From apps for fast food and food delivery to self-checkout and self-service kiosks, your favorite grocery stores and fast food chains are changing fast. Popular franchises like McDonald's plan to invest $2 billion into bringing AI and robots into stores and drive-thrus in 2024. In 2022, American grocery stores spent $13 billion on tech automations. The Food Industry Association expects spending on things like smart cards and revamped self-checkout aisles to grow 400% through 2025. Automation is playing a bigger role in fast food, and it will play a bigger role still. The problem is with minimum wage hikes in places like California, with other cost pressures still coming through. It's very expensive now to run a fast food business. And whilst fast food retailers have tried to remedy that by passing on prices to customers, customers, of course, don't like that and volumes go down. Americans are spending an average of $475 a month on groceries over the last decade.

menu prices at most major fast-food restaurants have outpaced national inflation rates, according to research from Finance Buzz. Popular fast food items like McDonald's McChicken and McDouble, Popeye's mashed potatoes and gravy, Taco Bell's Chalupa Supreme, and Wendy's Small Frosty have all doubled in price since 2014. Executives on earnings calls have taken notice of the high prices and have noted their growth in tech as a way to drive down prices and remain profitable. If we're doing a good job on the items and prices and the service we provide, saving them money with pickup and delivery, for example, we can continue to grow, share. So we're merchants at the core and And we've added through the technological changes that we've made and the service changes that we've made, a dimension to the business that's driving that growth. We're also investing for long-term growth in areas like digital and technology, as well as our

transformation efforts within our global business
services organization. By leveraging the full strength of our global scale,
we'll build new and modern capabilities, and ultimately unlock speed and
innovation for our entire McDonald's system. The American consumer is starting to pull back on
spending, and rising food and labor costs are causing the food industry to invest more into automation, to
lower labor costs, and improve sales in order to stay competitive and take advantage of shifting consumer
tastes. So the only way to square this circle really is to try
and reduce costs. And that means automation. So we will see many more ordering kiosks. We'll see the use of AI at drive-thrus. We'll see other areas of the business, including supply
chains, become increasingly automated, all with a view of taking out
the labor cost. Despite some grocery stores rolling back on
self-checkout automation earlier in 2024, the same companies are now rolling out smart carts.

Amazon is now selling groceries. It's Dash Carts, and this is a smart cart by Keeper Carts, which Instacart acquired in 2021. The carts are in large chains like Kroger and Shoprite. What's powerful about Caper is all the sensors on the device. So there's the camera sensors that look at the basket, there's the weights and measures certified sensor, and then there's the location sensor. And so what retailers are excited about is leveraging those sensors to make sure that they know exactly what's inside the shopping cart. And so, for example, even if somebody were to hide an item, for example, and put it into the cart, we know with certainty that with the weights and measures scale, that something went into the cart. Instacart also says the carts help customers stay within their grocery budgets. By having the running total, they're able to ensure that they stay on budget. There's no apprehension than what you get through the checkout line.

You're over budget, and you have to put things back. We're also seeing that customers really love the deals, the coupon clipping capabilities on the cart. And that's just the tip of the iceberg in the fast-food sector. McDonald's and Cali Express have opened fully autonomous stores that operate without human staff because labor is one of the biggest costs for fast-food players. Cali Express' parent company, Yum! Brands, has even developed a training app for employees. We've developed an internal mobile app called Super App that we've rolled out to over 9000 restaurants across the world. And what it is, is it's like having a digital coach in your pocket that helps our restaurant general managers identify areas that can continue to reduce costs of running a restaurant, coach team members, and being able to do their job more efficiently, and really providing an overall better experience for us to make sure that there aren't any wastes in inventory.

The company's full portfolio includes popular food chains like Pizza Hut, Taco Bell, and KFC, and is heavily investing in automation. Its digital business is booming, with its digital sales accounting for 50% of sales in Q1 of 2024, a first for the company. Where we can test any concept in a market, partner with a large tech giant, and be able to test things like AI and genAI in with our franchisees. And what our test results have shown is that when customers interact with that voice AI, we're at parity. When it comes to accuracy, we're at parity when it comes to being able to understand what the customers want. And finally, customers are actually responding favorably, saying that the friendliness of the voice AI is in some cases exceeding that of a human. 72% of consumers actively use automated tech like self-checkout and contactless payment, according to research firm Software Advice. They found that although consumers appreciate the speed and efficiency of automation, they're still

hesitant to embrace it everywhere. We can go in and make sure that a customer comes into
the app and feels a personal touch where we know their name. We store their credit card information and make
things easy to do if we give them value through exclusive deals and promotions, unlock our loyalty
and app, and we're able to really see them where they're at and be able to suggest things that they
might enjoy. All this ends up being an experience that they come
back for. And it's not just the food. We're in the try it and see phase of a lot of these AI
technologies. Not only are companies testing new technologies,
they're also testing customer reactions. This is why some retailers are pulling back on
self-checkout aisles. Some customers have pushed back against that, which has
meant that retailers have responded by reducing self-checkouts with self-checkout. There are a lot more errors. People miss scanning things, people may be deliberately
not paying for things and putting them in their bag.

