McDonald's ex-CEO just revealed a terrifying reality for fast-food workers

[Zorkorist]

We have to stop the Government.

-John

 

[Pulsar]

These are hard tasks to program, but can be machine learned with deep neural nets. You just need to tell the robot when it's doing it right and when it's doing it wrong, and over time, it will learn by itself to do it wrong less and less.
http://www.popsci.com/googles-robots-are-learning-hand-eye-coordination-with-artificial-intelligence

Are you on drugs?

 

[Victorian Gray]

And the present CEO says, nah.

"According to McDonald's CEO Steve Easterbrook, the fast-food chain won't replace workers with machines—even if restaurant operators have to pay the $15 hourly wage that protesters are demanding. "I don't see it being a risk to job elimination," Easterbrook said on Thursday at McDonald's annual meeting when asked if rising labor costs would force the chain to cut jobs, replacing workers with kiosks and "automatic pancake machines."

Instead, Easterbrook said, the company would look to automating food preparation, allowing more employees to work directly with guests and boosting customer service. "Ultimately we're in the service business, and we're competing with other opportunities for people to eat and drink out," says Easterbrook. "Frankly, we will always have an important human element."


http://www.slate.com/blogs/business...says_chain_will_use_robots_in_the_future.html

 

[ivwshane]

And the present CEO says, nah.

"According to McDonald's CEO Steve Easterbrook, the fast-food chain won't replace workers with machines—even if restaurant operators have to pay the $15 hourly wage that protesters are demanding. "I don't see it being a risk to job elimination," Easterbrook said on Thursday at McDonald's annual meeting when asked if rising labor costs would force the chain to cut jobs, replacing workers with kiosks and "automatic pancake machines."

Instead, Easterbrook said, the company would look to automating food preparation, allowing more employees to work directly with guests and boosting customer service. "Ultimately we're in the service business, and we're competing with other opportunities for people to eat and drink out," says Easterbrook. "Frankly, we will always have an important human element."


http://www.slate.com/blogs/business...says_chain_will_use_robots_in_the_future.html

Says the guy whose company gets a cut no matter what the costs are to the franchisee.

 

[Jaskalas]

The only solution is to let the market set wages...

The entire purpose of the market is to be... efficient. That means eliminating as many wages and associated costs as possible. This will always stand in contrast to rising costs and the needs of our people.

McD CEO says something positive for labor, because that's good PR for today.
Tomorrow is a different world, and as soon as a competitor uses automation to produce a cheaper product, consumers will flee from the more expensive McD. On that day, the CEO will sing a different tune.

Of course this guy plans to have a nice retirement bonus and/or golden parachute long before that happens. He won't even have to go back on his "word" today. Firing all the employees is the next guy's problem.

 

[cubby1223]

And the present CEO says, nah.

"According to McDonald's CEO Steve Easterbrook, the fast-food chain won't replace workers with machines—even if restaurant operators have to pay the $15 hourly wage that protesters are demanding. "I don't see it being a risk to job elimination," Easterbrook said on Thursday at McDonald's annual meeting when asked if rising labor costs would force the chain to cut jobs, replacing workers with kiosks and "automatic pancake machines."

Instead, Easterbrook said, the company would look to automating food preparation, allowing more employees to work directly with guests and boosting customer service. "Ultimately we're in the service business, and we're competing with other opportunities for people to eat and drink out," says Easterbrook. "Frankly, we will always have an important human element."


http://www.slate.com/blogs/business...says_chain_will_use_robots_in_the_future.html

Let's bold the other portion of your quote and see what emphasis it places on the story.

 

[cubby1223]

15x40x50 = 30k a year

10x40x50 = 20k a year

Robot arm costs 35k

Not sure why they wouldn't do the robot arms at 10 a hour. They would make the money back in 2 years.

You forgot to factor in several additional taxes and insurance payments per employee into your costs which are not reflected in an employee's salary.

 

[theeedude]

What I love is the irony of middle class Republicans taunting minimum wage workers with automation, when it's middle class jobs that are the biggest target of it. When Silicon Valley is looking for industries to disrupt, fast food is not high on the list. That's not a big money pot, and people don't really want their food cooked by a robot.

 

[shady28]

This (automation) is the field I work in, and I'll say that the McD CEO's estimates of cost for automation are shall we say - pie in the sky, overly optimistic, unrealistic.

