Why Fast-Food Joints Are So Mobile-Happy - InvestingChannel

Why Fast-Food Joints Are So Mobile-Happy

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Fast Food’s Biggest Problem

Source: Google Finance 

Over the long haul, QSR (quick-service restaurant) stocks tend to be fantastic investments. We think this will continue to be the case. If you invest with a long-term time horizon, you can’t go wrong with any of the big names in this category. 

The biggest problem these companies face: labor. From the union push at Starbucks (SBUX) to California’s attempt to set a super high minimum wage for fast-food workers, it’s in the best interest of quick-service establishments to find ways around hiring people. More evidence to support this conundrum in a second, but first… 

Starbucks led the way and went mobile and digital more than a decade ago. Domino’s Pizza (DPZ) followed suit shortly thereafter. Now, basically everyone’s on board with an app for ordering and rewards as well as in-store touch-screen ordering that doesn’t involve talking to an employee.   

At Starbucks, mobile ordering and payment made up more than 26% of revenue in Q4 2022. Rewards members accounted for 55% of the company’s domestic revenue. 

At Domino’s, more than 75% of U.S. sales came via digital channels. 

Roughly 25% of McDonald’s U.S. sales came via its app, delivery, or an in-store digital kiosk. 

While these numbers don’t mean the end of hourly workers, they could mean the need for fewer hourly workers, which might be good news for everyone involved.


Why Fast-Food Joints Are So Mobile-Happy

Key Takeaways:

  • You can’t blame fast-food workers for quitting. 
  • While fast-food joints er, quick-service restaurants pay more today than they did last year, there’s still a retention problem. 
  • No matter how you feel about hourly wage work in America, what’s happening is actually good news for restaurant stocks.

If you’ve worked in hospitality or retail, you know it’s not easy. You deal with quite a few jerks. The money isn’t great. Sometimes it’s not even good. And you’re expected to put in a ton of effort for a job you probably don’t care all that much about. If you have a crappy manager, the struggle is even realer. 

Fast-food joints started calling themselves “quick-service restaurants” for a reason: to change perception. It’s a euphemism. So as much as we admit to loving the occasional splurge at these establishments and enjoy covering the space, we’re still gonna call them fast-food places, if that’s okay with you. 

A recent report from Restaurant Dive reveals that even though 80% of fast-food jobs paid more in December 2022 than they did in December 2021, there’s still a retention problem:

  • Just 54% of fast-food workers hit the 90-day mark before quitting in 2022. 
  • Fast-food employees were 5x more likely to quit due to miscommunication with management during their first three months of work than after. 

So the surge you see in mobile-order pitches and in-store kiosks is happening for a reason. Same goes for the QR codes you have to scan on your phone to access the menus at some sit-down restaurants. They’re not mere relics of the pandemic. In many places, they’re here to stay. 

Because they require fewer employees or, at the very least, less engaged employees. Digitizing part of a cashier or server’s job means less for that person to do and worry about. Or that one person can more easily do two or more people’s jobs. 


The Bottom Line: However you feel about wage labor in the fast-food and broader hospitality space, you can probably agree on one thing: There’s a push to go mobile and digital, not only to suit consumer preference but to find a way around hiring so many people. 

As mobile and digital ordering and in-store kiosks continue to comprise a larger portion of sales, expect fast-food restaurants to trim staff. They’ll keep the best workers and pay them a bit more, saying goodbye to the employees they view as slackers, or more trouble than they’re worth. 

Between saving on labor costs and making life easier for consumers, The Juice thinks this bodes well, particularly for fast-food restaurants that thrive on loyalty and quick, high-volume service with as few friction points as possible.

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