In 2017, Shake Shack opened its kiosk-only ordering for the first time in New York City; It was immediately met by negative reviews. Customers were put off by the cashless ordering, as well as the bizarre lack of human interaction, and flooded the internet with poor reviews. Shake Shack was trying to demonstrate their commitment to technology, a core of their business to this day, it was simply a few years too early.
Kiosk ordering began making waves through Panera, who began their program with cafes around 2013. Through an internal company study, Panera determined that locations with kiosks experienced mid-single-digit lifts in same stores sales above the control group. However, it was still met with significant pushback from investors as the public did not embrace automated ordering. Investors believed kiosks took away from the traditional hospitality of ordering through a real person, therefore diminishing the brand, and would never be adopted by the public. However, by Q4 2016, Panera kiosk stores reported 450 basis points higher than franchised stores without them. With 70% of its cafes having kiosk technology, and an overwhelmingly positive financial influence, other chains took notice.
In the six short years since Shake Shack’s first kiosk, times have drastically changed. In the Q2 2023 earnings report, Shake Shack reported $271.8 million in revenue, up 17.8% in the same period a year prior; and kiosks are playing an integral role. Shake Shack now has kiosks in 250 of 270 company-owned restaurants throughout the United States and plans to complete the takeover in every location by the end of the third quarter.
Kiosks are crucial in that they support both revenue generation and cost savings. In the quarterly earnings report, Shack Shake reported kiosks sales to double year over year, with the kiosk having a “high single-digit percent lift” when compared to a traditional cashier. People typically spend on niceties like ice cream shakes, an item they might not get otherwise, and an incredibly high-margin item for Shake Shack. According to CFO Katie Fogerty, kiosks have become “Shake Shack’s most profitable sales channel.” Shake Shack has also been able to cut their labor by about “50 hours per week”, a significant saving on one of the biggest costs of any restaurant. Qualitatively, removing staff members from taking orders frees them up for enhancing guest experience, such as cleaning, restocking, or hand delivering meals to a table. In other words, hospitality opportunities can actually increase with the use of kiosks.
Kiosk ordering in other quick service restaurants has even seen greater financial growth than Shake Shack. Crazy Bowls & Wraps, a 16-unit healthy fast casual based out of St. Louis, rolled out Bite Kiosk ordering to all its 16 stores and experienced “check averages for orders placed on kiosks increase by 38 percent” according to Shannah Preseau, an executive for Crazy Bowls. Bite, who Branded invested in 2022, attributes this to its AI driven recommendation engine that typically produces a 20% increase in average check versus a traditional human cashier. No change in product offering or marketing tactics, just superior technology.
Now that multiple big brands (McDonalds, Burger King, Taco Bell) have embraced automated ordering, the future is incredibly promising. According to QSR Magazine, by 2027, the self-service market is expected to reach $63 billion, up from $40 billion in 2022.
Customers are now embracing the kiosk revolution as well. Research indicates that about 65% of quick-service customers prefer kiosks over traditional ordering systems, a far cry from Shake Shack’s initial launch. And while some owners express fear that kiosk ordering will negatively impact their experience, the National Restaurant Association actually found that 79% of customers believe it makes their experience more convenient.
Branded is excited to play a role in the kiosk revolution. Undoubtedly, smart operators understand kiosks are becoming financially indisputable tools that are here to stay. I can’t wait to see what technological advancement profoundly changes quick service dining next.