So a robot arm costs $35k, okay fine. How many do you need? Is that all you need, or will you need custom designed food prep assembly line? It's the latter. What is the support contract cost for that equipment?

Off the top of my head, custom designing something like that, prototyping it, programming it, testing it, and then ramping up manufacturing it to service thousands or tens of thousands of franchises will most likely cost a high 8-digit number before the first unit rolls off assembly lines.

But all that gets aggregated into the final cost of product, right? So what would that look like?

I'd bet that something like that would wind up easily costing 250k + per franchise, plus support contract cost which is almost certainly going to be well upwards of 30k/yr per install if you include PM (prev maint) since a franchise is not likely to keep a controls tech / mechanic on site..

And - this wouldn't automate the entire food prep line. You still have to move product from a truck, to cold storage, to the prep line. You also have to move it from prep line to customer.

Small franchises wouldn't be able to afford this kind of gear, which means the economy of scale / distributing cost of design / build / manufacture starts to fail.

Point being this is nowhere near as easy to do or as straightforward as this CEO says it is. To be blunt, if it were they would have already done it.

 

[Jaskalas]

....and people don't really want their food cooked by a robot.

$5 meal or $4 meal. Walmart exists because people choose the cheapest.
No one cares how it's made.

 

[MagnusTheBrewer]

This (automation) is the field I work in, and I'll say that the McD CEO's estimates of cost for automation are shall we say - pie in the sky, overly optimistic, unrealistic.

So a robot arm costs $35k, okay fine. How many do you need? Is that all you need, or will you need custom designed food prep assembly line? It's the latter. What is the support contract cost for that equipment?

Off the top of my head, custom designing something like that, prototyping it, programming it, testing it, and then ramping up manufacturing it to service thousands or tens of thousands of franchises will most likely cost a high 8-digit number before the first unit rolls off assembly lines.

But all that gets aggregated into the final cost of product, right? So what would that look like?

I'd bet that something like that would wind up easily costing 250k + per franchise, plus support contract cost which is almost certainly going to be well upwards of 30k/yr per install if you include PM (prev maint) since a franchise is not likely to keep a controls tech / mechanic on site..

And - this wouldn't automate the entire food prep line. You still have to move product from a truck, to cold storage, to the prep line. You also have to move it from prep line to customer.

Small franchises wouldn't be able to afford this kind of gear, which means the economy of scale / distributing cost of design / build / manufacture starts to fail.

Point being this is nowhere near as easy to do or as straightforward as this CEO says it is. To be blunt, if it were they would have already done it.

McD's already have a plan. They've been buying automated start ups since the late seventies. Technology has certainly changed however, make no mistake they already have a full fledged plan with economic impacts detailed. They and, the other big fastfood players have merely been waiting for the economic and customer acceptance to reach the required levels. It may be sooner than we think. I hope not as it will have as disruptive effect as the over extension of hotels in the eighties leading to the growth of management companies and the death of traditional innkeeping.

 

[Lash444]

$5 meal or $4 meal. Wall Mart exists because people choose the cheapest.
No one cares how it's made.

Isn't Walmart and McD's losing market share? Aren't they still the cheapest?

I refuse to buy food from Walmart. I don't know about you. When 90% of their honey stock is from China, and things like produce are the lowest grade available, you are more than welcome to buy all your stuff from there.

Which would be fine, except we are in a thread that has a lot to do with automation killing a lot of jobs that were once able to help put food on people's plates. Price will become the #1 factor when you can't afford anything but the necessities.

 

[Jaskalas]

Isn't Walmart and McD's losing market share?

Maybe if you think of Walmart as an online retailer. I bet they can get their !@# handed to them there. But as a grocery store? You have to pay $1 more per item if you want an alternative.

 

[zinfamous]

Maybe if you think of Walmart as an online retailer. I bet they can get their !@# handed to them there. But as a grocery store? You have to pay $1 more per item if you want an alternative.

Isn't Aldi cheaper? And their quality seems to be a little bit better than Wal-Mart, even though the stores and displays kinda look like shit.

They are a German company, so *I think* they maintain the same restrictions on their food quality that the EU enforces, which is much better than what we have here....but that's merely a guess. I wouldn't be surprised if US Aldi stores are able to operate under US regulations--seems they would be--and business is business. I doubt the corporate heads care all that much about moral-based quality control if they realize how much cheaper they can operate in one very large sector of their franchises.

