Sep 18, 2000 12:00 PM, CHRISTINE BLANK

AMERICAN FORK, Utah -- International Automated Systems here, a company that currently operates one U-Check store, said it is preparing to build its second highly automated self-service supermarket, to be followed by a national roll-out.

IAS plans to have U-Check stores in all 50 states, with at least several to open in the next six to 12 months, said Randy Johnson, vice president of marketing. Some stores will be run by IAS with partners, described by Johnson as "large retail chains and other types of companies." Several units are planned for the eastern U.S. by Schematics, Pittsburgh, which signed a $35 million contract with IAS last spring.

IAS said the second store will be 50,000 square feet, will serve as a prototype for future U-Check units and will be built somewhere in Washington County in southern Utah. IAS declined to reveal further details, including the name of the town where the store will be built.

The company's first store opened last year in Salem, Utah. It is a 25,000 square foot supermarket that employs a total of 18, including only two who take care of the front-end checkouts. A traditional supermarket of a similar size would require 50-60 employees, industry observers said.

The new U-Check store will be set up with 24 fully-automated checkout lanes with transactional security in the form of fingerprints stored on customers' magnetic stripe cards. When customers finish scanning their orders, they scan their fingerprint using a small device connected to the point-of-sale system.

The checkout lanes have the flexibility of switching between automated and attended cashiering. Shoppers can use other methods of payment, but U-Check gives a 5% discount to those who process their orders using the magnetic stripe card.

Along with such standard supermarket departments as bakery, deli, video, pharmacy and banking, the new U-Check store will feature a fully-automated gas station, a convenience store and a fast food restaurant.

IAS also plans to install vending machines that use its automated fingerprint identification technology for purchases of selling regulated items such as beer and cigarettes. The store's video department will utilize U-Check's new automated transaction gates, enabling customers to rent videos without a sales clerk.

The U-Check format is designed to slash standard supermarket labor costs, including accounting and management staff with its "back office grocery management systems," according to IAS.

"This self-serve system dramatically cuts the cost of running a supermarket," said Neldon Johnson, president and chief executive officer.

According to IAS, its automated equipment also is designed to increase supermarket profitability from the traditional 1.5% of sales to a projected 6% to 10%. It also is targets a reduction in supermarket labor costs of about 50% to 60% and a reduction in shrinkage of 50% to 60%.

IAS is enlisting potential franchisees, with Randy Johnson noting that "anyone can run or own one" of its stores. "It's just a matter of saying, 'I like this area.' If they've got the money, they can put up a store. They don't have to have a retail background," he said.

The company said it is keeping a low-profile with its plans. "People are copying what we do and are very threatened by it," said Randy Johnson. "We are keeping it guarded until we can move extremely fast." Although Randy Johnson would not mention which grocery chains are threatened by the fully automated stores, IAS said it filed lawsuits against Kroger Co., Cincinnati, and Optimal Robotics Corp., Montreal, earlier this year over alleged patent infringement regarding the U-Scan system.