fast food industry – The OM Blog by Heizer, Render, & Munson

OM in the News: How Did Self-Service Kiosks Change McDonald’s?

Self-service kiosks at McDonald’s and other fast-food chains have loomed as job killers since they were first rolled out 25 years ago, reports CNN.com (Sept. 20, 2024). But nobody predicted what actually happened. In one of the earliest mentions of kiosks in fast-food settings in 1999, industry publication Business Information said that McDonald’s was working to “develop an electronic order-taking system that may eventually replace some of its human equivalents.”

Self-service kiosks have expanded at McDonald’s

Instead, touchscreen kiosks have added extra work for kitchen staff and pushed customers to order more food than they do at the cash register. The kiosks show the unintended consequences of technology in fast-food and retail settings, including self-checkout. Chains are now experimenting with AI at drive-thru lanes, and the experience with kiosks holds lessons for them.

Today, instead of replacing workers, companies deploy kiosks to transfer labor to other tasks like handing off pickup orders, help increase sales, easily adjust prices and speed up service. Kiosks “guarantee that the upsell opportunities” like a milkshake or fries are suggested to customers when they order, said Shake Shack’s CEO. “Sometimes that is not always a priority for employees when you’ve got 40 people in line.” Kiosks also shift employees from behind the cash register to maintaining the dining area, delivering food to customers or working in the kitchen, he said.

Some McDonald’s are now rolling out kiosks that can take cash and accept change. But even in these locations, McDonald’s is reassigning cashiers to other roles, including new “guest experience lead” jobs that help customers use the kiosks and assist with any issues. In theory, kiosks should help save on labor, but in reality, restaurants have added complexity due to mobile ordering and delivery, and the labor saved from kiosks is often reallocated for these efforts. Kiosks “have created a restaurant within a restaurant.”

Quick-service and fast-casual segments of the restaurant industry continue to grow. Staffing levels were nearly 150,000 jobs, or 3%, above pre-pandemic levels. The impacts of kiosks were similar to other self-service technology such as ATMs and self-checkout machines in supermarkets. Both technologies were predicted to cause job losses. In banking, ATMs freed tellers from low-value tasks such as depositing and cashing checks to perform other tasks that created value.

Classroom discussion questions:

In what other industries have kiosks altered the service process?
Which of the 10 OM decisions in your Heizer/Render/Munson text are impacted by technologies such as this? How?

OM in the News: McDonald’s Decides No More Dry Burgers

In 1948, brothers Richard and Maurice McDonald retooled their original San Bernardino, Calif., restaurant around a slim menu selling burgers for 15 cents. Their restaurant, called McDonald’s, would go on to provide the blueprint for the fast-food business. They shrunk down the patties to make them more affordable, and served them with ketchup, mustard, onions and two pickles—no substitutes, to keep service fast. The concept was a hit.

Assembling the revamped burger in a test kitchen.

Burgers last year accounted for around 40% of U.S. fast-food sales, and most chains can’t make it without a strong contender. Some 68% of Americans eat burgers at fast-food restaurants at least once a month.

The problem for McDonald’s is that it came in 13th among U.S. chains based on the number of customers (28%) calling their burgers desirable, reports The Wall Street Journal (Dec. 1, 2023). White Castle led the list with 72%, and Burger King followed at 52%.

With increased competition in the burger market, McDonald’s executives decided to revamp many of the industrial-scale techniques that have produced cheap, uniform burgers. In some cases, the firm is reviving practices it scrapped long ago in a push for efficiency. “We can do it quick, fast and safe, but it doesn’t necessarily taste great. So, we want to incorporate quality into where we’re at,” said a top exec.

Deciding it’s had enough with dry patties and squishy buns, the firm made more than 50 tweaks on its burgers adding up to the biggest enhancements in decades. They started by cooking the beef with the onions on top of the patty, added room-temperature cheese that melted faster and put it all on the shinier brioche-style bun, a moister bread to better hold heat. They found cooking 6 burgers at a time instead of 8 improved consistency and delivered fresher patties. They calibrated the gap on the metal clamshell that presses burgers on the grill down to the millimeter, to avoid pressing too hard and squeezing out all the juices.

