McDonalds Buys Dynamic Yield For $300 Million to Bring Big Data to Drive-Thru

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“In a testament to the value of personalization, McDonald’s announced plans to acquire an Israel-based startup that uses data to serve up personalized offers to customers. According to people familiar with the matter, McDonald’s will acquire Dynamic Yield for upwards of $300 million.

The acquisition will inject technology into multiple areas of the traditional fast food restaurant, starting with a core feature: the drive-thru. McDonald’s tested the technology in a Miami location, where, according to Wired, the company’s algorithms took real-life factors like weather and traffic into account, suggesting appropriate menu items.

Thanks to new technology, restaurants collect plenty of data. But the practical application of that data is big business, and McDonald’s is seizing that opportunity with the Dynamic Yield buy.

“Upon closing of the acquisition, McDonald’s will begin to roll this technology out in the drive thru at restaurants in the United States in 2019 and then expand the use to other top international markets,” the company said in a statement on the news. “McDonald’s will also begin work to integrate the technology into all of its digital customer experience touchpoints, such as self-order kiosks and McDonald’s global mobile app.”

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McDonald’s Spent $48 Million to Push Bacon in February

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“McDonald’s led all companies in advertising dollars spent at $48 million, less than what the chain allocated in January. Taco Bell (second on the list) cut its TV advertising funding by nearly half, likely due to Grubhub picking up most of the tab for its joint commercial with the chain touting limited time free delivery. Grubhub reportedly spent just under $7 million in ad dollars in February.

The biggest surprise of the month was Arby’s, which catapulted up 26 spots from January to crack the top 10 in advertising dollars spent. The quick service restaurant has completed a large sales turnaround in recent years by relying more on promotions and new deli meats to entice customers, according to Forbes. The chain’s success also led its parent company to acquire both Buffalo Wild Wings and Sonic in 2018.

Overall, quick service restaurants and pizza chains dominated TV advertising again in February, with Yum Brands’ subsidiaries — Taco Bell, Pizza Hut, and KFC — in the top 10 for the fourth consecutive month.  Olive Garden and Applebee’s, the casual restaurants that cracked the top 10 in January, ended February at 11 and 14, respectively, after shelling out more than $10 million each.”

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McDonald’s Is Selling Cheesy Bacon Fries In Certain States

“McDonald’s traditional hot and crispy fries are getting jazzed up with two classic add-ons: Smoked bacon bits, and a gooey drizzle of real cheddar cheese sauce. It’s not quite the gravy-and-cheese-curd-topped poutine of our Canadian neighbors, but if you like your fries with a little something extra, this is your side dish.”

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The Big M loses it’s Size

For the first time since 1977, one of the largest restaurant chains inMcDonalds-Closing the world, McDonald’s, is projected to close more stores than open in the United States. Over the past two years, McDonald’s has been suffering from decreasing revenue and drops in profit from stores worldwide. Increasing numbers of competitors in the United States, economic instability in Europe and strict food safety regulations in Asia have effected the performance of McDonald’s. Already in the first quarter of 2015, McDonald’s closed 350 stores performing poorly in Japan, United States and China hoping it will drive profits upward. McDonald’s CFO Kevin Ozan is implementing turnaround strategies to “win over the millions of burger-eaters.” The company’s approach within limited service fast food is labeled to be outdated and far from trending dietary factors. This generation, the Millennials, are prone to be more health-conscious and interested in key words like “organic, free range, locally grown” which are areas that McDonald’s is incoherent with. With McDonald’s lagging attempt to follow trends, competitors continue to grow like Chipotle which caused the biggest drop in sales to McDonald’s with its entrance into the limited service industry. McDonald’s has not officially disclosed the number of stores closing but it is speculated that a target of 700 restaurants with poor sales will be shutting down this year.

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QSR Chains Seeking New Image

Quick-service chains will be attempting to reinvent a fresher image for the New Year by dropping their reputation of serving ‘junk food.’ The masses have spoken, expressing an aversion to overly processed and reheated foods. Chains such as Taco Bell and McDonald’s will be rethinking their choice of ingredients by removing the amount of artificial preservatives in their foods. Greg Creed, CEO of Yum Brands (owners of Taco Bell, KFC and Pizza Hut) realizes that, “This demand for fresh and real is on the rise.”

Creed stated at an investor and analyst presentation last month that the company should begin to use less preservatives and be more transparent about their use of ingredients. The objective to re-market fast-food into anything other than will be challenging as it has forever been perceived as fattening, cheap and unhealthy. Packaged food and beverage companies have already begun to reformulate their products by removing chemical ingredients. The transformation from junk food to ‘real,’ ‘fresh’ or ‘healthy’ food will be a tricky one. To read a few examples of QSR chains that are making moves towards this challenging recasting of their brands, click here.

 

McDonald’s to Simplify Menu Items

McDonald’s has had it’s biggest U.S. sales decline in 14 years, and is looking to take major steps to rectify the situation. The main step McDonald’s is taking to re- boost sales is to remove a good amount of items from its menu offerings. McDonald’s will also be getting rid of preservatives and will be offering customizable toppings. USA President of McDonald’s, Mike Andres, stated at an analyst meeting last month that the chain would be removing a total of eight items from the menu, offering 11 extra value meals down from the usual 16. Customers and investors alike have noticed that operations would run smoother and sales would stop being stagnant by drastically focusing and simplifying the menu. When there are too many menu items it becomes overwhelming and time consuming for staff members to learn all the procedures.

McDonald’s is also currently testing “Create Your Taste,” as part of its efforts to beat the 14 months of no sales growth. This would allow customers to personalize their burger, a key part of fixing McDonald’s image issue. Andres would also like to enhance McDonald’s menu offerings by having shorter ingredient labels and being “more culinary inspired.” The president also stated that, “the pace of change outside of McDonald’s has become faster than perhaps the pace of change internally.”

To read more about the steps McDonald’s is taking to reverse a negative sales growth, click here

Preorder Apps to Boost Efficiency

Beginning this December,  150 Starbucks shops in the Portland, Oregon area will have the opportunity to test a new preorder app to avoid the daunting morning coffee lines. Linda Mills, spokeswoman for Starbucks,  states that upon arrival the beverage will be sitting at the counter, and “If we need to remake your beverage to make sure it’s the right temperature, we’ll gladly do it.” Starbucks is not the only chain to incorporate preorder apps, large food-chains such as Pizza Hut, Domino’s Pizza, Taco Bell, Dunkin’ Donuts and McDonald’s are also in the development phase of testing these sort of new apps.

The startup OrderAhead from San Francisco are assembling merchant networks and they work by acquiring a 5-10% cut of each transaction. Jeffrey Byun, former derivatives trader and founder of OrderAhead, states that “OrderAhead addresses latent demand. We’re enabling behavior that was not possible before.” The mobile-payment startup Square is also releasing a preorder all for restaurants in San Francisco and New York. Richard Crone, researcher at Crone Consulting, believes that in the next couple years every quick-service enterprise should have a mobile express lane in order to have a chance at staying in the business.

Different chains will be rolling out their apps at different times and in different ways, whether the app gives an estimate duration until the order will be complete, or if there will be a separate line in store for mobile ordering pick up. Mills believes that while baristas will be challenged to work in the mobile orders into their routine,“the hardest part is just customer awareness, just getting them used to a different behavior and a different routine.” To read more about the different nuances in preorder app rollout and development and how they will help increase efficiency in stores, click here