Big Mac goes big tech, with a few snags

March 16, SAN ANTONIO, Texas (Reuters) – Burgers and fries were listed on paper menus, employees worked at physical counters, and customers paid cash to human cashiers when McDonald’s (MCD.N), opens new tab for operation in the 1940s.

It wouldn’t be too much of a stretch to refer to McDonald’s as a tech company that also happens to sell burgers given how pervasive technology is in the corporation these days.

Together, McDonald’s mobile app, order-taking kiosks that operate without humans, digital menus that adapt to the weather, trends, and other factors, and even generative artificial intelligence (AI) allow the company, which operates 40,000 locations across approximately 100 countries, to eke out additional sales and efficiencies valued at billions of dollars.

However, the same technology has the power to destroy McDonald’s.Several McDonald’s restaurants in its largest international markets, including Japan, Australia, and the UK, experienced system failures on Friday, forcing many of them to temporarily accept only cash or close completely. A McDonald’s in San Antonio, Texas, refused to accept orders using its app and was unable to process cash on Friday afternoon, 12 hours after the outages were initially reported. The company has not acknowledged the extent of the outages.

In a statement, McDonald’s claimed that a “configuration change” by an unidentified third-party vendor was the reason for the outage. When questioned, McDonald’s cited that assertion. McDonald’s Japan (2702.T), which opened a new tab on Saturday, expressed regret for the inconvenience and said that all of its locations and delivery service were running as usual.

The burger juggernaut did warn that this kind of event might occur, at least for Wall Street.The company’s attorneys stated, “We are increasingly reliant upon technology systems,” in a filing to the Securities and Exchange Commission on February 22. “Any breakdown or disruption of these systems could have a major effect on our operations, the operations of our franchisees, and the experiences and perceptions of our customers.”

The document even issues a caution against AI, saying that “the artificial intelligence tools we are incorporating into certain aspects of our restaurant operations may not generate the intended efficiencies and may impact our business results.”

However, it is unclear that McDonald’s will abandon its long-term plan to increase its dependence on technology in light of Friday’s broad outage.

McDonald’s hopes to increase the number of consumers who place orders via digital channels like its app and kiosks, which accounted for one-third of its sales in competitive countries in 2022.

In order to move restaurant computer systems into the cloud, McDonald’s and Google announced a partnership in December. With access to the world’s largest data set, this partnership will enable McDonald’s generative AI system to “better understand the broadest range of patterns and nuances,” leading to what the company promised at the time to be “hotter, fresher food.” A large portion of restaurant operations, including customized pitches based on internal customer profiles, are already powered by generative AI.

It goes beyond McDonald’s. Technology is the current go-to tactic for almost all of the big fast-food chains.

In 2019, Starbucks (SBUX.O) unveiled “Deep Brew,” an internal AI platform that the company claims would power its tailored offerings, inventory management, and retail staffing more and more. At the time, CEO Kevin Johnson made this announcement.

According to trade newspaper Retail Dive, Johnson stated at a retail conference in 2020, “Over the next 10 years, we want to be as good at AI as the tech giants.” In 2022, Starbucks brought on a former executive from McDonald’s to supervise its technological operations.

There are other risks associated with this new technology besides system failures.
After the CEO of Wendy’s (WEN.O) announced during an earnings call in mid-February that the restaurant would soon utilize “dynamic pricing” on its digital signs—yet another technology that would not have been available prior to the age of information—the public reacted negatively.

The business then emphasized that it had no intention of implementing “surge pricing”—a practice that would allow it to charge greater prices during peak hours—through the use of digital signs. Instead, Wendy’s claimed that the CEO’s comments alluded to the company’s intention to provide customers with discounts during off-peak hours.