McDonald's to end AI drive-through test with IBM

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The Global AI Partnership launched in 2021. The combination of the two companies' technologies aims to simplify and speed up operations with voice-activated configurations.

“While there have been successes to date, we believe there is an opportunity to explore voice ordering solutions more broadly,” said the franchisee memo from Mason Smoot, McDonald's US senior vice president and chief restaurant officer. After a thoughtful review, McDonald's has decided. “To end our current partnership with IBM on AOT … IBM is a trusted partner and we will continue to use many of their other products in our systems.”

Among its challenges, it had problems interpreting different accents and dialects, which affected the accuracy of the sequence, two sources familiar with the technology told CNBC. McDonald's declined to comment on accuracy or technology challenges, while IBM did not immediately respond to a request for comment on the tool's accuracy.

The decision comes as restaurants from Del Taco to Wingstop to Panera and more are testing ways to use AI to streamline operations, from front to back of the house. Chipotle and Yum brands have also been leaders in both robotics and AI investments in recent years.

In a statement, McDonald's told CNBC that it is not ruling out potential AI drive-thru projects in the future, even though it has ended its IBM partnership.

“As we move forward, our work with IBM gives us confidence that a voice ordering solution for the drive-thru will be part of the future for our restaurants,” the company said in a statement. “We see tremendous opportunity to advance our restaurant technology and will continue to evaluate long-term, scalable solutions that will help us make informed decisions about future voice ordering solutions by the end of the year. “

In the statement, IBM said it would work with McDonald's on “a number of other projects” once the test is finished.

“IBM is now in discussions and pilots with several Quick-Serve restaurant clients who are interested in AOT technology,” the company said in a statement.

McDonald's sold its McD Labs technology, formerly known as Apprente, to IBM in 2021. It also sold Dynamic Yield, a predictive ordering technology, to MasterCard in late 2021, following a landmark acquisition in 2019 that was part of its innovative plans for restaurants.

While McDonald's AI plans for the future are unclear, all eyes will be on Alphabet's Google. At its investor day in December, McDonald's announced a new partnership with Google Cloud, but neither company offered details about what that would entail.

“We're excited to see McDonald's leverage our generative AI, cloud, and edge computing tools to deliver great food for our employees and customers around the world,” Alphabet CEO Sundar Pichai said in a statement at the time. How will use the experience to improve.” .

In a note this spring, BTIG analyst Peter Saleh wrote that franchisees haven't seen much progress on automated order takers in drive-throughs, “expressing frustration that updates have been infrequent.” And the demonstration at the World Convention was very little,” as all the orders seen there were wrong. “We're still hearing that accuracy is in the low to mid-80% range and operating costs are high,” while the technology has yet to be extensively tested.

Saleh added that there had been speculation about Google's large presence at April's McDonald's Worldwide Convention in Barcelona, ​​leading some to believe that Google might replace IBM as the company's AI vendor. can take

“Accuracy is the most important thing right now,” Saleh told CNBC on Monday. “It has to be at least 95% accurate and it has to be saved. [franchisees] The money to put a person in a drive, and the way it's designed now, doesn't make sense,” he said of the IBM technology.

Google did not immediately respond to CNBC's request for information on what its partnership with McDonald's might entail. McDonald's declined to comment.

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