 

[cubby1223]

What I love is the irony of middle class Republicans taunting minimum wage workers with automation, when it's middle class jobs that are the biggest target of it. When Silicon Valley is looking for industries to disrupt, fast food is not high on the list. That's not a big money pot, and people don't really want their food cooked by a robot.

I have friends who won't order from a take-out place if they do not have online ordering. And these are strong liberal friends. They don't want to talk to a human over the phone. I think you're in for a real surprise by just how much people don't care if the food cooking is automated. Most restaurants you don't see the kitchen at all.

Oh and by the way:
http://www.gizmag.com/hamburger-machine/25159/

 

[DAPUNISHER]

This (automation) is the field I work in, and I'll say that the McD CEO's estimates of cost for automation are shall we say - pie in the sky, overly optimistic, unrealistic.

So a robot arm costs $35k, okay fine. How many do you need? Is that all you need, or will you need custom designed food prep assembly line? It's the latter. What is the support contract cost for that equipment?

Off the top of my head, custom designing something like that, prototyping it, programming it, testing it, and then ramping up manufacturing it to service thousands or tens of thousands of franchises will most likely cost a high 8-digit number before the first unit rolls off assembly lines.

But all that gets aggregated into the final cost of product, right? So what would that look like?

I'd bet that something like that would wind up easily costing 250k + per franchise, plus support contract cost which is almost certainly going to be well upwards of 30k/yr per install if you include PM (prev maint) since a franchise is not likely to keep a controls tech / mechanic on site..

And - this wouldn't automate the entire food prep line. You still have to move product from a truck, to cold storage, to the prep line. You also have to move it from prep line to customer.

Small franchises wouldn't be able to afford this kind of gear, which means the economy of scale / distributing cost of design / build / manufacture starts to fail.

Point being this is nowhere near as easy to do or as straightforward as this CEO says it is. To be blunt, if it were they would have already done it.

Your thinking is too contemporary. Botsourcing is going to replace 100s of millions of workers as this century progresses. And when you say the small guy will not be able to afford it, my question is: for how much longer? The production costs for many of these bots will shrink, while the number produced in a given time will increase significantly according to the articles I have read.

Next, take that small franchise owner's payroll, unemployment, worker's comp, health, and/or any other employee related costs. There is also the losses a biz suffers from human workers being sick, injured, taking unapproved days off, poor job performance, etc. Instead, that owner makes monthly payments on his bot sourcing, out of those same funds. Perhaps he leases, and can upgrade as newer and better features become available. Competition for his biz increases over time, lowering costs even further.

The botsourcing will have a higher profitability as time goes by. And eliminate many of the headaches that go along with humans. Employee roll over alone, can be a real headache and have a very negative effect on biz. While bots will malfunction or breakdown, they will still kick our human butts on long term reliability and job performance consistency.

My take away from it all, is that the present state of botsourcing is a terrible predictor for its future. It is likely to progress at a very rapid pace. Even if it is not your company at the forefront.

Edit: I get that this is your expertise, and you are in the trenches so to speak. And that you are acutely aware of the realities. And that I can only base my opinions on what others have wrote on the topic. That definitely gives you appeal to authority in a debate or discussion. I can only reiterate that your thinking is too right now, not the near future of botsourcing.

 

[JSt0rm]

You forgot to factor in several additional taxes and insurance payments per employee into your costs which are not reflected in an employee's salary.

good point. That means robots should be coming in even faster. but I guess they arent because reasons. May as well raise the min to $15

 

[glenn1]

good point. That means robots should be coming in even faster. but I guess they arent because reasons. May as well raise the min to $15

You can raise it to whatever you want. Either you will have the skills needed to create value to justify hiring you at that wage or you won't.

 

[theeedude]

$5 meal or $4 meal. Walmart exists because people choose the cheapest.
No one cares how it's made.

People absolutely care about how it's made. That's why it would be $4 and not $5. If they saw it as equivalent, it would be same price.

 

[theeedude]

I have friends who won't order from a take-out place if they do not have online ordering. And these are strong liberal friends. They don't want to talk to a human over the phone. I think you're in for a real surprise by just how much people don't care if the food cooking is automated. Most restaurants you don't see the kitchen at all.

Oh and by the way:
http://www.gizmag.com/hamburger-machine/25159/

Yeah, that's article from 2012, where are restaurants with these machines 4 years later? I am going to guess nowhere.

