Waylon Cunningham
SAN ANTONIO, Texas (Reuters) – When McDonald’s (NYSE:) first opened in the 1940s, its workers stood at physical counters, burgers and fries were listed on paper menus and customers paid cash to human cashiers.
How strange.
Today, technology so permeates every aspect of McDonald’s business that it would be only a slight exaggeration to call it a technology company that sells hamburgers.
McDonald’s mobile app; its deserted ordering kiosks; its digitized menus that change based on trends, weather and more; and even generative artificial intelligence—together they allow McDonald’s to generate billions of dollars in additional sales and efficiencies for the company, which has 40,000 stores in about 100 countries.
However, this same technology could bring McDonald’s to its knees.
On Friday, system outages hit McDonald’s restaurants in some of the world’s biggest markets, including Japan, Australia and the UK, forcing many stores to temporarily accept cash only or close entirely. McDonald’s did not disclose how extensive the outage was, but on Friday afternoon, 12 hours after the outage was first reported, the San Antonio, Texas franchise was not accepting orders on its app and was unable to accept cash.
In a statement, McDonald’s said the outage was caused by an unnamed third-party vendor during a “configuration change.” When asked to comment on the situation, McDonald’s representatives referred to this statement. McDonald’s Japan apologized for the inconvenience on Saturday, saying all its restaurants and delivery services were operating as normal.
The hamburger giant noted that something similar could happen, at least on Wall Street.
“We are increasingly reliant on technology systems,” the company’s lawyers wrote in an annual report to the Securities and Exchange Commission on Feb. 22. “Any disruption or failure in the operation of these systems could materially impact our or our franchisees’ operations, as well as the experience and quality of our customers.” perception.”
Even AI gets a warning in the filing, which states that “the artificial intelligence tools we implement in certain aspects of our restaurant operations may not deliver as intended and may impact our business results.”
However, Friday’s widespread power outages are unlikely to stop McDonald’s from pursuing its long-term strategy of becoming more reliant on technology.
McDonald’s wants more customers to order through digital channels such as its app and kiosks, which already account for a third of its sales in top markets in 2022.
In December, McDonald’s announced a partnership with Google (NASDAQ:) to move restaurant computer systems to the cloud, where the global scale of data will allow McDonald’s generative artificial intelligence system to “better understand the widest range of patterns and nuances,” leading McDonald’s to say at the time. that it would be “spicier, fresher food.” Generative AI already powers most restaurant operations and personalized presentations based on internal customer profiles.
It’s not just McDonald’s. Technology is a strategy for virtually every major fast food chain.
Starbucks (NASDAQ:) in 2019 announced its own internal artificial intelligence platform called Deep Brew, which then-CEO Kevin Johnson said would increasingly support its personalized offerings, store staffing and inventory management.
“Over the next 10 years, we want to be as good at artificial intelligence as the tech giants,” Johnson said at a 2020 retail conference, according to industry publication Retail Dive. In 2022, Starbucks hired a former McDonald’s executive to oversee its use of technology.
The risks associated with this new technology involve more than just system failures.
Wendy drew public backlash after its CEO said during an earnings call in mid-February that the chain would soon use “dynamic pricing” on its digital signage, another technology that would not have been possible before the information age.
The chain later clarified that it did not intend to use digital signage to implement “high pricing” that could allow it to charge higher prices during peak hours. Most likely, according to Wendy’s (NASDAQ:), its CEO’s remarks were related to its plan to offer discounts to regular customers during quiet periods during the day.