What Do McDonald’s AI Investments Say about the Future of Customer Service?

6 min read
Sep 20, 2019
  • Post on Twitter
  • Share on Facebook
  • Post on LinkedIn
  • Post on Reddit
  • Copy link to clipboard
    Link copied to clipboard

Last week, McDonald's bought Apprente, a technology firm specializing in artificial intelligence (AI) systems to take orders in quick service restaurants (QSR). They mentioned drive thrus in the press release. And drive thrus account for around %70 of their sales. They're even making their acquisition into a new Silicon Valley branch of the company – McDonald's Tech Labs.

The obvious conclusion is that robots will take your McDonald's drive thru orders from now on.

Fast food is a low margin business. They'll save on labor costs. The well greased McDonald's machine will work more smoothly than before. Customers will get used to shouting their orders at a bot. You might not get that extra packet of ketchup with your super-sized fries, but you'll live. It's McDonald's. The prices are low.

But there is a big problem with the "get a bot to do it" vision when dealing directly with customers. It hasn't worked yet. Anywhere.

AI bots, the future of customer service?

Eatsa was a San Francisco restaurant with a futuristic concept. Customers ordered on tablets and picked up their food from compartments when their name flashed on a screen. Human employees were busy in the background, but customers didn't see them.

Even though some version of Eatsa may jump to mind after seeing the announcement of McDonald's AI technology acquisition, this is unlikely for several reasons.

First of all, Eatsa closed shop this summer after just four years of operation.

Second, despite a lot of hype, chatbots haven't replaced live chat as expected. Since AI-assisted voice ordering hasn’t been widely used yet, chatbots are the closest example we have of automated customer service on a large scale. While customers are okay with chatbots in many situations, experts say that when used too often, they lower customer satisfaction.

Third, bots responding to voice commands are harder to pull off than chatbots responding to text input. For proof, and a good laugh, look up the hashtags #sirifail and #alexafail on Twitter.

McDonald's might still be your father's McDonald’s

McDonald’s is cautious when adapting to new trends. They tend to experiment and try out several variations of any change before taking action. For example, a full 8 years after Starbucks unveiled ordering from its mobile app, McDonald's introduced the feature to its app.

This might seem like a losing recipe, but the results say otherwise. McDonald’s is the biggest quick service restaurant (QSR) chain in the world. It has 10 000 more stores than second-place rival Starbucks. And it has grown consistently since its initial expansion under Ray Kroc.

Competitors are also exploring AI-assisted voice ordering. McDonald's will probably not rush into this untested territory. Don't expect it to automate everything and change what is already working well enough.

But there will be changes, even if gradual. So what are McDonald's intentions? Given its size and global influence, whatever they decide on could change customer expectations. Even for products and services well outside of the QSR industry.

To see where McDonald’s might be heading, it’s helpful to examine the biggest problems the fast food giant is facing.

Drive Thru speed and accuracy

A study last year by QSR Magazine showed McDonald's to have the slowest average speed of service among the 10 chains analyzed.

While this may seem like an obvious priority, and a good reason to invest in speedy AI automation, let's not get ahead of ourselves. The study also showed McDonald's drive thrus to be more full of waiting customers than all except one other chain. Longer wait times could be in part responsible for lines, but it also shows that McDonald's drive thrus are popular. Waiting for a Big Mac forty seconds longer than the industry average isn't scaring hungry customers away.

Order accuracy is another obvious target. Many experts cite the possibility of a touchscreen plus voice assistant as a way to get orders right more often, saving time for both customer and restaurant. However, the same QSR magazine study showed that, at 92.9%, McDonald's had the third best order accuracy.

McDonald's would undoubtedly be happy to improve both accuracy and speed of service. But these factors also don't emerge as a sufficient reason to lay down millions of dollars to set up and AI division in Silicon Valley.

Is McDonald's becoming a tech company?

McDonald's announced plans in 2017 to allow a higher percentage of its restaurants be owned by franchisees – from %83 to %95. McDonald's corporate is more of a brand manager than ever before. Do such technology acquisitions make the brand more attractive to investors?

The current darlings of Wall Street are technology companies. Companies that are not in the business of creating new technologies emphasize their technology side projects to get more attention from investors.

This could be part of McDonald's strategy. As Amazon has shown, getting a long leash from investors can pay off big. Amazon has sacrificed profit for years, preferring reinvestment into new projects. And investors love them more than ever.

McDonald's is solidly profitable though. Their conservative approach to business makes it unlikely that this is the whole story. And nobody in McDonald's is publicly claiming the fast food giant is now a "tech company”.

Good people are hard to find

McDonald's, along with most fast food chains, have a labor problem. The company itself emphasizes that finding the good restaurant employees is harder than ever. It talks of developing the right soft skills for potential employees.

Most observers point to low wages and a miserable work environment as the primary reasons for high employee turnover rates. McDonald’s generally rates low for employee satisfaction in restaurants, lower even than many of its fast food rivals.

Whatever wording you choose, McDonald's is having trouble finding enough people to work in its restaurants. The problem is more severe right now given record low unemployment rates in many places, including its biggest market in the US.

Some claim Mcdonald's investments in AI are intended to replace employees in restaurants and lower costs. This is plausible. But just as plausible is the argument that they need automation to do tasks they can't find people for.

Make restaurant employees happier

It's likely that leaders at McDonald's know that employee satisfaction is a problem. CFO Kevin Ozan said as much in an interview recently though he put a positive spin on it. "We’re also exploring technologies that can help us reduce or eliminate repetitive tasks and make employees’ jobs more interesting and rewarding." Reports indicate that they are also working on automating many tasks in the kitchen.

Automating as much as possible could solve two huge problems for McDonald's – relieving labor shortages and making the current employees more likely to stick around.

Make customers happier

When McDonald's leaders say soft skills are more important than ever, it could be an indication of where they see the fast food industry going. More jobs in McDonald's restaurants could involve dealing face to face with customers. AI-assisted automation will take care of mundane tasks leaving employees to make sure customers are happy.

According to this vision, McDonald's intends for AI to lead to more and better human interaction in its restaurants. Not quite the cold, robotic future you might think of when hearing about its move into AI.

If other experiments with AI bots in customer service are good indicators, this vision also seems realistic. Humans still want to deal mostly with humans when they buy something.

There probably won't be an AI bot taking your drive-thru order. At least not anytime soon. But an AI bot and a touchscreen might be there to make sure everything goes smoothly and quickly.