The Toll of a New Machine

O'Leary is sensitive to the perception--from both staff and passengers--that Kinetics' kiosks take jobs. But he argues that they're really just eliminating tedious, repetitive work and freeing agents to deliver real customer service to passengers who don't like the machines, or have more complicated issues. "My position has evolved," he says. "Watching anyone do clerical transactions over and over again just looks like wasted time. Having [a ticket agent] punch the same combination of 122 keys over and over and over again--that's just wasted effort in the 21st century. It's not the society I think of as productive."

Here's how persuasive the self-service machines were to Gary and Kim Moulton, who own the McDonald's at the intersection of Interstate 4 and Highway 27 in central Florida, and five more McDonald's in that area. The day in early 2002 when the very first machine was delivered and hooked up, the Moultons ordered nine more. "I said, 'Tell us when you can install the rest of them,' " says Gary.

For the Moultons, the self-service ordering machines have been one surprise after another. "The first surprise was, the first day it went in, customers said to us, 'It's not just fast, it's not just accurate--this is fun!' " says Kim. One college girl was so amazed by the machines, she ran up and hugged Gary. "She said, 'Thank you, this is the greatest,' " he recalls, still amazed at the reaction. (The Moultons' favorite customer response comes at their highway store, from tourists: "We don't have these up north.")

The Moultons expected the kiosks to handle 25%, maybe 30% of their volume; the average across all six stores after two years is 45%, and at a couple of them, more than 50% of customers order themselves. People routinely stand in line for the kiosks, even when the counter is clear, with people ready to take orders.

These machines are the work of Todd Liebman, who started a company called Quick Kiosk, which he sold to Kinetics last year. Liebman is now head of a Kinetics division targeting "quick service" restaurants. Fast-food machines are both simpler and more complicated than the airline machines. They are simpler because they don't have to constantly and quickly access vital, secure databases such as passenger manifests. They are more complicated because even a McDonald's lunch menu offers many more choices than an airplane seat map. You can specify the elements of your burger--cheese, lettuce, ketchup, mayonnaise--in a range of choices from none to extra. Everything from breakfast to dessert has a picture.

Here's the double-reverse flip of productivity improvement: The kiosks have increased sales at McDonald's so much that the owners have had to add two more employees in each store.

The machines have actually increased the Moultons' labor costs--in two ways. Volume overall is up so much that they have had to add kitchen staff to make more food. And the Moultons have added "kiosk representatives" to greet customers and help them with the machines. "We've basically had to add two people per store," says Gary. "One in the kitchen, one for the kiosks, and we haven't been able to take anyone off the front counters." But if labor costs have gone up, the Moultons' cost of labor as a percentage of sales has dropped. "We've outpaced the labor costs with the increase in sales," says Gary.

That's the double-reverse flip of the productivity improvement: The kiosks make everyone at the Moultons' restaurants so much more efficient--customers, kitchen staff, counter staff (who still take all cash payments and deliver everyone's food)--that the Moultons have used the machines to increase their payroll. During the breakfast and lunch rushes, the kiosks give the Moultons all kinds of headroom to keep customers flowing and lines down.

In fact, unlike the airport, where you've already picked your airline before you face check-in lines, the kiosks in a McDonald's can quickly increase business. One of the key factors in picking a fast-food lunch spot is the wait. The front counter is a choke point. "I had a customer come up to me in one of our city stores recently," says Gary. "She said, 'I love these kiosks, but it sure is hurting your business, because there are no lines at lunch anymore!' "

The final surprise is that customers who use the kiosks spend more money. Because the Moultons' volumes are so high, and have remained that way for so long, they know this is not some quirk of self-selection. On average, customers who use the machines spend $1 more per check. "With the size of our typical order, that's a 30% increase," says Gary. "That's huge."

The Moultons have a couple of ideas to explain why kiosk checks are bigger. The color kiosk screens are a great sales tool--you can put the new McDonald's premium salads right in the center: 20% of customers who initially don't order a drink and are offered one (with a picture) buy it. Then there's the embarrassment factor. A substantial customer might be reluctant to upsize the fries, or order two Big Macs, or an extra apple pie, from a counter person. The kiosk can't snicker, even to itself.