There’s an interesting piece up in the New York Times about how McDonald’s is investing heavily in technology to adopt to a fast-changing consumer and competitive landscape.
The story goes into how the 2nd biggest fast food company in the world – Subway is #1 – has acquired AI companies this year and set up its own in-house tech lab.
The Chicago QSR giant already has digital menu boards, is heavily deploying self-service ordering screens in stores, and is now focusing on drive-thru, adding digital pre-sell and menu displays and using AI to tailor orders customer by customer.
Reports the Times:
Now, the chain has digital boards programmed to market that food more strategically, taking into account such factors as the time of day, the weather, the popularity of certain menu items and the length of the wait. On a hot afternoon, for example, the board might promote soda rather than coffee. At the conclusion of every transaction, screens now display a list of recommendations, nudging customers to order more.
At some drive-throughs, McDonald’s has tested technology that can recognize license-plate numbers, allowing the company to tailor a list of suggested purchases to a customer’s previous orders, as long as the person agrees to sign away the data.
Right around DSE 2019, in March, McDonald’s spent more than $300 million to buy Dynamic Yield, an Israeli company that does the AI-based suggestive selling on the order screens at drive-thrus. That set-up is expected to be used at almost all U.S. McD’s drive-thrus by the end of this year.
Reports the Times: Already, the recommendation algorithms built into the drive-through menu boards have generated larger orders, the McDonald’s chief executive, Steve Easterbrook, said during an earnings call in July. (Mr. Henry, the chain’s information executive, declined to reveal the size of the increase.)
McDonald’s more recently acquired a two-year-old start-up (oh to have an exit strategy that takes just 24 months) that does AI-driven voice ordering.
Says McDonald’s, announcing the deal this fall: Apprente was founded in 2017 in Mountain View, California, to create voice-based platforms for complex, multilingual, multi-accent and multi-item conversational ordering. In McDonald’s restaurants, this technology is expected to allow for faster, simpler and more accurate order taking at the Drive Thru with future potential to incorporate into mobile ordering and kiosks.
There are a few things going on here with all this.
First, consumer dining habits are changing. While there are still no end of people eating burgers and fries and guzzling giant cups of soda, there is a broader societal shift to healthier dining choices and many, many options serving that need. So QSRs like McDonald’s have to try to up the average order size for the diners they do still get.
Second, even though QSR workers make peanuts per hour, a typical store has a lot of staff. The more that technology can do to supplement or replace staff at order stations, the lower the long-term operating cost.
The Times pieces also looks more broadly at how QSRs – whether burgers or pizzas – are investing in tech. That could prove an issue for digital signage software and solutions companies who target that sector. Restaurants are extremely unlikely to become display hardware companies, but as they launch tech labs and hire software developers, their need for third-party CMS software that just does the relatively simple task of menu boards may diminish.
A few companies, notably Stratacache, already has AI capabilities. But the majority who target that market do not.
In-house software is far less likely to be developed by the smaller national and regional chains, who have relatively small tech teams and use third-party payment and other systems.
Interesting piece, worth a read if you chase that sector, or c-stores, which are turning into quasi-QSRs. The Times has a pay wall, so you may or may not be able to read it.
Dave Haynes is the founder and editor of Sixteen:Nine, an online publication that has followed the digital signage industry for some 14 years. Dave does strategic advisory consulting work for many end-users and vendors, and also writes for many of them. He’s based near Halifax, Nova Scotia, on Canada’s east coast.