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Daily news and analysis about the food tech revolution

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McDonald’s Drive-Thru Plans Need to Factor In Franchisees

The big to-do in the drive-thru lane of late is news that McDonald’s is testing automated ordering at 10 locations in Chicago, Illinois. 

The tech is based on an acquisition McDonald’s made in 2019 of voice-tech company Apprente. Through it, intelligent systems, rather than human beings, take the drive-thru customer’s order and send it to the kitchen for fulfillment. At an investor conference last week, McDonald’s CEO Chris Kempczinski said the company is seeing 85 percent accuracy on orders, with only about 20 percent of orders across the 10 stores requiring human intervention.

While Kempczinski is confident we’ll see voice-ordering at all McDonald’s drive-thrus in the next five years, he added that consumers shouldn’t expect to see it widespread as soon as next year. “There is a big leap between going from 10 restaurants in Chicago to 14,000 restaurants across the U.S. with an infinite number of promo permutations, menu permutations, dialect permutations, weather — I mean, on and on and on and on,” he said at the conference.

Separate from the technical feats the system must accomplish, there is also a huge number of franchisees to consider in the process of a wide-scale implementation. There are currently 38,000 McDonald’s operating across roughly 115 countries. The majority — 93 percent — are franchisees. Getting them onboard may be no small feat, either.

Disputes over technology have created tension between McDonald’s and its franchisees for years now — going all the way back to when some franchisees argued against having to offer Uber Eats to customers. The latest disagreement between the two groups concerns a $423-per-month fee corporate has been charging franchisees to cover a $70 million lag in outstanding technology fees. The National Owners Association (NOA), a group of McDonald’s franchises that formed a few years back, has gone as far as suggesting it create a technology cooperative to give owners more control over technology-related decisions. Ernst & Young is currently conducting a third-party audit of the fees in question.

All of which is to say, now may not be a great time to attempt a major rollout of what will probably be a costly system. How costly voice ordering will be for franchisees is unclear just yet, but it would presumably require setup and maintenance costs at the very least. And as we saw with McDonald’s Dynamic Yield acquisition, implementation, and eventual downgrade, not all new tech brings a justifiable amount of return on investment for franchisees. 

Labor also presents some urgent items to consider. 

While automating drive-thru ordering via a system like Apprente’s could aid in the current struggle against the current labor shortage, franchisees will still have to spend time and money training their employees to use the tech and work alongside it. In many cases, that means training them to learn when to not get involved.

At the investor conference, Kempczinski said one learning from the existing 10 implementations of the new tech was training crew to “not want to jump in” as soon as there is a question or pause from the system. “We’ve had to do a little bit of training of ‘just keep your hands off the steering wheel, let the computer do its work,’” he told investors, adding that it took time for crew members to learn to “trust” the technology. 

While McDonald’s hasn’t officially confirmed this, it’s likely franchisees would be in charge of training for the above. That in turn would mean operators and manages must first get comfortable with the tech themselves. And, given the high rate of turnover in QSRs, this could potentially eat up a lot of time if a manager were continually having to train new hires.

Many see the digitization of the drive-thru as essential. The drive-thru lane has become progressively slower over the years. The pandemic didn’t help that latter point, since lockdowns turned the drive-thru into one of the main order channels for restaurants, making overall wait times even longer. Other QSRs, including Chipotle, KFC, and Burger King, have all announced plans to make their drive-thrus more high tech to speed up wait times and improve order accuracy. Clearly McDonald’s needs to compete. This time around, though, it also needs to make sure it thoroughly considers its franchisees’ needs in the process.

More Headlines

Presto Launches a Bundle of Tech Tools to Help Restaurants Reopen With Fewer Staff – Restaurant tech platform Presto today launched a new product bundle it says is meant to help restaurants keep their operations up-to-par in the midst of the ongoing labor shortage.

Tesla May Soon Open Its Own Restaurant – Tesla has filed a trademark under restaurant services, which suggests the automaker may be finally working to realize its dream of combining its charging stations with an old-school drive-in restaurant.

Yum China’s New Program Will Teach Digital Skills to Children in Rural Areas – Yum! Brands spinoff Yum China is investing in more digital education for underserved areas. 

