With the $300 million purchase of an artificial intelligence firm by the biggest fast food chain in the world, a new era of technology-first restaurants has begun.
Even while McDonald’s $300 million acquisition of Dynamic Yield in March was not the largest in the restaurant industry, it nevertheless demonstrated a significant shift in the fast food industry toward technology.
While Starbucks partnered with software startup Brightloom last year to license its technology and make it available to other businesses, Yum Brands invested $200 million in Grubhub in 2018.
By recruiting new employees, developing technology in-house, or working with additional tech companies, major fast food chains including Yum Brands, Wendy’s, Shake Shack, Chick-fil-A, Chipotle, and others have been expanding their digital presence.
In an interview with Restaurant Dive, Sterling Douglass, co-founder, and CEO of Chowly shared his excitement about restaurants’ increased use of technology.
I think that for a very long time, tech companies have been trying to persuade restaurants to change their business models to embrace new technologies. More internet companies, in my opinion, will adapt their business strategies to the restaurant industry.
The implementation will start with the drive-through, which McDonald’s has highlighted as a growth priority for 2019.
The new technology, according to the business, will make its American premiere this year before being made available in other sizable overseas markets. McDonald’s plans to integrate technology into every area of its digital customer experience in the future.
McDonald’s does not typically enter into such arrangements. It spent $173.5 million on its most recent large acquisition, Boston Market, which it ultimately sold to Sun Capital Partners Inc. The company also bought a stake in Chipotle in 1998, developed it, and then sold it in 2006.
The stake exceeded the cost of acquiring Dynamic Yield dollar for dollar. The Wall Street Journal points out that it is scarcely a noteworthy blip for a company with a market value of $142 billion.
However, McDonald’s CFO Kevin Ozan stated that the business would focus on “what we label just running better locations” this year in addition to decreasing operational complexity and increasing personnel numbers.
McDonald’s CEO Steve Easterbrook previously said that the business was installing “zoom boards,” which are little computer displays at the drive-thru that show the restaurant’s current wait times.
It identifies where the bottlenecks are. Cash handling, payment methods, and possibly if customers are being asked to park and wait since the food isn’t ready.
According to the fast food company, Dynamic Yield’s ability to meet customer expectations and commitment to enhancing growth potential around “developing marketing technologies” allowed for “the continuing improvement and elevation of the McDonald’s customer experience using developing marketing technologies.”
The rapid acceptance of technology, according to Douglass, “wouldn’t have happened a few years ago,” he continued. “The author claims, “I believe it has only occurred now because McDonald’s made such a significant investment in [Dynamic Yield] technology.
McDonald’s continued its expansion after purchasing Dynamic Yield by also purchasing Apprentice, a voice-automation company, in order to integrate conversation technology into drive-thrus.
McDonald’s and the Apprentice team created McD Tech Labs, a global technology team in Silicon Valley, as a result of the agreement. This group will hire more engineers, data scientists, and other IT specialists, which suggests that further innovations are in the works.
As a result of the agreement, McDonald’s will become the sole owner of Dynamic Yield and will continue to fund its main personalization service. The business, which has locations in New York and Tel Aviv, Israel, will carry on independently.
In the US, McDonald’s Q4 same-store sales rose by 2.3 percent. The 4 percent increase in global comps was significant since it followed 14 consecutive quarters of positive global increases. To $5.16 billion, McDonald’s annual revenue fell by 3%.
It reported a profit of $1.42 billion, or $1.82 per share, up from $699 million, or 87 cents per share, a year earlier. After subtracting a tax benefit and an adjustment related to the federal tax change, McDonald’s earned $1.97 per share. as per mcdonald’s dynamic yield series 300m mastercardchin.
The company already has a testing facility for new systems and technologies. In a McDonald’s in a Chicago suburb, it piloted an automated fryer and beverage equipment in June. These programs all show McDonald’s dedication to technology, and Dynamic Yield is not likely to be the firm’s final big acquisition.
“Our judgment is that those who aren’t investing in technology, at some point, will be behind and will need to catch up,” CFO Kevin Ozan said during an earnings call in October.
And we’d rather be a little bit ahead of the curve by spending the right amount that will, in our opinion, support future growth.
After acquiring the conversational platform Apprentice in the same year, McDonald’s bought Dynamic Yield in 2019 and founded McD Tech Labs, a subsidiary dedicated to employing technology to improve employee and customer-facing experiences.
On Monday, Mastercard announced that it had finished buying Dynamic Yield from McDonald’s. The agreement aims to enhance Mastercard’s ability to provide businesses with consumer engagement and loyalty offerings.
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In 2019, McDonald’s acquired Dynamic Yield for $300 million. The program immediately made its way onto the chain’s drive-thru ordering boards and offered customized product recommendations.