For a chain with tens of thousands of restaurants, the overhaul posed a massive undertaking. Restaurants would have to retrain workers to look out for quality measures like when grills were running too hot and drying out patties. McDonald’s needed to ensure bakeries across the world could comply with its new specifications for buns. The plan has taken 6 years to implement.

Classroom discussion questions:

Other products and services have been around for many years, like the Big Mac, and have also had continued success through enhancements. Identify one such product.
Why did it tale McDonald’s so long to improve its burger?

OM in the News: McDonald’s to Add Automated Drive-Thru Ordering

McDonald’s is making a bet it can automate the task of taking drive-thru orders, reports New Equipment Digest (Sept. 10, 2019). The world’s biggest restaurant company is buying startup Apprente, a developer of voice-recognition technology for use in the restaurant industry, to help speed up lines. The idea is to eventually have a machine, instead of a person, on the other side of the intercom to relay orders to kitchen staff. Chicago-area restaurants are testing the system.

McDonald’s sees Apprente helping it move cars through the drive-thru lane more quickly and take orders more accurately than employees. The company is also investing to add ordering apps and kiosks in its restaurants and digital menu displays. Fast-food companies are looking for an edge amid intense competition.

Apprente says its technology can accurately interpret conversational language — such as a customer ordering a hamburger with no onions and extra sauce. McDonald’s already is testing the technology in its drive-thru lanes, which makes up about 70% of the company’s business. It plans to roll Apprente’s technology out nationwide, and predicts it will have a “positive impact on more than half of our customers.”

McDonald’s also spent $300 million on Dynamic Yield Ltd. this year, a company which helps retailers improve performance by collecting personal data from customers to fine-tune sales pitches and promotions. McDonald’s uses Dynamic Yield’s tools to suggest food and drinks to diners based on factors such as time of day, weather and traffic.

Classroom discussion questions:

Why is this an important OM tool for McDonald’s?
Compare this to the 7 other major changes described in the Global Company Profile on McDonald’s that opens Chapter 9.

OM in the News: At KFC, a Bucketful of Supply Chain Trouble

Changes in the KFC distribution system left 600 KFCs in England without chicken.

Diners don’t care about supply chains, distribution centers, or logistics. All they want is their meal. But 2/3 of the 900 British KFC restaurants were closed for 4 days a few weeks ago. The reason: There was no chicken.

“Reliable supply chains that can make—or break—a business’s ability to operate smoothly,” writes Businessweek (March 5, 2018). And it’s the case not only for manufacturers, but also for the restaurant chain that serves up a 14-piece “bargain bucket” of chicken for $24 to British patrons.

When the supply chain goes awry, it can wreak havoc on products that are particularly time-sensitive. That’s what happened at KFC, which pared back its logistics network to cut expenses. The epicenter of the so-called #KFCCrisis was in Central England at a KFC distribution center, which suffered a breakdown in its first week as the hub of the chain’s new strategy. Tons of chicken spoiled there or in the backs of trucks as drivers awaited instructions that never came. Lost sales tallied in millions of dollars.

Just prior to the shutdown, KFC dropped its longtime food-delivery partner, Bidvest, and switched to a pair of German outfits, DHL and QSL. KFC promised “a new benchmark” in food supply, consolidating from 5 regional distribution sites to just the one. But changing long-standing supply practices can be risky, especially true with fresh meat, which is prone to contamination and must be shipped in refrigerated trucks.

KFC’s U.K. restaurants get most of their chicken from two huge suppliers. From those suppliers, the meat is sent via truck to the distribution center, and that’s where things went awry. DHL provides trucks and warehousing, while QSL is responsible for stock management. Under the previous deal with Bidvest, chicken was sent from the regional distribution sites to KFC stores. With the new system, all meat is dispatched from the Central England hub to satellite depots, then moved to smaller vehicles for the last leg. That’s a tried-and-true model for auto parts and parcels, but chicken and car parts are not the same.

Classroom discussion questions:

What went wrong at KFC’s supply chain?
Why should KFC be concerned (and a few dozen stores are still closed)?

