The autonomous mobile robot Tally 3.0 scans the inventory of a grocery store.
Automation and robotics are typically associated with multi-million dollar budgets in multi-billion dollar companies. But as the cost of technology has come down, it has become more affordable for small businesses, even small businesses.
Outside of Atlanta in Jonesboro, Georgia, That Burger Spot!, a burger and wing restaurant with four locations, has grown tired of being slowed down by phone orders.
There are beef burgers, turkey, Impossible, black beans, fish, chicken and more. Then there is the question of the number of patties, sauces and other customizations. Considering all the choices, a single order over the phone took an average of seven to eight minutes. And that’s only if there were staff on hand to take those orders.
“Our menu is a little complex, there are a lot of options,” said Cedric Pool, president of That Burger Spot Franchising, Inc.
“Staff…that was a problem and continues to be a problem,” Pool said. “We thought we could automate the order taking process, we wouldn’t have to pay someone to do it.”
After some research, they found a solution in Grubbrr, which sells standalone kiosks that can take in-store orders and integrate them with online ordering and a point-of-sale system. Pool started with two kiosks in one location, costing $14,400, which is roughly the amount the company would pay someone over the course of a year to take orders over the phone.
After encouraging customers to use the kiosk and order online, the restaurant’s average ticket order rose from around $19 to over $21. Average sales per hour worked rose from the high $50 range to $85, Pool said.
“Restaurants have been notorious laggards when it comes to technology. And they’ve done so primarily because they’ve had access to extremely low labor costs,” said Sam Zietz, CEO of Grubbrr.
According to a recent report by the National Restaurant Association, seven out of 10 restaurateurs said they currently do not have enough employees to meet customer demand. The restaurant industry added 1.7 million jobs in 2021but many restaurants are still severely understaffed and expect labor shortages to continue to hamper growth.
In the most recent CNBC|SurveyMonkey survey of small businesses for the first quarter, 17% of respondents in the accommodation and food service industries cited labor shortages as the biggest risk to their business.
Dirk Izzo, senior vice president and general manager of NCR Hospitality, a technology provider for restaurants, said that in cities like Denver and Jacksonville, Florida, customers cite costs for kitchen and front desk staff that are 20 to 40% higher. than a year ago.
“If you’re picking up those costs, anything you can do to automate things is a big savings,” Izzo said.
One example of technology that has become mainstream and affordable for restaurants is contactless ordering and payment. More and more restaurants are using at-the-table QR codes that push customers to order and pay from their phone. This saves staff time, who would otherwise have to pick up the order and manually enter it into the POS system.
The cost of robotics is being driven down by broader investments from the global smartphone industry and the self-driving car industry.
“The cost of this technology has come down significantly,” said Brad Bogolea, co-founder and chief executive of Simbe, which provides an autonomous robot that uses computer vision to track inventory at a grocery store, drugstore or hypermarket.
For now, Simbe mainly works with large retailers, but Bogolea said the company also works with smaller retailers with 50 to 100 stores. Simbe’s robotic inventory can check an entire store’s inventory three to four times a day and place orders directly when items start to run out. “It is not humanly possible to scan at this frequency or fidelity with human labor in these environments,” Bogolea said. Retailers traditionally spend 30 to 100 hours per store per week on inventory.
In many cases, technology vendors offer automation as a service. Instead of dealing with large upfront costs for equipment, businesses pay monthly fees. GreenSeed Contract Packaging, located outside of Chicago, implemented robotics to automate some particularly repetitive packaging functions, such as packing baby snacks into a box or moving packed boxes off the line on a pallet. The company is billed monthly based on the number of hours the robot works.
“Instead of using an agency to get a temporary worker, you can use a robot,” said David Gray, CEO of GreenSeed. Depending on the structure of the contract, the cost of robotics is 40% to 50% of what it would pay to hire a person, which costs at least $17 or $18 an hour, not including benefits or temp agency fees. “That way you can really cut costs and get better consistency,” Gray said.
Although the cost of technology has come down, smaller companies – which lack economies of scale – still have to spend more as a percentage of revenue than their larger counterparts. Outside the food sector, a telling example comes from the world of accounting. According to a recent Ernst & Young survey, 70% of large companies with revenue of $30 billion or more plan to spend between $2 million and $6 million on tax automation technology. In comparison, 81% of small businesses with less than $1 billion in revenue plan to spend between $1 million and $3.99 million, less, but not that much.
“It’s a strain on small businesses where they spend almost as much,” said David Helmer, global head of tax and financial operations at Ernst & Young.
Inflation impacts how small businesses view the cost of automation compared to rising costs in other key areas of their business.
San Francisco-based Nana Joes Granola has been facing higher raw material and labor costs and is trying to figure out how to cut costs for its premium granola as consumers take a closer look at decisions of portfolio. Michelle Pusateri, owner of Nana Joes Granola, said options include reducing the volume of bags by a few ounces, or reformulating the recipe to reduce ingredient costs, or figuring out how to use automation for her production process. and equipment that can make it easier to pump more volume.
The company, which counts Whole Foods among its retail partners, faces a highly competitive market and while it was able to pass some costs onto customers in 2021 as sales soared, it is harder to be a higher-cost granola during inflation, Pusateri said. .
The company received a Covid EIDL loan, which was mainly used to source ingredients that had risen in price, an inflationary factor that forced it to buy higher volumes to get better deals. But Nana Joes Granola has also earmarked a small portion of that loan for automation on the packaging side of production, and it may also need to take out commercial loans for equipment.
“I don’t think inflation is going to go away anytime soon. We’ll be stuck in there and having more volume to pump with the same staff and same overhead is what we’re looking at now,” Pusateri said.
Pusateri, who said she supports the higher wages workers receive across the economy, adds that investing in automation would not mean downsizing. “The women who have worked for us since 2016 have been doing the same things over and over again and there’s fatigue in that,” she said.
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