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MCD: A Robot Waiting to Happen?

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May 08, 2013 – Comments (4) | RELATED TICKERS: MCD

Board: Macro Economics

Author: whafa

I bought MCD today after eating a very rare breakfast in one of their stores. I've been meaning to do it for a while, like years now. They satisfy my #1 requirement of paying a dividend higher than 10 year treasuries (actually, higher than 30 year at 3%), and I don't see people getting thinner or healthier except at the margin.

But the thing that made me pull the trigger today was the realization that the whole business could be automated.

I've been eating the same Sausage McMuffin with Egg since I was 7 years old. The patty hasn't changed, the muffin hasn't changed, the recipe hasn't changed. In fact, that's one of the reasons people turn to the golden arches in the first place: It's comforting, consistent, nostalgic food for a very large number of people. In fact, I'd guess that the #1 variation in my McMuffins over the years has been due to human error.

The basic layout of the store hasn't changed either. Ordering station, kitchen, with a hot rack in between to pass the food between. Fries station on the side, ice cream station opposite side.

The whole place is a robot waiting to happen. I can imagine in 10 years walking into a McDonald's with 2 people on staff to maintain the burger stations and replace food inputs as they run low. For a company that employs 1.7 million people worldwide, the impact on margins will be impossible to ignore. I'd be shocked if they're not working on it right now.

This is just a hunch, but I saw it today. So I bought some stock.

4 Comments – Post Your Own

#1) On May 09, 2013 at 12:04 AM, jiltin (29.53) wrote:

I like the idea of automating MCD, but that does not mean it is good buy. The robot waiting to happen may take place with another franchise. If that happens, MCD may not be attractive.

However, I appreciate your idea of automating MCD.

 

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#2) On May 09, 2013 at 11:04 AM, ikkyu2 (99.24) wrote:

I'd argue that it basically is already automated.  The moving parts that are used now are mostly human, but that's because those are cheaper to run on a per-hour basis than a good FANUC or Cincinnati Milacron would be.

Few years ago I blogged that McD is generally misplaced in its sector - it is a tech company.  The food, and its means of assembly and delivery, as a business model share more in common with DuPont or Apple than they do with the family run restaurant down the block.

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#3) On May 09, 2013 at 8:20 PM, jiltin (29.53) wrote:

Note his point "For a company that employs 1.7 million people worldwide".

Hence, I still feel the idea is good if workable solution is there. It will improve the profitability. However, jobless increases.

Machines can be stopped from one place to another. There are supply chain factories, such as chip makers, entirely automate the function.

If automation is possible not only MCD, but all many fast food restaurants follow the trend.  

 

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#4) On May 09, 2013 at 8:21 PM, jiltin (29.53) wrote:

You see nowadays banks reducing the teller counters...

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