We don’t regularly read Nation’s Restaurant News or Fast Casual. We’ve always felt these two outlets constrained their writers from much critical thinking in order to win friends in the industry… which doesn’t really assimilate with our style. That’s why we missed an article from the latter by more than six months, but it only further proves what we’ve been saying for years:
Brick and mortar businesses are the worst run businesses we’ve ever seen.
Johnny Rockets is finding itself in a tough market. The better burger concept has become overplayed, and casual restaurants are struggling. To revitalize their brand, Johnny Rockets had to make a tough choice: pivot to a quick service (QSR) concept or risk a more uncertain future.
According to Johnny Rockets’ Senior Director of IT, Harry Yu, their move to QSR is about the following:
The intent is to enhance guests’ experience, speed of service, to help them get their order quicker and easier,” he said. “It’s aimed to enhance the guest experience so they don’t have to go and wait in front of a register for a to-go order.
This is definitely an interesting move to watch. A number of restaurants will need to rethink their business model as consumers demand more convenience and younger generations would rather spend money on delivery fees than tip the underproductive wait staff.
You know what’s even more interesting though? How much Johnny Rockets blew on some technology in this business model change. Like their brethren at Panera, Johnny Rockets leadership didn’t appear to bother with any diligence in making their decisions on technical solutions.
What did Johnny Rockets do?
Johnny Rockets is implementing self-ordering kiosks. There’s nothing wrong with this approach, and Johnny Rockets may be onto the larger trend of self-service. But they paid literally 100x more for the kiosks than they should have. The number was so large that it even struck the author of the Fast Casual article as a crazy amount. He tells us it was Johnny Rockets who provided the figure, and NCR who told him the figure was crazy (our words, not NCR’s).
How much did and is Johnny Rockets spending on its self-order kiosks?
Each kiosk represents a $170,000 investment, with an expected ROI of 21 to 24 months, the company said.
We’re not sure how Johnny Rockets can begin to pull this number out a hat.
Let’s do a quick rundown of some data points.
Kiosk hardware costs $1,500 to $2,000, particularly towards the lower end of that range if you are buying a good number of them. Software for online ordering (which is all you’re running on the kiosks) costs $100/mo per location. Ask any number of online ordering providers if you care. If we assume 3 kiosks per location, plus an implementation fee and support, and we annualize the ordering software, maybe we’re at $10,000 (which was the upper range of what NCR provided us, by the way). For one kiosk, a $1,700 price tag seems more than fair.
Apparently that wasn’t high enough for Johnny Rockets. They’re like that rich Brit on the old Crank Yankers show who is always telling everyone to double their rates because money is no object.
How did moneybags Johnny Rockets get to $170K per terminal?
To find out, we asked the man in charge of the project, Harry Yu.
Harry said… well, absolutely nothing. Restaurant leadership has too frequently demonstrated that it has a difficult time responding to inquiries, remember? That’s why they’re still in the Hadean Eon. So the radio silence was to be expected, sadly.
Our guess is that Johnny Rockets built everything in-house because it was a fantasy for one of their technical staff. They amortized the effort and crossed their fingers that no one would be the wiser. Or they wanted to show franchisees how much they were “investing” to discourage others. This quote leads us to believe it to be the case:
The online ordering was a separate project for the company
Why they would’t just punt it to a third party who does this all day is beyond our explanative powers.
This, ladies and gentlemen, is how political fiefdoms thrive in brick and mortar to the detriment of shareholders. If a decision requires objectivity based on data, it’s like cerebral rigamortis sets in as the merchant struggles to synthesize coherent thoughts. Instead of admitting they need help, they overspend to prove how smart and irreplaceable they are. It surely impresses their colleagues but not anyone with a modicum of business acumen.
On the shareholder subject it’s odd that Johnny Rockets would be given so much financial leeway with private equity ownership. Sun Capital must be busy financially engineering the asset and couldn’t be less bothered with rolling up their sleeves and running a better operation. You know if Johnny Rockets overspent this much on its kiosk efforts it’s blown drastically larger sums of money elsewhere.
With all the hem and haw over competition from ecommerce and business model changes, it should be obvious by now that merchants create the largest of their problems themselves; they’re their own worst enemy!
Maybe someone from Johnny Rockets will read this and issue an explanation. Or maybe they don’t want anyone finding out. One thing is clear: restaurants need to respond to people that offer help, because boy do they need it… even if they won’t admit it.
Johnny Rockets has since hired a new PR firm. This new firm tells us the previous PR firm reported incorrect figures. While there is a cost of $170K, the old PR firm did not understand the definition of a kiosk. The $170K figure refers to a stand-alone counter (think a hotdog cart on steroids).
Elliot Maras, the author of the original article for Fast Casual, shared his email string and showed, on multiple occasions, that both Harry Yu and the original PR firm were firm in their belief that the $170K figure was for a kiosk like the one below.
The take away? Definitions matter.