OM in the News: McDonald’s New Dining Experience

Steve Easterbrook, McDonald’s chief executive, demonstrating how ordering is done at a self-service kiosk in NY — Steve Easterbrook, McDonald’s CEO, demonstrating a self-service kiosk in NY

McDonald’s just announced changes that could reshape the diner’s experience, saying that it would expand its digital self-serve ordering stations and table service to all of its 14,000 American restaurants. The company said once people order at one of the stations — sleek, vertical touchscreens — they will get a digital location device and can take a seat. When their burgers and fries are ready, the technology will guide a server to the table to deliver the food with a big smile and a thank you.

Customers will still be able to order food the old-fashioned way, at the counter. But the move to self-order systems and table service is one way to address one of the biggest problems the company’s restaurants have faced in recent years: slower food delivery to customers, caused by more items on the menu. The thinking is that customers will be more willing to wait if they are sitting at a table instead of waiting at a counter.

“McDonald’s has tested the order system in 500 revamped restaurants,” writes The New York Times (Nov. 18, 2016), and is now introducing it around the globe. Some 44,000 customers have been served at tables using the new system, with families and groups being the biggest users so far. The self-serve stations seem to make it easier to customize an order. Many of the company’s customers, though, do not enter the restaurant. About 60-70% of sales come from its drive-through lanes.

The vast majority of McDonald’s locations are owned by franchisees, and they will be responsible for paying for the changes. Equipment and installation of the 8 order screens cost upward of $56,000, and franchisees are often loath to make such investments at a time when sales are stagnant.

Classroom discussion questions:

Draw a process chain network (see Ch.5) for this system.
How has the company added “service efficiency”?

OM in the News: Chipotle’s Toxic Supply Chain

My family is the perfect customer unit for Chipotle Mexican Grill. We eat organic, prefer range fed animals, and select local fresh vegetables and fruit. For a long time, the chain of 1,900+ locations has reminded customers that its fresh ingredients and naturally raised meat are better than rivals’ and better for the world. The implication: If you eat Chipotle, you’re doing the right thing, and maybe you’re better, too. But fewer people associate Chipotle with “healthy” today, reports BusinessWeek (Dec. 28, 2015-Jan.10, 2016). Almost 500 people around the country have become sick from their food since July. And food-safety experts say they believe the total number affected is at least 10 times the reported number.

The company has always urged customers to think about its supply chain. Now they are. And so is Chipotle, which has blamed the outbreak on its supply chain’s use of local farmers and growers. To respond to the crisis, it will shift more food preparation out of restaurants and into centralized kitchens–doing things more like the McDonalds type of chains it’s long mocked.

Chipotle has about 100 major suppliers for its 64 ingredients–plus many more local farms, which supply 10% of its produce. More food will be prepared ahead of time, out of sight at commissaries, and transported to 19 distribution centers and then to restaurants. “They’re sort of in a bind,” says a Boston U. prof. “They want to have this local, fresh image, and making food in a commissary and shipping it all over the country takes away from that.”

Before it’s harvested, produce will be screened for pathogens using DNA-based tests. Meeting these higher standards will be expensive for smaller farms: There’s the cost of the testing itself and of discarding rejected vegetables and herbs. From there, it will be sent to the commissaries, to be washed, sanitized, and retested. The commissaries, rather than the restaurants, will be responsible for cleaning and packaging the cilantro, shredding the lettuce, and dicing the tomatoes.

Classroom discussion questions:

Compare Chipotle’s supply chain to that of Darden’s, described in the Global Company Profile in Chapter 11.
What are the advantages and disadvantages of using locally grown supplies?

OM in the News: Wendy’s Blackberry Supply Chain Troubles

It will have taken three years and a search involving more than 30 growers for Wendy’s to procure enough blackberries for a new salad it plans to offer next summer, reports The Wall Street Journal (Aug.19, 2015). “It’s been a slow, painful journey for us,” says the head of procurement. “We spent 14 months scavenging around the industry, looking at more suppliers than we ever have.” Wendy’s quest for the nearly 2 million pounds of blackberries it will need to embellish a seasonal salad at its 6,500 North American restaurants illustrates the challenges large chains are trying to digest as they seek to keep up with growing demand for fresh ingredients.

