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Daily news and analysis about the food tech revolution

Dynamic Yield

McDonald’s May Sell Part of Tech Company Dynamic Yield

McDonald’s is considering selling part of AI startup Dynamic Yield, which it acquired in 2019, according to a report from the Wall Street Journal. 

The original intention behind the $300 million Dynamic Yield acquisition was to install the company’s AI tech into self-service kiosks and drive-thru menu boards at McDonald’s locations. With the implementation, menus would become more technologically sophisticated, able to offer things like more personalized recommendations for customers. McDonald’s currently has Dynamic Yield implementations in the U.S., Canada, and Australia.

But as WSJ reports, after analyzing the Dynamic Yield platform, McDonald’s has found that the tech “hasn’t delivered the promised sales boost” originally hoped for at the time of the deal. The QSR mega-chain aimed for Dynamic Yield order suggestions to boost drive-thru sales by 1 percent in the U.S. Sources told WSJ that sales have fallen short of that target, and one franchisee said that “the return on investment is just not there.”

The Dynamic Yield platform is just one piece of technology McDonald’s franchisees have called into question recently. Despite the chain’s aggressive push towards digital ordering and all the accompanying technological changes, franchisees have pushed back on how much they must pay for all this tech. Ernst & Young is currently conducting an audit of these technology fees, while franchisees have paused all non-essential communication with McDonald’s corporate.

Still, missed sales targets and franchisee tensions don’t spell the end of Dynamic Yield’s platform as part of Mickey D’s operations. McDonald’s said it would keep parts of the company, including those that service the chain’s drive-thrus and kiosks. While details are few and far between, McDonald’s shift towards stores with more drive-thru lanes and less dining room space suggest Dynamic Yield’s tech will continue to provide at least some value going forward. 

McDonald’s is currently “exploring” the sale of a portion of Dynamic Yield. There is no set timeframe for a deal, and it is entirely possible that no deal at all will happen.

ConverseNow Raises $3.25M for Its AI-Driven Restaurant Ordering Platform

Restaurant tech startup ConverseNow announced this week it had raised a $3.25 million seed funding round for its platform that uses AI to automate the process of ordering food. The round was led by Bala Investments with participation from LiveOak Venture Partners, Tensility Venture Partners, Knoll Ventures, 2048 Ventures, Bridge Investments, and Delphi Display Systems’ CEO Ken Neeld. It brings ConverseNow’s total funding to date to $3.3 million. 

ConverseNow’s CEO Vinay Shukla says part of the Austin, TX-based company’s new funds will go towards improving the AI that powers its platform. 

That AI allows restaurants to automate and personalize the ordering process for customers. Restaurants can integrate it across multiple sales channels (drive-thru, mobile app, etc.) to increase things like order accuracy and make better personalized recommendations based on a customer’s order history and other data. The platform integrates with restaurant POS systems as well as back-of-house kitchen displays.

AI is a hot topic when it comes to speeding up service and improving order accuracy in the restaurant. McDonald’s put the conversation squarely in the spotlight last year when it acquired Dynamic Yield and installed the company’s AI tech in its drive-thrus. Starbucks has in the past claimed AI is “a very important part” of its overall strategy. And a survey from the end of 2019 found that 71 percent of customers are “amenable” to having more AI in their restaurant experience.

If the same survey were given now, that figure would probably be higher. The COVID-19 pandemic has forced most restaurants to pivot to off-premises orders, and even as dining rooms slowly reopen, states’ guidelines recommend keeping to-go meals a priority. That in turn will mean more people going to the drive-thru and ordering via off-premises channels such as websites, mobile apps, and even the good old-fashioned telephone.

The other plus of AI right now is its ability to increase contactless ordering and payments. In the restaurant tech stack, it’s the tools that can offer more seamless ways to provide these things that will provide the most value.  

ConverseNow said in the press release that its tech is already being used by “leading QSRs.” In addition to improving its AI platform, the company will also use the new funds to improve customer acquisition. 

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.

McDonald’s Acquires Dynamic Yield to Make Menus More Netflix-y

McDonald’s announced today that it has acquired personalization platform Dynamic Yield to make the fast food giant’s menus more technologically dynamic. Terms of the deal were not disclosed, but sources told TechCrunch the price was more than $300 million.

According to the press announcement:

McDonald’s will utilize this decision technology to provide an even more personalized customer experience by varying outdoor digital Drive Thru menu displays to show food based on time of day, weather, current restaurant traffic and trending menu items. The decision technology can also instantly suggest and display additional items to a customer’s order based on their current selections.

So it’s kinda like a Netlix, only it recommends Big Macs and chicken nuggets.

Mickey D’s said the technology had already been tested in several locations last year and will roll out at drive throughs in the U.S. throughout 2019. Additionally, the technology will be integrated into other customer screen experiences like in-store kiosks and mobile web app as well.

This type of dynamically generated content is one of the strengths of electronic menus as it can present and potentially better upsell items it knows people typically buy. McD’s can also make the purchasing process more efficient (i.e. present breakfast items prominently in the morning) to ideally sell more stuff.

No doubt a behemoth like McDonald’s acquiring Dynamic Yield will speed up adoption of advanced ordering and personalization tech, and spur others in the space to do the same (that is, if McDonald’s can get its franchisees on board).

In fact, drive throughs and kiosk ordering have already been experiencing a bit of a renaissance with QSRs. Long John Silver invested heavily in revamping its drive throughs as it looks towards fully automating the experience. Good Times Burger & Frozen Custard in Colorado is using AI to take customers’ drive through orders. And in-store ordering kiosks at Caliburger let you pay with your face.

Based in New York, Dynamic Yield had raised $83.3 million dollars.