Searching for ways to lower labor costs, restaurants are hoping that artificial intelligence can take down drive-thru orders \u2014 but it will likely be years before the technology becomes widely available.<\/p>\n
This year, 16% of restaurant operators plan to invest in artificial intelligence, including voice recognition, according to a survey from the\u00a0National Restaurant Association. Most of the big spending comes from large chains, which have the capital and scale to make the technology work for their businesses.<\/p>\n
Even before the pandemic, labor costs had been rising for restaurants, leading operators to look to technology to boost their profit margins. Then Covid came, which not only accelerated labor costs but also led to a shift away from dining rooms and toward drive-thru lanes. California\u2019s decision earlier this year to\u00a0hike wages for fast-food workers\u00a0to $20 an hour has only made operators more inclined to embrace technology to cut their labor costs, which has so far helped\u00a0mostly in the automation of back-of-the-house tasks.<\/p>\n
At the same time, ChatGPT and other AI tools have fueled new excitement for generative AI in restaurants, though the industry is typically slow to embrace technological advances.<\/p>\n
One stumbling block for the burgeoning tech came in June, when\u00a0McDonald\u2019s\u00a0told its franchisees\u00a0that it would end its trial of Automated Order Taker, AI technology meant for its drive-thru lanes through a partnership with IBM. Once an early mover in the voice-ordering race, the fast-food giant now plans to turn to other vendors.<\/p>\n
Then there\u2019s\u00a0Presto Automation, the AI drive-thru technology company which disclosed last year in Securities and Exchange Commission filings that it uses \u201chuman agents\u201d in places like the Philippines and India to complete orders. Presto interim CEO Gee Lefevre maintains that using humans is common in the AI industry and helps train the technology without straining the restaurant\u2019s workforce. The company unveiled a fully autonomous version in May. Still, the initial lack of transparency may scare off some operators.<\/p>\n
While some restaurants may be skeptical of using AI for drive-thrus now, adoption may increase in the coming months and years.<\/p>\n
The tipping point for voice ordering is likely in 12 to 18 months, according to T.D. Cowen analyst Andrew Charles. That\u2019s when he thinks at least two of the nation\u2019s top 25 restaurant chains will go all in, expanding their small trial runs of the technology across their footprints.<\/p>\n
\u201cIt\u2019s like third-party delivery a few years ago: Everyone was testing it, then when McDonald\u2019s went with Uber, everyone else followed with their own partnerships,\u201d Charles said.<\/p>\n
This time, McDonald\u2019s likely won\u2019t be the first mover.<\/p>\n
Companies with voice-ordering technology say their AI doesn\u2019t replace jobs \u2014 it just frees up workers for other tasks. They also tout secondary benefits.<\/p>\n
SoundHound, an early leader in the space, said that its AI can take more than 90% of orders without requiring human intervention; the typical accuracy rate for humans is between 80% to 85%. SoundHound also said that its AI can speed up drive-thru lanes by roughly 10% because it can process orders faster. Plus, AI tries to upsell customers every order, raising average check size.<\/p>\n
Moreover, in the future, AI could be able to take orders from non-English speakers, representing a large opportunity both internationally and domestically, according to Charles.<\/p>\n
But for all the possible pros, there are also some drawbacks to generative AI.<\/p>\n
For one, restaurants risk damaging their reputations by using artificial intelligence, Bank of America Securities analyst Sara Senatore wrote in a research note on Friday. For example, inaccurate orders can cause delays and frustration, even if the AI transfers customers to a human restaurant worker.<\/p>\n
Moreover, while younger customers might enjoy the increased efficiency and lack of human interaction, older age cohorts tend to think differently. The majority of baby boomers would prefer fewer technology options while dining, according to a\u00a0consumer survey\u00a0from earlier this year conducted by the National Restaurant Association.<\/p>\n