Wendy’s installed salad bars in restaurants in 1979, but the toppings have grown from simple tomatoes and croutons to include strawberries, blueberries, almonds and edamame. And it has accelerated the pace of product introductions, with seven new salads in the past two years. Fresh ingredients present a challenge for big chains because of their sprawling supply chains and rapid, repeatable preparation processes.

Adding blackberries posed Wendy’s most difficult supply-chain challenge ever. Most blackberries are sold to grocery stores, leaving little supply for restaurants. To meet Wendy’s needs, growers had to plant extra bushes, which take three years to produce mature fruit. Wendy’s normally reviews two to five suppliers for each type of produce it uses, but the company went through more than 30 before finding a pair that could supply enough blackberries. To maintain consistency, Wendy’s sends franchisees instruction cards dictating how the berries should be washed, cut and placed on the salads. Restaurants also need to ensure worker safety for all the slicing fresh produce requires—workers must wear chainmail mesh gloves—and to ensure the added prep work doesn’t slow service.

Classroom discussion questions:

Are other fast food chains facing similar supply chain issues?
Why are fruits and vegetables so important in fast-food restaurants today?

OM in the News: Burger King–A Tale of Two Countries

Anthony Moore, at Tampa Burger King, calls his wage "very inadequate" — Anthony Moore, at Tampa Burger King, calls his wage “very inadequate”

Hampus Elofsson, ending his 40-hour workweek at Burger King, had paid his rent and all his bills, stashed away some savings, yet still had money for nights out. That is because he earns $20/hour — the base wage for fast-food workers throughout Denmark and 2.5 times what many fast-food workers earn in the U.S. “You can make a decent living here working in fast food,” he says. “You don’t have to struggle.”

In Denmark, fast-food workers are guaranteed benefits their American counterparts could only dream of, writes The New York Times (Oct.28, 2014). There are 5 weeks’ paid vacation, paid maternity and paternity leave and a pension plan. Workers must be paid overtime for working after 6 p.m. and on Sundays, and they often get their work schedules a month in advance.

In contrast, fast-food wages in the U.S. are so low that half of the nation’s fast-food workers rely on some form of public assistance: they earn an average of $8.90 an hour. As a shift manager at a Burger King near Tampa, Anthony Moore earns $9 an hour, typically working 35 hours a week and taking home around $300 weekly. Not surprisingly, turnover rates differ significantly: Danish estimates are that 70% of Burger King and Starbucks workers stay for more than a year. By contrast, McDonald’s found its workers’ average tenure in the U.S. was 8 months.

So if Danish chains can pay $20 an hour, why can’t those in the U.S. pay the $15 an hour that many activists and fast-food workers have been clamoring for? Economists say the comparison is “apples to autos” because of fundamental differences between Denmark and the U.S., including Denmark’s high living costs and taxes and a generous social safety net. The Danish fast-food restaurants are also less profitable than their American counterparts. The higher wages and the higher menu prices help explain why there are 16 McDonald’s per million inhabitants in Denmark, but 45 McDonald’s per million in the U.S.

Classroom discussion questions:

1. Why does the U.S. restaurant industry predict “a wave of woe if pay were to jump toward Denmark’s levels?”

2. What are the advantages and disadvantages of each system?

OM in the News: Chipotle’s Burrito Velocity

“Another year, another breakthrough in Chipotle’s blinding burrito-making speed,” writes Quartz (April 21, 2014). Over the first 3 months of 2014, the US Mexican-food chain saw an average increase of 7 transactions per hour at both peak lunch and dinner hours—12 to 1pm and 6 to 7pm. On Fridays, one of its busiest days of the week, Chipotle fielded 11 more customers per hour at lunchtime on average across its stores, a 10% increase.

“One important element of delivering great customer service is you’ve heard us say over and over is faster throughput,” says the CEO. “We’re excited that our teams are ready to break new throughput records.” Another way to think about throughput is to think about it as burrito-velocity—that is, the speed it can funnel a customer and the burrito being made for them from the beginning of its line to its end. The chain puts every part of its assembly line under a microscope to make sure it functions as efficiently as possible.

