In The Founder, a 2016 film about Ray Kroc – the entrepreneur who from 1954 took McDonald’s from family enterprise to multi-billion dollar empire – one scene shows the businessman as he orders from the fast-food restaurant for the first time. “Hi, welcome to McDonald’s, may I take your order?” asks a smiling waiter, before delivering Kroc’s 35 cent order for a hamburger, french fries and a Coca-Cola.
Over a half-century later, things have changed, and not just price-wise. The fast food company seems to be moving away from small talk with human waiters, to futuristic casual dining services. Think voice assistance and suggestions tailored to your preferences, in a style vaguely reminiscent of an Amazon shopping basket.
Just this week, McDonald’s announced that it is acquiring Apprente, a Silicon Valley company that uses artificial intelligence to understand speech. The technology will be deployed in drive-throughs, and potentially self-order kiosks and mobile apps, in a move to increase automation in restaurants and speed up delivery, while also reducing inaccuracies in order taking.
It is not the first time that McDonald’s has embraced AI. Earlier this year, it acquired customisation company Dynamic Yields, in a deal that was reported to be worth more than $300 million (£243 million) – its largest deal in twenty years. Using Dynamic Yield’s decision-logic technology, the restaurant creates drive-through menus tailored to its customers based on the time of the day, trending items, previous choices and even the weather.
“The Dynamic Yields acquisition was very smart,” says Sam Oches, who writes annual reports on drive-throughs for the fast food industry magazine QSR. “McDonald’s is making sure it has the right tech to quickly bring the right food to the right person. It’s refining the overall drive-through experience, and that’s good for both business and customer.”
With 70 per cent of the chain’s orders coming through drive-throughs, it is easy to see why the fast food company would want to make the experience a seamless one. Dynamic Yield’s technology was deployed in 8,000 US drive-throughs; and the company is planning on moving it to international markets after the end of this year.
But McDonald’s drive-throughs still have one major flaw: they’re not fast enough. Oches’ 2019 report shows that the burger chain lags behind its competitors when it comes to the time it takes customers to get their hand on their food. While the average wait in a Burger King drive-through is just over 193 seconds, the waiting time in McDonald’s is about 273 seconds, making it the tenth and slowest fast food company studied in the report.
While this may come down to better signage and simpler menus, competitors of McDonald’s are also innovating to improve their drive-throughs. Since 2016, for instance, Chick-fil-A has had waiters taking orders through the drive-throughs line and bringing orders directly to cars.
But competition is also coming from other fronts. Feng Li, chair of information management at Cass Business School, explains that new players such as home delivery companies are setting new standards in the industry.
“These powerful new players are coming into the market with new capabilities to provide personalised services to their customers.” he says. “Restaurant businesses respond to this new competition by using new technologies. It is a defence strategy.”
In other words, McDonald’s is making sure that it is part of the wider changes in the food industry. This strategy was initiated as early as 2017, when the restaurant launched its Velocity Growth Plan, with goals included improving customer service through technology. The same year, in a move that showed it was embracing modern food trends, it started delivering meals via Uber.
Fast-forward a couple of years, and the chain restaurant is now opening the McDonald’s Tech Labs, a group within McDonald’s Global Technology team, formed of engineers, data scientists and experts working on bringing solutions to the business’ future needs. The Labs, predictably, will be based in Silicon Valley.
So is the half-century-old fast-food chain becoming a tech company? For ManMohan Sodhi, professor of operations and supply management at Cass Business School, McDonald’s may be trying to – but its reasons for doing so are not so obvious.
Sodhi explains that using technology to personalise customer experience is actually contrary to McDonald’s business model – a model that he remembers was used as an example of lean manufacturing at business school. “You have a small menu, you always do the same things, you don’t deviate,” he says. “That works with a specific supply chain, and it is the reason that customers are served quickly. But it goes completely against customisation.”
One of the reasons that could have motivated McDonald’s in acquiring Dynamic Yields and Apprente, he continues, may be the fear of missing out on the tech furore. He adds: “They want to acquire something AI-related simply to show that they are part of the tech world.”
Sodhi draws a parallel with the dot-com bubble in the late 1990s. In similar fashion, he explains, McDonald’s seems to be keen on jumping on the tech band-wagon, but without having decided exactly where it stands among Silicon Valley start-ups – or if it has a place among them at all.
It is still too early to tell how much the company will benefit from its new partnerships, and from what will come out of McD Tech Labs. From the looks of its latest quarterly reports, though, it would seem that its future is safe: McDonald’s is still the world’ largest chain restaurant by revenue, with earnings up 18 per cent year-on-year and over 37,000 locations worldwide. Whether it includes chatbots or not, the future of fast-food still looks very much red and yellow.
This article was originally published by WIRED UK
