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Big Mac becomes Big Tech, with a few snags

A man reads a message in the window of a shuttered McDonald's restaurant after the firm announced it ceased operations due to a system outage, in Tokyo, Japan, March 15, 2024

SAN ANTONIO, Texas, March 16 (mod1s) - When McDonald’s (MCD.N), opens new tab initially began for business in the 1940s, its personnel stood at physical counters, its burgers and fries were listed on paper menus, and its customers paid cash to its human cashiers.
How quaint.
Today technology so pervades every element of McDonald's operation that it would only be a tiny exaggeration to label it a tech corporation that happens to sell burgers.
McDonald's mobile app; its human-less, order-taking kiosks; its digitized menus that change based on trends, the weather and more; and even its generative AI - together, these enable McDonald’s to eke out additional sales and efficiencies worth billions of dollars to the company, which has 40,000 locations in roughly 100 countries.

Yet the same tech may also drive McDonald's to its knees.
On Friday, system disruptions afflicted McDonald's restaurants across several of its major worldwide markets, including Japan, Australia and the United Kingdom, causing many shops to temporarily accept only cash or shut down altogether. McDonald’s hasn’t specified how widespread the outages were, but on Friday afternoon, 12 hours after the outages were initially reported, a restaurant in San Antonio, Texas wouldn't process orders on its app and couldn't accept payment.

McDonald’s stated in a statement the disruption was triggered by an unknown third-party vendor during a "configuration change". Asked for reaction, McDonald's pointed to that remark. McDonald's Japan (2702.T), opens new tab on Saturday apologized for the inconvenience, stating all its outlets and its delivery service were running regularly.
The burger behemoth did signal that something like this may happen, at least to Wall Street.

“We are increasingly reliant upon technology systems,” company attorneys stated in its annual Securities and Exchange Commission filing on Feb. 22. “Any failure or interruption of these systems could significantly impact our or our franchisees’ operations, or our customers’ experiences and perceptions.”
Even AI gets a caution in the document, which warns 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."

Yet Friday's massive outage is unlikely to bounce McDonald’s out of its long-term ambition to strengthen its dependence on digital.
McDonald’s wants more consumers to purchase via digital channels like its app and kiosks, which already contributed up a third of its sales in top markets in 2022.
In December McDonald’s announced a partnership with Google to move restaurant computer systems into the cloud, where the global scale of data will allow McDonald’s generative AI system to “better understand the broadest range of patterns and nuances,” resulting in what McDonald's at the time said would be "hotter, fresher food." Generative AI already controls most of the restaurant operations and individualized pitches generated from internal profiles of consumers.
It's not just McDonald's. Tech is the approach du jour of practically every major fast food restaurant.
Starbucks (SBUX.O), opens new tab in 2019 revealed its own internal AI platform, termed “Deep Brew," which then-CEO Kevin Johnson claimed will increasingly power its tailored offerings, shop staffing and inventory management.
“Over the next 10 years, we want to be as good at AI as the tech giants,” Johnson told a retail conference in 2020, according to Retail Dive, a trade newspaper. Starbucks in 2022 appointed a former McDonald's executive to manage its usage of technology.
Risks from this new technology don't merely arise from system breakdowns.
Wendy’s (WEN.O), opens new tab drew widespread outcry when its CEO indicated during an earnings call in mid-February that the company will soon implement "dynamic pricing" on its digital signage - yet another technology that would not have been conceivable before the age of information.
The company then stated that it did not aim to employ digital signage to execute "surge pricing" that may enable it charge greater rates during busy periods. Rather, Wendy's maintained, its CEO's words alluded to its strategy to give discounts to guests during sluggish portions of the day.


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