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Episode 114: Antitrust the process

May 21, 2019

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McDonald’s bets on AI to help it sell more burgers

Renata Sago Mar 26, 2019
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Pull into line at a typical McDonald’s drive-thru and you’re greeted by a screen showcasing specials. Pull forward, and you’ll see the standard menu for that time of day. Then you place your order (a cheeseburger and a milkshake, maybe?) and you hear two words: “Anything else?”

McDonald’s wants to be able to anticipate the answer to that question by investing in artificial intelligence. The fast-food chain announced it will acquire Dynamic Yield, a digital startup with headquarters in New York and Tel Aviv, for more than $300 million. This is the fast-food chain’s biggest acquisition since it bought Boston Market 20 years ago.

Dynamic Yield, which already works with retail clients like Ikea, Sephora and Urban Outfitters, will help McDonald’s upgrade its drive-thru menus at its more than 14,000 U.S. locations, making them change based on factors like the weather and the time of day. McDonald’s hopes this will bring customized offerings.

“The bigger picture would be able to tailor to individual people by knowing who the individual people are as they come to engage in a purchase,” said Michael Littman, a computer science professor at Brown University.

Customization, Littman added, could lead to more sales for McDonald’s because it would give the company an idea of what customers might want, like a sundae to go with their cheeseburger, for example.

The AI capabilities could extend beyond the drive-thru, helping McDonald’s shape its mobile app and loyalty programs. This data could be used to develop new programs and menu items tailored to consumer nutrition preference, according to Eric Cohen, senior vice president of consumer business at Cambridge Consultants.

“The systems could become smart enough such that they could say ‘I’m sorry, you’ve had too many hamburgers this week,’” he said. “‘I suggest a salad.’”

There are risks for McDonald’s though. R.J. Hottovy, consumer strategist with Morningstar, said McDonald’s has been pretty successful in recent years for simplifying its operations.

“This technology may add some complexity back into the model,” he said.

McDonald’s plans to eventually roll out the new technology at its international locations.

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