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This is what your McDonald's may someday look like. Image source: SOTI.
McDonald's (NYSE: MCD) has rolled out its next-generation restaurant in parts of Europe, Canada, and Australia, and now the company plans to further expand the program in the United States.
The fast-food chain, which has ridden all-day breakfast to turn around its business, hopes that adding technology to its eateries can improve the customer experience and drive sales. Called "Experience of the Future," the McDonald's initiative involves adding Samsung (NASDAQOTH: SSNLF) Galaxy tablets to its locations.
Customers can use the tablets, which are mounted tableside and sitting in kiosks, to order custom "gourmet" burgers in the United Kingdom restaurants where they have been deployed. In some cases, the tablets are used to entertain customers, and in Sweden, Investopedia reported, they can be used to turn a Happy Meal box into a set of virtual reality goggles.
Since "Experience of the Future" remains in the pilot phase, exactly how it will work remains a bit of a moving target. Ultimately, though, it's easy to see the tablets being used for ordering, offering a heavy level of customization without requiring a frontline worker to get everything right from a verbal order. In addition, the devices could entertain customers while they wait for food and allow them to pay their bill.
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It's still early in the process and McDonald's does not have a formal rollout plan yet, but CEO Stephen Easterbrook called it "a very exciting opportunity across the next few years in the U.S." in the company's Q2 earnings call (as transcribed by Seeking Alpha). He also acknowledged that while he is being mindful of short-term needs, "we don't want to lose the strategic direction that we believe is right for long term."
The company said in its conference call that more than half of its restaurants in Canada have been fully converted to the "Experience of the Future," while the U.K. count is near 40% and France is at nearly 25%, with table service in about 80% of restaurants.
How has it been working?
In the U.K., which has been a big test market for the new store concept, McDonald's has partnered withenterprise mobility management company SOTI to change how McDonald's and it customers interact. SOTI called "Experience of the Future," which also involves updating the look of the stores, "the biggest investment and operational change in its 41 year history in the U.K."
That sounds like hyperbole, but when you think about it, McDonald's operates roughly the same way it did since it started becoming a major brand in the 1960s. The new concept brings the chain into, if not the future, at least the present, according to McDonald's UK IT head Doug Baker.
"Technology has an important role to play in all walks of life, including our customers' eating out experience, so the changes we're making as part of the 'Experience of the Future' program bring us closer to the way people live their lives today," he said in the press release. "We pride ourselves on listening to customers and providing an outstanding experience; innovations such as tablets help provide this experience and have been extremely popular with customers."
In the conference call, Easterbrook said the "Experience of the Future" is already a success: "We are seeing a good pickup in sales as we roll this out ... So we know we're onto something. We know customers respond well. And certainly, it breathes a lot of new life into our restaurants and into the brand."
Why is this important to McDonald's?
In a broad sense, at least in the U.S., McDonald's has lagged behind some of its competitors when it comes to technology. The chain does not allow ordering through its app nor does it offer a mobile-pay option. Easterbrook acknowledged this during the earnings call and pointed out that the company has been testing various technologies in order to speed up service while improving order accuracy.
"The real devil [is] in the detail, down to the font size on the order receipts to make sure our teams who are collecting the orders can gather the right items," he said. "But also, there's a lot of work we're doing in the future where we believe we can also enhance service, speed and accuracy and get technology to do some of that heavy lifting for us."
Going forward, "Experience of the Future" could solve those problems. Orders placed via a tablet can be incredibly detailed, with a much lower possibility of mistakes being made. Want one pickle, light ketchup, and no special sauce? That's an easy order to place via a tablet, but perhaps one that would cause problems in a drive-thru line.
Adding technology should lead to happier customers with a side of lower employee costs. If tablets take the orders, then actual people don't have to. That does allow for more space behind the counter for production, but it also should lower costs in a meaningful way.
The McDonald's of the future may only be a mix of the Starbucks and Chili's of today, but it's a big step into the present for the chain, which should increase customer satisfaction while growing the bottom line.
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Daniel Kline has no position in any stocks mentioned. He has a VHS tape that tells the story of Grimace Island. The Motley Fool owns shares of and recommends SBUX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.