A lot has been made about the benefits of artificial intelligence, particularly as it relates to how big cloud companies such as Amazon (AMZN), Alphabet ‘s Google (GOOGL) and Microsoft (MSFT) are developing the software, and how hardware companies like Nvidia (NVDA) are making the brains that make all that AI software possible. That’s certainly been a boon to all of those Club names as their stocks have soared this year. However, what hasn’t got as much attention is the opportunity that generative AI applications can bring to other sectors in the form of increased productivity and efficiency — and ultimately, margin improvements. The quick-serve restaurant (QSR) industry, for example, is an area poised to see huge tailwinds from AI. Wendy’s (WEN) and Jack in the Box (JACK) certainly think so as vocal, recent early believers. For the Club portfolio, our QSR name is Starbucks (SBUX). We think the coffee giant could increase profitability through the use of generative AI at its drive-thru windows, which would allow the chain to reassign difficult-to-find workers within their current locations to tasks that require the human touch and/or to redeploy them to open up new stores. Why the QSR industry? For starters, we’ve already seen what Wendy’s wants to do. In a new partnership with Alphabet, the burger chain plans to use a custom AI chatbot at drive-thrus. CEO Todd Penegor told Jim Cramer in a May interview for “Mad Money” that he wants to “lean into late night,” which has typically been an underserved daypart. Wendy’s will pilot its new AI drive-thru tech this month at some locations in the Columbus, Ohio, area. Jack in the Box has also been looking into ways that artificial intelligence can make the company more efficient at a time when inflationary pressures on the economy have increased food costs. CEO Darin Harris told Jim recently that his team is looking to enhance profitability via an improved labor model that leverages robotics and AI. In fact, Harris said that a voice AI solution currently used at company Del Taco stores is already taking about 85% of the orders at the locations where it’s been deployed. The AI is proving more effective than its human counterparts at upselling — convincing customers to buy additional or more expensive menu items. In an attempt to extrapolate how such AI applications could help Starbucks, we first wanted to recognize the drag that the ongoing labor shortage in the U.S. has had on hiring, which has left many food service businesses scrambling to staff the locations they already have — let alone expand. Adopting a Wendy’s-like AI model at Starbucks’ drive-thrus could alleviate some of the hiring issues by shifting current would-be drive-thru workers into different open roles or ones that can’t be done by machines. The AIs could even expand accessibility and grow the customer base by recognizing many different languages (besides just English), including sign language. Drive-thru locations, as we see…
Read More: Starbucks could boost profits by putting AI chatbots at its