald's gradual introduction of digital ordering kiosks and employees who deliver food to tables will boost sales, according to a new analyst report.

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The company's plan to introduce its "experience of the future" concept at all of its U.S. locations by 2020 is getting off to an encouraging start, Cowen analyst Andrew Charles said Friday. The rollout includes touch-screen ordering in the lobbies of each restaurant, and franchisees interviewed by Cowen are embracing the concept.

The fast-food giant plans to introduce the concept in 2,500 of its 14,000 U.S. restaurants by the end of 2017.

"The initial indicators are showing positive signs," Charles said in an interview, adding that it resembles Panera Bread's successful rollout of self-ordering in-store kiosks.

Charles estimated that McDonald's could roll out the concept to an additional 3,000 stores in 2018, bolstering sales at locations open at least a year by 0.7 percentage points.

One of the company's archrivals, Wendy's, is also adding kiosk ordering at 1,000 restaurants by the end of 2017.

Although some analysts view touch-screen ordering as a way to reduce labor costs, McDonald's has said that's not its strategy.

"It’s not actually meant as a labor replacement," CEO Steve Easterbrook said at the company's 2016 shareholders meeting. "We can just reapportion that labor into more service orientated roles that we think the customer will benefit both ways."

Charles said McDonald's could save on labor costs over time because of the kiosks but likely not initially. Instead, it allows workers to bring food to the table and complete other tasks.

"Panera saw a nice sales lift," because of kiosk ordering, Charles said. McDonald's continues to offer sales register attendants at each location.

Other initiatives that McDonald's has recently announced will also boost the bottom line, including cooking Quarter Pounders with fresh beef, Charles said.

The jury is "still out" on whether food delivery represents a significant opportunity for McDonald's, which will be available on a trial basis through Uber in 3,500 restaurants by the end of the month, Charles said in the research note.

"We are believers in delivery’s opportunity in the restaurant industry as operators broadly realize the need to broaden accessibility to drive sales," he said. "However, we need some convincing that delivery has staying power for McDonald’s given quick-service skews to a lower income consumer while delivery skews higher income."

SOURCE Nathan Bomey and Zlati Meyer , USA TODAY