Survey: 71% of Consumers Are ‘Amenable’ to More AI in Their Restaurant Experience

Well over half of consumers “are amenable” to more artificial intelligence (AI) and advanced tech in their restaurant experience, according to a new survey from ad-tech firm AdTheorant.

The survey of over 2,000 U.S. adults, conducted this past September by The Harris Poll, looks at consumer sentiment and interaction with quick-service restaurants (QSRs) and fast-casual restaurants (FSRs) across a number of areas, AI among them.

Of those survey respondents, 71 percent said they would be “open to QSRs/FSRs incorporating AI into their business.” In particular, consumers would be most interested in AI if it could help drive down the cost of menu items (43 percent) and speed up the ordering process (42 percent).

As to the actual AI technologies that could do that, consumers are most interested in screens, according to the survey. Sixty-six percent said they were interested in using a touchscreen device (phone, kiosk, etc.) to order and nearly half of respondents, 42 percent, said they would like a voice-ordering system. 

Restaurants are already trying to meet this demand. Self-service kiosks are becoming a regular fixture at QSRs and FSRs as chains revamp their store formats to be more delivery- and takeout-friendly. In the last few months alone, we’ve seen Shake Shack, Chopt, Sweetgreen, and Krispy Kreme, among many others, unveil new store formats that feature kiosk ordering. Meanwhile, KFC is reinventing the concept of the drive-thru to be more touchscreen-centric, and McDonald’s leads the pack in terms of AI in the restaurant with its 2019 acquisitions of AI company Dynamic Yield and and voice-tech startup Apprente.

More surprising was the lower percentage of survey respondents who said AI offering more personalized food recommendations was important. On of the goals for McDonald’s when it acquired Dynamic Yield this past March was to make menus more “Netflix-y.” In other words, menus could dynamically generate recommendations based on a number of factors (past orders, trending items) and in doing so offer more relevant recommendations and upsell items.

AdTheorant’s report, however, notes that just 22 percent of consumers said this would be an important driver of their adopting more AI tech during their restaurant experience.

Part of that may be a matter of exposure. McDonald’s aside, many chains are still just getting started when it comes to the AI-driven menu. Dunkin’ is said to be dabbling with it. Starbucks says AI is a key piece of its overall digital strategy moving forward and that it’s Deep Brew initiative, which will (among other things) power better menu recommendations will be a big part of the chain’s focus in 2020.

Will Steve Easterbrook’s Departure Slow Down McDonald’s Tech Initiatives?

McDonald’s has fired CEO Steve Easterbrook after he engaged in a consensual relationship with an unnamed employee. The board voted on Friday to remove him, according to the Wall Street Journal. McDonald’s USA President Chris Kempczinksi was named the new CEO, effective immediately.

According to the WSJ, Kempczinksi noted he would maintain Easterbrook’s focus on tech, saying, “There isn’t going to be some radical strategic shift. The plan is working.”

Clearly, no sane executive in 2019 would reverse course on technology initiatives that could speed up and simplify restaurant operations while also meeting demand for delivery, convenience, etc. For McDonald’s, however, this executive shakeup could certainly slow the pace of change.

Under Easterbrook’s tenure, McDonald’s pursued an aggressive strategy around technology. In the last year alone, that included the acquisition of Dynamic Yield and subsequent rollout of the latter’s AI technology at McDonald’s drive-thru, buying up voice-tech startup Apprente and building a new tech innovation lab, expanding delivery with more third-party partners, and a heap of other developments that seem to land in the inboxes of us reporters every other day.

All this and more is part of McDonald’s Experience of the Future mandate for stores, an initiative that requires franchisees to update their store designs, invest in tools like self-order kiosks and new menu items (e.g., fresh beef), and curbside pickup.

Not surprisingly, McDonald’s franchisees have pushed back at these costly but not necessarily profitable changes. A recent Bloomberg article noted that “[Franchisees] object to the enormous costs of the project, which, for owners of several locations, can run into tens of millions of dollars, even with McDonald’s offering to subsidize 55 percent of the capital for the remodels.”

About a year ago, a group of U.S.-based McDonald’s franchisees formed the National Owners Association advocacy group to address some of these challenges. For example, franchisees were originally required to have their locations remodeled by 2020, a date that, after enough outcry, was pushed back to 2022 (albeit with caveats).

