How Does Replacing Employees With Ordering Kiosks At Panera

How Does Replacing Employees With Ordering Kiosks At Panera Change Its

How does replacing employees with ordering kiosks at Panera change its break-even point? During 2016, Panera Bread Company (PNRA) is building ordering kiosk centers in its cafes. These ordering kiosks will allow customers to browse nutritional content of its menu items and will allow for personalization of menu items. Panera has stated that wait times will be shortened and order accuracy will be improved by using this new technology. Panera expects to realize labor savings from using the ordering kiosks in place of employees.

The company you work for owns a line of restaurants. The CEO is interested in this concept, but has some questions. Questions Are the kiosks mostly a fixed cost or a variable cost? Explain. Would an employee taking orders at the counter be considered to be a fixed cost or a variable cost? Explain. How does the change to using kiosks to take orders rather than using employees to take orders change the break-even point? Why? Are there any other considerations that the company should look at before implementing something like this? Write a memo to the CEO of the company. (Make up your own name for the company). Your memo should include the following segments: 1) Begin the memo by briefly restating the problem/opportunity; 2) Answer the questions asked by the CEO. 3) Compare alternative courses of action the company can take regarding this; 3) develop your argument for your view while discussing the merits/drawbacks of other options. 4) State your conclusion and the possible consequences of that choice. Your report should be a minimum of two pages in memorandum form. Memo templates are available in Word (while in Word click on F1 and search for memo). Samples of previous student memos are available under the ‘course content’ tab. Avoid plagiarism; use your own words or cite the source of the information if you are quoting someone else. Points will be deducted for poor grammar or spelling. To receive credit for the assignment, submit the case in a single file as an attached Word or Open Source document under the assignment section of Blackboard. To attach a file, click on attachments under the “submission” portion of the assignment. Be sure to check the box on the ‘Plagiarism Tools’ line that agree to submit your paper for checks.

Paper For Above instruction

The ongoing technological transformation within the restaurant industry presents a significant opportunity for companies like Panera Bread and others to enhance operational efficiency, improve customer experience, and optimize costs. Panera’s initiative to introduce ordering kiosks in its cafes exemplifies this trend, promising benefits such as reduced wait times, increased order accuracy, and labor savings. This memo explores the implications of replacing human order takers with kiosks, focusing on cost structures, the break-even point, and strategic considerations for implementation.

Restating the Opportunity

The primary opportunity addressed here is the adoption of self-service ordering kiosks in Panera’s cafes. Such technology aims to streamline the ordering process, improve operational efficiency, and potentially lead to significant labor cost reductions. The move responds to changing consumer preferences for expediency and personalized service, as well as the industry’s push toward automation and digitization.

Cost Classification: Kiosks and Employees

In analyzing the costs associated with kiosks, it is crucial to distinguish between fixed and variable costs. Ordering kiosks represent a substantial capital investment—purchasing, installation, and maintenance—classified primarily as fixed costs. Once installed, these costs do not fluctuate directly with the number of customers served, at least in the short term. Maintenance and periodic upgrades are also largely fixed, provided the number of kiosks remains unchanged.

Conversely, an employee taking orders manually generally incurs costs that can be considered variable, especially if employee hours are adjusted based on customer volume. Typically, labor costs fluctuate with the level of sales, making employee wages a variable cost component. However, some fixed labor costs exist (such as managerial salaries or scheduled staff regardless of demand), but from the operational standpoint, front-line employee wages are largely variable.

Impact on Break-Even Point

Replacing employees with kiosks tends to alter the break-even point, primarily due to the shift from variable to fixed costs. The break-even point is where total costs equal total revenue; thus, how costs are classified influences the volume of sales required to cover these costs.

When kiosks substitute for employees, initial fixed costs increase because of the capital expenditure on technology. However, operational variable costs decrease since fewer employees are required for order-taking. This change typically raises the fixed cost component but reduces variable costs, which can lower the break-even volume if sales volumes are high enough to offset the fixed investment.

This shift can be advantageous in high-volume settings, where the reduced variable costs per customer outweigh the fixed capital expense. Conversely, in low-volume cafes, high fixed costs may increase the break-even point, making the investment less immediately profitable.

Additional Considerations Before Implementation

Before adopting kiosks, the company should evaluate several strategic and operational factors. Customer acceptance of automation varies; younger demographics tend to embrace self-service, but older or less tech-savvy customers may prefer human interaction. Staff adaptation and re-training are essential, ensuring smooth integration and maintaining service quality.

Furthermore, the initial capital investment must be justified through cost savings and revenue enhancement. The company should conduct a thorough cost-benefit analysis, considering maintenance, potential technology obsolescence, and ongoing technological support.

Operational flexibility is another consideration — kiosks may streamline processes but could also reduce personalized service, impacting customer satisfaction. Additionally, data collection through kiosks offers valuable insights into customer preferences, which can inform future menu planning and marketing strategies.

Finally, broader industry trends toward automation and digital ordering systems suggest that early adoption could provide competitive advantages, but the company must balance this with the potential risk of alienating certain customer segments.

Conclusion and Strategic Recommendation

In conclusion, replacing employees with kiosks at Panera can positively influence the company's cost structure and break-even point, especially in high-volume locations. The shift from variable to fixed costs must be carefully managed, with an understanding that significant initial capital expenditure may temporarily elevate fixed costs and the break-even volume. Strategic planning should incorporate customer preferences, technological support, and long-term benefits versus upfront costs.

It is recommended that the company pilot this initiative in select locations with varied customer demographics to gather data and assess impacts comprehensively. Based on pilot outcomes, scaling the initiative can be justified where clear advantages are demonstrated, thus positioning the company for future growth through technological innovation.

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