As far as the company is concerned, faster service is the same thing as better service. For that reason, the chain is finicky about things Chipotle-lovers likely hardly even notice. Credit cards, for instance, are better than cash, because they’re faster. And that person who wanders around cleaning off counters and re-filling empty meat, vegetable, rice, and bean containers is crucial. In fact, she even has a title: linebacker. Linebackers, who patrol countertops, replace serving-ware, and refill bins of food, are one of Chipotle’s four, Maoist-sounding pillars of effective lightning-speed service. The others, which together make up what the chain refers to as its “four pillars of great throughput,” include the extra person between the one who rolls your burrito and the one who rings up your order, a commitment to having every ingredient and utensil in its place, and finally, making sure its best servers are always working at peak hours. Some of Chipotle’s fastest restaurants currently run more than 350 transactions per hour at lunchtime, which equates to nearly 6 transactions per minute!

Classroom discussion questions:
1. Why is throughput such an important OM measure at Chipotle?

2. What are the four pillars of great throughput?

OM in the News: Chipotle’s Operations Strategy for Faster Service

Lines snaking out the door at lunchtime have long been a bottleneck to growth at Chipotle, the burrito chain, writes Quartz.com (Jan. 31, 2014).But the fast-food firm managed to speed up service by 6 transactions per hour at peak times this past quarter by implementing what it calls the “four pillars of great throughput.” Here they are:

+“Expediters.” That would be the extra person between the one who rolls your burrito and the one who rings up your order. Her job? Getting your drink, asking whether your order is for here or to go, and bagging your food.

+“Linebackers.” The people who patrol the countertops, serving-ware, and bins of food, so the ones who are actually serving customers never turn their backs on them.

+“Mise en place.” What in a regular restaurant means setting out ingredients and utensils ready for use means, in Chipotle’s case, zero tolerance for not having absolutely everything in place ahead of lunch and dinner rush hours.

+“Aces in their places.” A commitment to having what each branch considers its top servers in the most important positions at peak times, so there are no trainees working at burrito rush hour.

Chipotle is also mulling incorporating a Starbucks-style mobile payment system (the chain already accepts online orders for pick-up), which the company is hopeful will help funnel customers in and out of its lines a bit faster. But the company is open to a number of other options, too, so long as they help speed up service.

Classroom discussion questions:

1. Which of the techniques for improving service productivity in Chapter 7’s Table 7.3 is Chipotle using?

2. Which Process-Chain-Network (PCN) Analysis domain (see Figure 5.12 in Chapter 5) best describes Chipotle?

OM in the News: Speeding Up the McDonald’s Drive-Thru

McDonald’s Corp., losing the speed race to rivals and racking up customer complaints about slow service, is adding a third drive-thru window, reports The Chicago Tribune (Nov.15, 2013).

Called Fast Forward Drive-Thru, the reboot will start appearing in new and rebuilt McDonald’s stores next year. Patrons now pay at the first window and pick up food at the second. Soon there will be a second pick-up window. The drive-thru is even more important to McDonald’s than the Big Mac. The fast-food chain generates 70% of its sales from hungry drivers. Ever since McDonald’s created its first drive-thru in 1975 in Sierra Vista, Ariz., fast-food chains have competed fiercely to shave seconds off order times, equipping workers with headsets, video cameras and clocks showing how long cars have been waiting. In the early days, fast-food restaurants derived about 40% of their sales from drive-thrus.

Disgruntled diners have taken to Twitter to complain about slow drive-thru service at McDonald’s. “I HATE when McDonald’s makes me pull out of the drive thru line and wait in a parking spot like a chump,” @EmLynnClements posted last week. @HumblePie34 added: “McDonald’s needs an express drive thru lane so I don’t have to wait an hour for a mcflurry.”

A more complicated menu has bogged down McDonald’s service. Customers, for example, can choose from 9 different sauces to go with Mighty Wings. Fueling up at McDonald’s drive-thrus takes longer than at Taco Bell and Wendy’s. It takes 189 seconds at a McDonald’s, compared with 158 seconds at Taco Bell and 134 seconds at Wendy’s. McDonald’s drive-thru service is slower than last year and its slowest ever.

