McDonald's AI Drive-Thru Disappears

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Published: June 18, 2024 6:40 am

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McDonald’s Corp. (NYSE: MCD) wants to cut labor costs to improve profits and its share price.
Yet it has scrapped plans for AI-based drive-thrus at 100 locations.

It seemed like a good idea, and perhaps a way to cut labor costs at McDonald’s Corp. (NYSE: MCD) outlets. This was to team up with International Business Machines Corp. (NYSE: IBM) for an AI-based drive-thru. McDonald’s canceled the plan as something went wrong.

CNBC obtained a document stating that the plan was scrapped at about 100 locations. The effort was known as the Automatic Order Taker. The concept was as simple as the name. Customers spoke into a microphone. When they reached the delivery window, their food was ready, and presumably faster than if a human had done the work.

McDonald’s spoke as if the service was perfectly fine. Mason Smoot, senior vice president and chief restaurant officer for McDonald’s U.S., said, “While there have been successes to date, we feel there is an opportunity to explore voice ordering solutions more broadly.” However, voice recognition could not recognize all voices, depending on the accent of the order taker. Since the partnership with IBM is three years old, the companies have more than enough time to see what is wrong.

Why AI?

Fast-food companies need the order-based artificial intelligence model, particularly as worker wages go up. The reasons for wage increases are inflation-driven paychecks and state minimum wage laws. At some point, the cost of people starts to eat into profits. On its most recent earnings call, McDonald’s said increased food prices were hurting business. So, without any question, was the cost of labor There are only a few ways to bring down operating costs.

McDonald’s needs some magic beyond the Golden Arches. Its stock is down 15% this year, while the S&P 500 is 15% higher. Labor costs could be the key to an improvement, if only AI worked.

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