 

[JSt0rm]

You can raise it to whatever you want. Either you will have the skills needed to create value to justify hiring you at that wage or you won't.

apparently $15 a hour is still cheap enough for mcdonalds to hire people.

 

[shady28]

Your thinking is too contemporary. Botsourcing is going to replace 100s of millions of workers as this century progresses. And when you say the small guy will not be able to afford it, my question is: for how much longer? The production costs for many of these bots will shrink, while the number produced in a given time will increase significantly according to the articles I have read.

Next, take that small franchise owner's payroll, unemployment, worker's comp, health, and/or any other employee related costs. There is also the losses a biz suffers from human workers being sick, injured, taking unapproved days off, poor job performance, etc. Instead, that owner makes monthly payments on his bot sourcing, out of those same funds. Perhaps he leases, and can upgrade as newer and better features become available. Competition for his biz increases over time, lowering costs even further.

The botsourcing will have a higher profitability as time goes by. And eliminate many of the headaches that go along with humans. Employee roll over alone, can be a real headache and have a very negative effect on biz. While bots will malfunction or breakdown, they will still kick our human butts on long term reliability and job performance consistency.

My take away from it all, is that the present state of botsourcing is a terrible predictor for its future. It is likely to progress at a very rapid pace. Even if it is not your company at the forefront.

Edit: I get that this is your expertise, and you are in the trenches so to speak. And that you are acutely aware of the realities. And that I can only base my opinions on what others have wrote on the topic. That definitely gives you appeal to authority in a debate or discussion. I can only reiterate that your thinking is too right now, not the near future of botsourcing.

Botsourcing is not new, not at all, and it's not a technical term. It simply means bringing manufacturing and assembly back to the USA through improved productivity via automation.

Now for that, yes I think automation is and always has been the only hope of a future of US manufacturing. For the most part I blame dull minded executives and short-sighted unions for having resisted it for so long. It is also the future of distribution and e-commerce retail operations.

But these are operations where a facility can be built and $50M or more (in the case of manufacturing, a *lot* more) in automation deployed with an expectation that it will last 10-20 years. Hundreds and possibly thousands work at these centers, so replacing 50 semi-skilled workers with a $10M automated system and 3 or 4 high-skilled technicians makes sense.

The only way I see that being mass marketed into burger joints is if the burger joints become as large as small department stores, with sales volumes proportionally higher as well. Deploying million dollar automation systems to a burger joint, then providing any decent level of support and spare / replacement parts for it at small joints that have only 4-5 employees on staff at any given time just isn't cost effective.

I'm sure we'll see, have seen, some interesting proof of concept type places or large automated fast food joints in major metro areas that have the volume. These are usually done to prove a point about the capability of technology to make a burger. But in a practical sense, no, not on a widespread scale unless the nature of fast food turns to walmart sized joints.

 

[Victorian Gray]

Let's bold the other portion of your quote and see what emphasis it places on the story.

Did you not read the rest of that sentence?

"allowing more employees to work directly with guests and boosting customer service."

Now, what was that about emphasis?

 

[JSt0rm]

This (automation) is the field I work in, and I'll say that the McD CEO's estimates of cost for automation are shall we say - pie in the sky, overly optimistic, unrealistic.

So a robot arm costs $35k, okay fine. How many do you need? Is that all you need, or will you need custom designed food prep assembly line? It's the latter. What is the support contract cost for that equipment?

Off the top of my head, custom designing something like that, prototyping it, programming it, testing it, and then ramping up manufacturing it to service thousands or tens of thousands of franchises will most likely cost a high 8-digit number before the first unit rolls off assembly lines.

But all that gets aggregated into the final cost of product, right? So what would that look like?

I'd bet that something like that would wind up easily costing 250k + per franchise, plus support contract cost which is almost certainly going to be well upwards of 30k/yr per install if you include PM (prev maint) since a franchise is not likely to keep a controls tech / mechanic on site..

And - this wouldn't automate the entire food prep line. You still have to move product from a truck, to cold storage, to the prep line. You also have to move it from prep line to customer.

Small franchises wouldn't be able to afford this kind of gear, which means the economy of scale / distributing cost of design / build / manufacture starts to fail.

Point being this is nowhere near as easy to do or as straightforward as this CEO says it is. To be blunt, if it were they would have already done it.

$15 a hour will bring the end of the low skill worker they say... Then an expert weighs in.

 

[Zorkorist]

$15/hour is twice as expensive as today's $7.50/hour.

Look for your cost of basic items to go up too.

-John