Easterbrook’s departure won’t stop tech innovation at McDonald’s. Nor should it. And to be clear, no one has officially yet stated any specific changes to the strategy. But the conversation around franchisee tensions has only grown louder in recent months, and under Kempczinksi’s leadership it’s possible McDonald’s could slow its pace on some of these developments or give franchisees more say in how to implement some of these initiatives without incurring some of their heavy costs. Meanwhile, McDonald’s has to somehow address its sluggish sales while still maintaining its edge over other QSRs, who are rapidly deploying self-order kiosks, AI in the drive-thru, and other high-tech solutions. Whether the chain can do that more effectively under Kempczinksi looks to be yet-another unanswered question in this ongoing McSaga.

Newsletter: The Drive Thru Matters More Than Ever. So Do Farm Bots and Decaf Coffee

From self-service kiosks to mobile apps to dedicated pickup shelves and portals, there’s no end to new tech trying to speed up the order-pay-collect process for customers at QSRs.

But if the last week has made anything clear, it’s that while those pieces certainly play a role in the future of the restaurant, the drive thru is still the most important area of growth — at least for fast-food. Even as Minneapolis tries to ban drive thrus, companies are pumping enormous amounts of money and energy into improving this area, most notably with last week’s news that McDonald’s, king of all QSRs, had acquired voice-tech company Apprente. It’s the second acquisition Mickey D’s has made in 2019 of a technology company whose offerings can speed up lagging drive-thru lines and move more customers in less time. In March, the mega chain acquired a company called Dynamic Yield and has since installed its AI tech in thousands of McDonald’s drive thrus to make the order experience more personalized for customers.

Others aren’t sitting still. In 2019 alone, Dunkin’ has expanded its “Next Generation” store, which features dedicated drive-thru lanes for mobile orders, to other parts of the U.S.; KFC started testing a drive-thru-only concept in Australia; and a slew of new tech companies have emerged offering various digital and AI-powered tools to take orders at the drive thru.

It’s not hard to understand why. As of last check, drive thrus still make up over 50 percent (in some cases closer to two thirds) of all orders for many QSRs. At the same time, bigger menus and more disjointed pieces of tech in the restaurant space have slowed down the order process and made wait times in drive-thru lanes longer. As Apprente CEO Itamar Arel, Ph.D., said back in 2018, “Fast food is not always fast and bottlenecks at ordering stations result in lost sales.” McDonald’s and others can’t afford those lost sales, so anything — whether an extra lane or a full-on tech makeover — to move people through the line faster could give QSRs an edge in the rising competition. You can bet there will be plenty more news from the drive-thru lane as more major QSRs revamp to take a page from McDonald’s playbook and reinvent themselves with tech.

Weeding Out the Labor Shortage Problem
The drive-thru isn’t the only area the food world is looking to speed up production. This week a company called FarmWise raised $14.5 million for its self-driving robots that remove weeds from crops without the need for herbicides or pesticides. (We expect these machines will be able to do much more than pull weeds in future, too.)

For the agtech world, machines like these not only save time, they also pick up the slack left by a major labor shortage in farm production. Farmers and ranchers in the U.S. say this labor shortage is the most limiting factor they face on their farms, and it’s not one that looks like it’ll be solved any time soon.

Hence, the robots. Every farm in America won’t have autonomous bots to pick weeds and harvest produce at the snap of a finger, but these machines are an increasingly appealing solution to the labor issue. Robots don’t need breaks, can work in sweltering heat and humidity, and in some cases can work faster than a human. As we look to solutions for both farm labor and wasted crops on the farm, these bots hold many possibilities.

Photo: Decafino

Disrupting Decaf
Meanwhile, someone wants to reinvent decaf coffee.

Decafino, a startup based out of Seattle, launched a Kickstarter campaign today for a tea bag-like product it claims can remove caffeine from any cup of brewed coffee. As my colleague Catherine Lamb detailed, the biodegradable pouch can be dropped in a cup of coffee (or caffeinated soda, for that matter), and within three to four minutes will remove the caffeine from the beverage.

If the product does as it claims, it could open up many more options for decaf coffee drinkers, who often face very limited selections at stores and coffee shops, and in some cases no options at all.

Personally, I’d have to be told I needed triple bypass surgery to stop drinking caffeinated coffee, and no doubt that day will come. In the meantime, there are plenty of folks out there who love the taste of coffee but for health reasons cannot drink the real thing. If Decafino is successful, these people might find a whole new world of drink choices.

