Popular franchises like McDonald's plan to invest $2 billion into bringing AI and robots into stores and drive-thrus in 2024.

In 2022, American grocery stores spent $13 billion on tech automations.

The Food Industry Association expects spending on things like smart carts and revamped self-checkout aisles to grow 400% through 2025.

Automation is playing a bigger role in fast food and it will play a bigger role still.

The problem is with minimum wage hikes in places like California, with other cost pressures still coming through, it's very expensive now to run a fast food business.

And whilst fast food retailers have tried to remedy that by passing on prices to customers, customers, of course, don't like that and volumes go down.

Americans are spending an average of $475 a month on groceries.

Over the last decade, menu prices at most major fast food restaurants have outpaced national inflation rates, according to research from Finance Buzz.

Popular fast food items like McDonald's McChicken and McDouble, Popeye's Mashed Potatoes and Gravy, Taco Bell's Chalupa Supreme, and Wendy's Small Frosty have all doubled in price since 2014.

Executives on earning calls have taken notice of the high prices and have noted their growth in tech as a way to drive down prices and remain profitable.

If we're doing a good job on the items and prices and the service we provide, saving them money with pickup and delivery, for example, we can continue to grow share.

So we're merchants at the core and we've added through the technological changes that we've made and the service changes that we've made, a dimension to the business that's driving that growth.

We're also investing for long-term growth in areas like digital and technology, as well as our transformation efforts within our global business services organization.

By leveraging the full strength of our global scale, we'll build new and modern capabilities and ultimately unlock speed and innovation for our entire McDonald's system.

The American consumer is starting to pull back on spending and rising food and labor costs are causing the food industry to invest more in automation to lower labor costs and improve sales, in order to stay competitive and take advantage of shifting consumer tastes.

[How AI and automation are taking over grocery stores and drive-thru lanes]

So the only way to square this circle really is to try and reduce costs, and that means automation.

So we will see many more ordering kiosks.

We'll see the use of AI at drive-thrus.

We'll see other areas of the business, including supply chains, become increasingly automated, all with a view of taking out the labor cost.

Despite some grocery stores rolling back on self-checkout automation earlier in 2024, the same companies are now rolling out smart carts.

Amazon is now selling grocers its Dash carts, and this is a smart cart by Keeper Carts, which Instacart acquired in 2021.

The carts are in large chains like Kroger and ShopRite.

What's powerful about Keeper is all the sensors on the device.

So there's the camera sensors that look at the basket.

There's the weights and measure certified sensor, and then there's the location sensor.

And so what retailers are excited about is leveraging those sensors to make sure that they know exactly what's inside the shopping cart.

And so, for example, even if somebody were to hide an item, for example, and put it into the cart, we know with certainty that with the weights and measures scale that something went into the cart.

Instacart also says the carts help customers stay within their grocery budgets.

By having the running total, they're able to ensure that they stay on budget.

There's no apprehension that when you get to the checkout line, you're over budget and you have to have to put things back.

We're also seeing that customers really love the deals, coupon clipping capabilities on the cart.

And that's just the tip of the iceberg in the fast food sector.

McDonald's and CaliExpress have opened fully autonomous stores that operate without human staff.

Because labor is one of the biggest costs for fast food players.

Yum! Brands has even developed a training app for employees.

We've developed an internal mobile app called Super App that we've rolled out to over 9,000 restaurants across the world.

And what it is, it's like having a digital coach in your pocket that helps our restaurant general managers identify areas that can continue to reduce costs of running a restaurant,

coach team members and being able to do their job more efficiently and really providing an overall better experience for us to make sure that there aren't any waste in inventory.

The company's full portfolio includes popular food chains like Pizza Hut, Taco Bell and KFC, and is heavily investing in automation.

Its digital business is booming, with its digital sales accounting for 50 percent of sales in Q1 of 2024, a first for the company.

We can test any concept in a market, partner with a large tech giant and be able to test things like AI and Gen AI with our franchisees.

And where test results have shown is that when customers interact with that voice AI, we're at parity when it comes to accuracy, we're at parity when it comes to being able to understand what the customers want.

And finally, customers are actually responding favorably, saying that the friendliness of voice AI is in some cases exceeding that of a human.

[The risk and reward from the robots]

72% of consumers actively use automated tech like self-checkout and contactless payment.

According to research firm Software Advice, they found that although consumers appreciate the speed and efficiency of automation, they're still hesitant to embrace it everywhere.

We can go in and make sure that a customer comes into the app and feels a personal touch where we know their name, we store their credit card information and make things easy to do.

