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Fast Casual: Quantifying the Impact of Automation

RJ Hottovy
Oct 6, 2023
Fast Casual: Quantifying the Impact of Automation

Ahead of next week’s Fast Casual Executive Summit and Chipotle’s announcement that it will begin testing an automated digital makeline assembly process, we thought we’d take a closer look at one of the topics we are most often asked about: what impact will robotic automation have on the limited-service restaurant industry?

Ask almost any restaurant operator about what keeps them up at night, and the answer will likely be labor availability. As such, it’s not surprising that more and more restaurant chains are evaluating automation as a way to address labor issues. Already, we’ve seen White Castle adopt Miso Robotics’ burger-flipping robot Flippy at a Chicago-area restaurant, which was then adapted to Flippy 2.0 to take on additional responsibilities around the kitchen. This isn’t Chipotle’s first foray into automation either, as they began testing Miso Robotics’ Chippy robotic solution to cook and season Chipotle tortilla chips in 2022. The end goal of these machines is to make restaurants more efficient by freeing up employees from performing routine, repetitive tasks and improving overall speed of service.

Sweetgreen has also embraced automation, including the application Infinite Kitchen technology at its store in Naperville, IL. The technology–which leverages the Spyce technology that the company acquired in 2021–allows customers to customize their salads or bowls via self-service kiosks, mobile apps, or via tablet from the restaurant’s “host”. From there, the bowls are moved down a conveyor belt as the ingredients are evenly dispersed. The restaurant is not completely automated however and does require some human interaction (team members add the final touches to an order at the finishing station).

Source: Sweetgreen 5/10/23 Press Release

On its Q2 2023 update, Sweetgreen CEO Jonathan Neman highlighted three benefits of the Infinite Kitchen, including: (1) faster throughput (including the capability to produce between 400-500 bowls, plates and sides an hour, which is 50% more than a typical restaurant's front and digital make line combined); (2) a more consistent in-store experience, with less congestion in the restaurant; and (3) labor efficiency, as the company hired one-third fewer team members than a typical new restaurant with similar volume.

Although the Infinite Kitchen has only been open a few months, the early results have been promising.  Our data indicates that during Q3 2023 (the first full quarter that Infinite Kitchen has been open), visits to the Naperville location exceeded the chain average by more than 50%, which reinforces Neman’s comments about faster throughput (below). Management also noted that restaurant-level margin for the Naperville store was 26% in June (the first full month of operation), significantly higher than the chain average of 20.4%. As the restaurant continues to ramp the Infinite Kitchen format–including a second location in Huntington Beach, CA before the end of the year–it could be a meaningful contributor to future profitability.

We’ve looked at throughput trends for Chipotle in the past, but based on the visit per location trends we’ve seen from sweetgreen’s Infinite Kitchen format and Chipotle’s plans to adopt a similar model, we thought we’d revisit the topic. Below, we’ve compared peak hour (11:00 AM-2:00 PM) visits per location for sweetgreen, Chipotle, and CAVA (all three are “assembly line” fast casual concepts) for Q3 2023 compared to a year ago period.

While automation hasn’t been adopted widely enough at any of these chains to have a material impact on peak hour throughput (and there are other factors that may be impacting visit per location trends such as pricing, return-to-office, and population migration), we’ve seen some positive improvement year-over-year. This improvement is likely the result of better-in-store training and reduced turnover (Recall that Chipotle management noted that it had a lot of new employees last summer that were "still getting trained up on the basics of great throughput"). However, improved training processes will also be an important step in implementing new automation technologies in the future. It’s unlikely that every restaurant will see the 50% lift in production/visitation capacity due to implementing automation technologies, but the profitability potential that sweetgreen’s Infinite Kitchen and other automated formats offer will likely push more restaurant operators in this direction.

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RJ Hottovy

Head of Analytical Research,

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank. R.J. also brings a wealth of experience with early-stage investments as a committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he advised over 50 food service companies on more than $200 million in early-stage capital raises and M&A transactions.

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