McDonald’s Acquires Voice Ordering Tech Startup Apprente, Will Form New Tech Lab

McDonald’s announced today that it will acquire Apprente to bolster the fast food giants voice-based ordering capabilities. This is the second tech startup acquisition for Mickey D’s this year, and the Apprente team will form the basis of a new tech lab for the chain.

In the press announcement, McDonald’s described Apprente and how it will use the startup’s technology:

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.

The Apprente acquisition is part of McDonald’s ongoing evolution into more of a tech company. Back in March of this year, McDonald’s acquired personalization platform Dynamic Yield for $300 million to make its menus more Netflix-y with recommendations based on factors like the weather or current purchases. That technology is now deployed into more than 8.000 McDonald’s locations. Additionally, the chain was reported in June that McDonald’s was experimenting with robot-powered deep fryers and voice-activated technology at its drive thrus.

Major QSRs see over half their orders come via the drive thru, so it’s no surprise that area of fast food is a hotbed of tech activity. Both Clinc and Valyant AI are working on their own voice-tech solutions, and 5thru uses AI to that involves scanning a customer’s license plate. And while McDonald’s has certainly made the biggest strides of all QSRs in terms of adding tech to the drive-thru experience, others, including KFC and Dunkin’, are also experimenting with ways to speed up order times and upsell more customers.

Seeing this type of competition is most likely spurring McDonald’s decision to ramp up its own tech efforts internally. As such, the company also announced today that the Apprente team will be the founding member of a new group within McDonald’s Global Technology team called the McD Tech Labs based in Silicon Valley. The new lab will be going on a hiring spree to bring on engineers, data scientists and other technology related positions.

McDonald’s Installs Dynamic Yield’s Personalization Tech in 700 Locations

McDonald’s has wasted no time in bringing personalization to its restaurants since the company’s acquisition of Dynamic Yield in March. On the company’s Q1 earnings call this week, CEO Steve Easterbrook said McDonald’s has already installed Dynamic Yield’s technology in 700 McDonald’s locations in the U.S.

As of right now, the technology is being used for drive-thru menus, which it can create based on data like weather, trending menu items, and current restaurant traffic. As you start ordering, the menu will automatically suggest upsell items based on that data as well as what you just ordered. Getting a McCafe? The system is probably going to suggest you order a donut stick, too.

Easterbrook noted on the call that, “Over time using data from the millions of customers that we serve daily the technology will get smarter and smarter through machine learning.”

For now, installments of Dynamic Yield’s tech are in the drive-thru, but Easterbook said we’ll eventually see it across all of McDonald’s digital platforms, including mobile ordering and self-order kiosks.

The focus on drive-thru is in part because of a larger effort by McDonald’s to cut down the amount of time customers spend in drive-thru lines. For most quick-service restaurants, the length of time customers spend in the drive-thru line has gone up over the years, despite advances in technology. Average speed-of-service time for drive thrus was 234 seconds in 2018 compared to 225 seconds the previous year, which only goes to show you it’s not about having the tech but knowing how to use it.

Acquiring Dynamic Yield is one way McDonald’s has addressed this problem. Another effort, which Easterbrook discussed on the call, was an “incentive program,” where McDonald’s locations competed against one another “to deliver the best drive-thru service times.”

However, it’s more likely that an AI-driven platform like Dynamic Yield’s will make the real difference in speeding up service and making it more accurate and personalized — in the drive-thru and otherwise. And Dynamic Yield isn’t the only version of AI up and running. Apprente makes neuroscience-inspired AI that can enable voice-ordering and integrate with restaurant POS systems. And 5thru, which isn’t yet in restaurants but is “coming soon” to a number of large quick-service chains, will (gulp) scan your license plate and offer personalized recommendations based on your linked profile.

McDonald’s installations of Dynamic Yield’s tech seems slightly different, though. Yes, the company is focused on making the drive-thru better, but, as the company plans to expand the tech into other areas, it seems like the Dynamic Yield acquisition is about integrating the many different pieces of the digital restaurant operation to drive the kinds of customer experiences and recommendations that will generate more sales. That could well be the winning strategy for any restaurant in this inescapably tech-driven new age of business.