If we give them value through exclusive deals and promotions, unlocked our loyalty and app and we're able to really see them where they're at and be able to suggest things that they might enjoy.

All this ends up being an experience that they come back for, and it's not just the food.

We're in the try it and see phase of a lot of these AI technologies.

Not only are companies testing new technologies, they're also testing customer reactions.

This is why some retailers are pulling back on self-checkout aisles.

Some customers have pushed back against that, which has meant that retailers have responded by reducing self-checkouts.

With self-checkout, there are a lot more errors.

People misscanning things, people may be deliberately not paying for things and putting them in their bag, and it costs retailers a lot of money.

And whilst they don't talk about theft a lot, it is one of the real reasons why people want to cut back on the use of self-checkout.

But the other issue is that whilst self-checkout is liked by some people, it's absolutely hated by other people.

It makes the customer do more of the work.

And some people just don't like that, especially in a grocery store where you've got a lot of stuff to bag and scan.

And it's seen as a deterioration of the service.

The reason why customers love Keeper is because of everything extending from the screen.

It transformed shopping for being almost this utilitarian thing, a chore.

You go to the store as a chore to a shopping adventure.

The tech isn't without challenges.

The problem with smart carts is they're a very expensive and over engineered technology.

You think about the number of carts an average supermarket has, that is going to cost an absolute fortune for most retailers to replace all those carts with smart carts.

And it's not going to happen on scale.

While grocery retailers struggle with self-checkout, fast food chains are placing more and more self-service kiosks in restaurants.

When customers come in, they love the ability to customize and as they have the ability to customize, we're finding that's also helping customers discover new products that we love for them to learn about.

And it's also helping us see bigger ticket size when it comes to our franchise unit economics.

We've seen ranges go from 18 percent higher to the use of kiosks up to 30 in some of our markets.

And we think this is a win-win for both our customers and for us.

Retailors and fast food outlets can see the benefits, but some of the technology hasn't really proven itself.

There are glitches, there are things that retailers need to look at and to iron out.

[What's next?]

Self-checkout is struggling at grocers.

Self-service is booming for fast food.

AI tech in shopping carts is being well received.

But AI in drive-thru faces many hurdles.

So where does technology go from here?

We remain confident that as we take a look at pricing across our brands and our markets, we'll continue to partner and find ways to make sure we can address cost pressures and give customers the value they expect and know that the ominous brands will do.

In the future, you could imagine things like the Ask Instacart capability, where you could ask Instacart to budget you a full meal plan for the week.

And you could imagine asking it to abide by certain dietary preferences that you have.

And then as you get to the store, you can take that and sink it to the cart and then chop it, chop it really seamlessly.

As automation grows, so do the concerns around job losses.

The Bureau of Labor Statistics forecast a 2 percent drop in total retail jobs from 2022 to 2032.

Still, the Bureau of Labor Statistics predicts that the industry will need more than 500,000 new workers each year to account for turnover.

In the fast food industry alone, the Bureau of Labor Statistics predicts job openings will grow by 2 percent, with one million new workers needed each year from 2022 to 2032.

It's not like automation has replaced all of these jobs.

I think the worry is that over time it will replace more of these jobs and it will lead to it becoming a lot more difficult for folks to get these entry level positions.

We're not quite at that stage yet, but we are in danger of going there at some point in the future.

And a decision has to be taken as to how we deal with that.

Now, it's possible that grocery chains and other retailers will create other roles.

There could be customer service facing roles, more associates wandering the aisles to help customers find things.

So we could see these roles replaced with different types of positions.

But the danger is that some of these traditional positions might disappear because ultimately, retailers do want to reduce costs and automation gives them a way to do that.

What we do believe is that technology can play a really big role in empowering our team members to spend more time on valuable activities, like spending time with the customer.

And technology can help in areas that our customers really value, things like improving order accuracy, reducing the wait time, increasing the speed at drive-thru.

We see a lot of upside over the next several years with AI and technology being able to enhance customer experience while making the team members job a lot easier.

That longer term vision we have that on a five to 10 year horizon, customers shouldn't have to choose between shopping online and in-store.

It'll be one single personalized mode, all powered by Instacart.

While food prices do remain an important part of a customer's decision, we believe that the experience that they have digitally is going to be a key differentiator.

Today, customers want more than just the meal.

They're looking for personalized, easy, frictionless experiences.

And for us, that's what we're investing so heavily into things like AI, self-service kiosks, drive-thru, and other things that can help automate a lot of the work that goes on.