and it costs retailers a lot of money. And whilst they don't talk about theft a lot, it is
one of the real reasons why people want to cut back on the use of self-checkout. But the other issue is that whilst self-checkout is
liked by some people, it's absolutely hated by other people. It makes the customer do more of the work, and some
people just don't like that. Especially in a grocery store where you've got a lot
of stuff to bag and scan, and it's seen as a deterioration of the service. The reason why customers love caper is because of
everything extending from the screen. It transforms shopping from being almost this
utilitarian thing, a chore you go to the store as a chore to a shopping adventure. The tech isn't without challenges. The problem with smart carts is they're a very
expensive and overengineered technology. You think about the number of carts an average
supermarket has that is going to cost an absolute

fortune for most retailers to replace all those carts
with smart carts, and it's not going to happen on scale. While grocery retailers struggle with self-checkout,
fast food chains are placing more and more self-service kiosks in restaurants. When customers come in, they love the ability to
customize, and as they have the ability to customize, we're finding that it's also helping customers
discover new products that we love for them to learn about, and it's also helping us see bigger ticket
size. When it comes to our franchisee unit economics, we've
seen ranges go from 18% higher through the use of kiosks, up to 30% in some of our markets, and we think
this is a win-win for both our customers and for young retailers. And fast food outlets can see the benefits, but some of
the technology hasn't really proven itself. There are glitches. There are things that retailers
need to look at and to iron out.

Self-checkout is struggling at grocers. Self-service is booming for fast food. AI, tech, and shopping carts are being well received, but AI and drive-thru face many hurdles. So where does technology go from here? We remain confident that as we take a look at pricing across our brands and our markets, we'll continue to partner and find ways to make sure we can address cost pressures and give customers the value they expect, and know that the dominant brands will do. In the future, you can imagine things like the Ask Instacart capability, where you could ask Instacart to budget you a full meal plan for the week, and you could imagine asking it to abide by certain dietary preferences that you have. And then as you get to the store, you can take that and sync it to the cart and then shop it, shop it really seamlessly. As automation grows, so do the concerns around job losses. The Bureau of Labor Statistics forecasts a 2% drop in total retail jobs from 2022 to

2032. Still, the Bureau of Labor Statistics predicts
that the industry will need more than 500,000 new workers each year to account for turnover
in the fast food industry alone. The Bureau of Labor Statistics predicts job openings
will grow by 2%, with 1 million new workers needed each year from 2022 to 2032. It's not like automation is replaced all of these jobs. I think the worry is that over time, it will replace
more of these jobs, and it will lead to it becoming a lot more difficult for folks to get
these entry-level positions. We're not quite at that stage yet, but we are in
danger of going there at some point in the future, and a decision has to be taken as to how we
deal with that. Now, it's possible that grocery chains and other
retailers will create other roles that could be customer service-facing roles, more, more associates
wandering the aisles to help customers find

things so we could see these roles replaced with
different types of positions. But the danger is that some of these traditional
positions might disappear because ultimately retailers do want to reduce costs, and
automation gives them a way to do that. What we do believe is that technology can play a really
big role in empowering our team members to spend more time on valuable activities, like spending time with
the customer, and technology can help in areas that our customers really value. Things like improving order accuracy, reducing the
wait time, increasing the speed at drive through. We see a lot of upside over the next several
years, with AI and technology being able to enhance customer experience while making the team member's job
a lot easier. That longer term vision we have that on a 5 to 10 year
horizon. Customers shouldn't have to choose between shopping
online and in store. It'll be one single personalized mode, all powered by
Instacart. While food prices do remain an important part of the
customer's decision, we believe

that the experience that they have digitally is going
to be a key differentiator. Today, customers want more than just the meal they're
looking for personalized, easy, frictionless experiences. And for us, that's where we're investing
so heavily into things like AI, self-service kiosks, drive-through, and other things that can help automate
a lot of the work that goes on.

How AI And Automation Are Taking Over Grocery Stores And Drive-Thru Lanes

Welcome to the official YouTube channel for CNBC. From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

For real-time news updates from around the world, visit: http://www.cnbc.com

For CNBC's primetime TV lineup, visit http://tv.cnbc.com

For CNBC's International YouTube channel, visit: http://www.youtube.com/cnbcinternational