Then there\u2019s the fact that the technology isn\u2019t perfect. Restaurants with weak Wi-Fi will need to speed up their internet connections. Locations by noisy highways will likely find that voice-ordering tech will need a few years to catch up and better understand customers. And restaurants with long, complicated menus will likely find that the AI struggles are more pronounced.<\/p>\n
For McDonald\u2019s, the risks aren\u2019t worth it \u2014 for now.<\/p>\n
The fast-food giant\u2019s foray into AI for the drive-thru began in 2019, when the company bought Apprente, renaming it McD Tech Labs. Two years later, McDonald\u2019s\u00a0sold McD Tech Labs\u00a0to IBM and announced a global partnership with the tech company for undisclosed terms. McDonald\u2019s had already tested the technology at a handful of Chicago area locations. Offloading the tech to IBM led to a larger scale test of roughly 100 restaurants.<\/p>\n
But the results from the trial run fell short of McDonald\u2019s standards. The technology had issues interpreting different accents and dialects, hurting order accuracy, among other challenges, two sources familiar with the matter\u00a0<\/strong>told CNBC. At the time, McDonald\u2019s declined to comment on the technology\u2019s accuracy or challenges, while IBM did not respond to a request to comment on the tool\u2019s accuracy.<\/p>\n Despite the setback, McDonald\u2019s isn\u2019t abandoning the goal of using artificial intelligence to take drive-thru orders.<\/p>\n \u201cWhile there have been successes to date, we feel there is an opportunity to explore voice ordering solutions more broadly,\u201d Mason Smoot, senior vice president and chief restaurant officer for McDonald\u2019s U.S., wrote in a memo to franchisees.\u00a0<\/p>\n The Golden Arches isn\u2019t the only chain with a voice-ordering test.<\/p>\n Yum Brands\u2019\u00a0Taco Bell is expanding its test of voice AI from five locations to 30 restaurants in California \u201cbased on positive consumer feedback,\u201d executives said in early May. White Castle plans to use SoundHound\u2019s technology in more than 100 of its restaurants by year-end. And last year,\u00a0Wendy\u2019s\u00a0announced a test\u00a0at a company-owned restaurant in Columbus, Ohio, through a partnership with\u00a0Google.<\/p>\n So far, early movers have largely been companies with lower average unit volumes, T.D. Cowen\u2019s Charles said. The industry metric refers to a chain\u2019s average annual sales by restaurant. Because those chains\u2019 locations have lower sales, there\u2019s more financial incentive to use AI to mitigate higher labor costs, according to Charles.<\/p>\n Panera Bread\u00a0founder Ron Shaich\u00a0told CNBC that the real winners will be a \u201cfast follower\u201d rather than the first mover with voice ordering. Shaich, who currently serves as chair of\u00a0Cava\u00a0and chief executive of his own investment firm Act 3 Holdings, claims credit for being the first mover on plenty of restaurant tech advancements: free Wi-Fi in Panera\u2019s restaurants, combining the chain\u2019s mobile app and loyalty program and introducing self-order kiosks.<\/p>\n But in the case of voice ordering, Shaich said he thinks it\u2019s better to sit tight while the technology gets ironed out and focus on making sure the overall customer experience can beat the competition.<\/p>\n \u201cNobody\u2019s running to a restaurant because it has this technology,\u201d he said.<\/p>\n \u2014 CNBC\u2019s\u00a0<\/em>Kate Rogers<\/em>\u00a0contributed reporting for this story.<\/em><\/p>\n<\/p>\n Searching for ways to lower labor costs, restaurants are hoping that artificial intelligence can take…<\/p>\n","protected":false},"author":0,"featured_media":1333,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-1332","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/posts\/1332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/comments?post=1332"}],"version-history":[{"count":0,"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/posts\/1332\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/media\/1333"}],"wp:attachment":[{"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/media?parent=1332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/categories?post=1332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tradetrovex.com\/index.php\/wp-json\/wp\/v2\/tags?post=1332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}