Classroom discussion questions:

1. Name 5 ways to increase service efficiency (see Chapter 5, page 175).

2. What are the advantages and disadvantages of adding the 3rd window? Why doesn’t every drive-thru use this approach?

OM in the News: Queuing Up at the Drive Thru

Chick-fil-A averages a whopping 6.09 cars in its drive-thru queue

Since the advent of the modern quick-service drive thru, restaurant operations managers have tinkered with the nuts and bolts to create a drive thru that is as fast, efficient, and pleasant as possible. Innovations throughout the years, from wireless headsets and order-confirmation boards to dual lanes and pre-sell signage, have created a better drive thru capable of handling the 60–70% of business that loops the exterior of most fast food restaurants. Accuracy has topped out around 90% for most chains. Cleanliness and favorable exteriors are clearly a major investment in the industry. And order-confirmation boards have become a common tool.

Speed of service, though, has slowed at drive thrus, reports QSR Magazine (Oct. 2013). McDonald’s experienced its slowest average speed of service in the past 15 years, at 189.49 seconds; Chick-fil-A’s speed (203.88 seconds) was its slowest showing since 1998, Krystal’s (217.89) since 1999. The decline in speed is a bad thing, but times are changing. Food isn’t so simple anymore. Burgers and fries have become burrito bowls and customizable salad kits.

That could help explain Chick-fil-A’s speed-of-service. The chicken chain had, on average, more than 6 cars in the drive-thru queue, far and away more than competitors and nearly a full vehicle more than last year. The company is investing more in dual-lane drive thrus to better handle capacity issues. But the move toward more specialty sandwiches is also adding seconds to service time.

Speed is still a top priority at fast food restaurants, and they continue to design systems and procedures accordingly. For example, Wendy’s uses a separate grill and sandwich station in the drive thru to maintain its industry-best speeds, and it trains and cross-trains employees repeatedly to ensure the fastest speeds. Taco John’s is revisiting its drive-thru layout to improve little things that might impede the ability to service the drive thru quickly.

Classroom discussion questions:

1. What tools does OM provide to speed drive thru service?

2. How do the various chains differ in handling drive thru customers?

Good OM Reading: Taco Bell and the Golden Age of Drive-Thru

If there was one article you could ask your students to read at the beginning of the OM semester, it would be this lead piece in Businessweek (May 9,2011). The theme is that OM innovations at fast food restaurants like Taco Bell rival those at any factory in the world. Written from the view of the drive-thru window (which generates about 70% of fast food sales), the article lets you overview your course with issues of productivity (Ch.1), technology and process design in services (Ch.7), layout (Ch.9), and time & motion studies (Ch.10). The story also comes with a 1-1/2 minute video which the students will enjoy as well.

Here is a quote from the 5-page reading: “Go into the kitchen of a Taco Bell today, and you’ll find a strong counter argument to any notion that the US has lost its manufacturing edge. Every Taco Bell, McDonald’s, Wendy’s, and Burger King is a little factory, with a manager who overseas 3 dozen workers, devices schedules and shifts, keeps track of inventory and the supply chain, supervises an assembly line churning out a quality-controlled, high-volume product, and takes in revenue of $1 million to $3 million a year, all with customers who show up at the front end of the factory at all hours of the day to buy the product”.

The firm’s CEO concludes, “At Taco Bell today I’ve got 6,000 factories, many of them running 24 hours a day”.
Adds a former Wendy’s VP for OM, “The most advanced operational thinking in the world is going on in the back” of a fast food restaurant. Wendy’s is rated as the fastest brand (an amazing 134 seconds per drive-thru vehicle), but Taco Bell comes out 1st ranked overall with an average time of 164 seconds and a 93.1% accuracy rate.

This article describes the restaurant layout (the topic of our Global Company Profile in Ch.9), new technologies in the industry, bottlenecks, staffing issues, and much more. It is a perfect lead-in to the exciting topic we teach.