Nearly a year after Shake Shack dropped its first cashless kiosk in a Manhattan restaurant, the company is beginning to grow its electronic ordering systems to more locations. In a second quarter earnings call last week, CEO Randy Garutti confirmed that the fast-casual burger chain is expanding its experiment with cashierless ordering to more stores with a focus on markets like the Bay Area and Seattle with higher minimum wages.
Garutti told analysts that five Shake Shacks currently feature a hybrid ordering system with both kiosks and cashiers, according to a Seeking Alpha transcript of the call. Garutti qualified the expansion by stating that the company still has a “lot to learn before we do any further rollout” of the cashless kiosks. Garutti continued that some “newer Shacks” may open with the hybrid cashless format in markets with “high labor costs such as the Bay Area and Seattle.”
Restaurateur Danny Meyer, hospitality guru and co-founder of Shake Shack, once appeared to view automation in Shake Shacks with skepticism. “We think differently about automation because what we do takes full hands and full hearts,” Meyer remarked in a 2016 interview with Eater. “It takes human beings and we have no desire to turn human beings into machines, iPads, or other things that take away the opportunity for people to experience Shake Shack with the hospitality that built our company for 32 years.” But a year later, Shake Shack was heralding the roll out of its first completely cashless restaurant at Astor Place.
Early visitors including Eater New York critic Robert Sietsema praised the faster transaction times with the kiosks, but cash-loving customers ultimately revolted against the inegalitarian format that discriminates against people that don’t have debit and credit cards. Shake Shack responded by adding back cashiers at the location with the option of using the kiosk.
In this latest call, Garutti seemed more optimistic about the hybrid format. “We’ll say we’ve gotten some of our highest marks from our guest surveys on the experience of the kiosks, even versus our other channels with which you can order,” he said. “So that’s encouraging, people like it, but we only have again today five Shacks that offer it.”
Issues regarding labor were a recurring theme throughout the call. Garutti noted that labor costs year-over-year were up significantly and that the company is trying to strike a balance between offering competitive wages that attract employees and and offering opportunities to move into higher wage positions, while also keeping an eye on the bottom line. In Nashville, for example, Garutti noted that the chain is offering a starting wage of $13 — above Tennessee’s state minimum of $7.25. Comparatively, in “higher increasing” wage markets like New York, Shake Shack is paying the minimum wage. “When it comes to kiosks, it’s absolutely one of our goals to decrease the payroll over time,” Garutti said.
“Look, it’s a changing economy. It’s hard and it’s always been hard,” he said. “This is 17 years in the making this story and this question has never been an easy one. And I’m pretty certain that 10 years from now, when we’re talking, it will still be a hard one.”
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