McDonald's wants to make the McPick 2 pick for you.
The restaurant is integrating decision-based technologies into its menus to take the guess work out ordering. McDonald's is working to make fast food even faster.
The burger chain made a $300 million purchase last month of Dynamic Yield, a personalization and decision logic tech company. Both companies say it is the first deal of its kind in fast food. A week later McDonald's invested $3.7 million in mobile app developer Plexure.
The investments fit into McDonald's larger strategy.
"The reality is, the technology spend is going to be at a high level for a while," said McDonald's EVP and CFO Kevin Ozan, during a conference in March. Technology is a competitive weapon and McDonald's is willing to incur costs. "We like that spend because that's spending on growing the business."
So somewhere between flipping burgers and frying McNuggets, McDonald's entered the tech game. The same is true of Domino's and Starbucks, where customers are served either a hot pizza pie or shot of espresso with a side of technology.
"We like that spend because that's spending on growing the business."
Kevin Ozan
EVP and CFO of McDonald's
McDonald's investments are pressuring other restaurant CIOs.
The requirements and composition of restaurant CIOs are less focused on the internal infrastructure and more on consumer-facing technologies, inventory and labor management systems, e-commerce, social commerce, cybersecurity, and merger and acquisition activity.
Technology enables competition and the restaurant industry is broadening the "separation between the haves and the have-nots with technology," said Aaron Allen, founder and chief strategist for Aaron Allen & Associates, global restaurant consultants, in an interview with CIO Dive.
The companies that have technological capabilities are fairly vocal about their gains, or what "McDonald's would call 'moat-building' around their business through these technologies," said Allen.
The technological "moat" separates the Big Mac maker from its competition and adds to that insulation by acquiring young tech companies.
New CIO prerequisites
Highlighted by McDonald's investments, restaurants are looking for CIOs who have experience acquiring new technologies or serving on acquisition teams that require integration or consolidation, according to Allen.
McDonald's global CIO Daniel Henry came to the fast food chain after more than a decade at American Airlines, according to LinkedIn. Henry served as American Airlines' VP of customer technology and enterprise architecture from 2012 to 2017, right in the timeframe of American's historic 2013 merger with U.S. Airways.
The consumer facing technologies that restaurants are exploring or investing in also requires the eye of professionals outside of technology.
A unique guest experience is derived from a seamless cohesion of data, digital offerings and marketing expertise.
"If you recognize the guest, you can get the food quite wrong, and they'll still come back," said Christian Berthelsen, CTO, of restaurant and hospitality software provider Fourth, in an interview with CIO Dive.
Marketing professionals, rooted in personalization, are teaming up with CIOs to co-create experiences in the digital space. When Chris Andrews became the first CIO of Pei Wei in November, he was tasked with digital innovation, reporting directly to Brandon Solano, Pei Wei's chief marketing and digital officer.
"If you recognize the guest, you can get the food quite wrong, and they'll still come back."
Christian Berthelsen
CTO of Fourth
About five years ago, an intersection of technology and marketing emerged, said Andrews, in an interview with CIO Dive. "What the brands are looking for now are the guys who have the digital chops to partner with marketing" to streamline the omnichannel experience."
Having a cohesive plan between the tech and marketing leaders alleviates pressure points that might disrupt or interfere with responsibilities. If a CMO is doing an RFP from a vendor the CIO would want to have a say in it. There was fighting over "controlling dollars" and the lines between tech and marketing became "blurred."
The Panera model
Technical product development teams that enthuse stakeholders or shareholders to trust the process and the investment — is almost as important as the technologies.
Without such personnel or transferable skills, technology investments aren't easy for restaurants to justify, especially when a company's board is not digitally savvy.
The restaurant industry for a long time maintained the "let's wait and see" approach to technology and investments, said Allen. Digitally savvy restaurants have an attitude of "this is a really important strategic lever and that increases the value of CIOs."
Panera Bread's board wasn't yet able to see the return on the heavy tech investments made by then CEO Ron Shaich. His cutting edge technology plans contributed to Shaich leaving the company in 2010, only to return to the CEO role in 2012.
That was the around the time Panera "had the opportunity to be contrarian" and "bet on digital, loyalty, delivery" while other restaurants held back, according to Shaich, during a 2017 interview on Mad Money. Shaich has since stepped down as CEO to pursue personal interests while staying on Panera Bread's board.
Some companies have not looked at technology as a way to improve overall service levels and instead have "just [kept] up with the Joneses in terms of things like loyalty programs, server tablets," said Allen.
"It's hard to look cool if you've got a pager that was from the 1980s still in use."
Aaron Allen
founder and chief strategist for Aaron Allen & Associates
Under Shaich, Panera Bread made a prototype "inclusive of both digital access and improved operational processes," or Panera 2.0, for enhancing customer experience with technology as early as 2012, according to the company's FY 2015 annual report.
By 2015, 300 Panera cafes had been "converted" to Panera 2.0 after focusing on e-commerce, delivery and pick-up solutions through omnichannel capabilities. The company noted "while the nature of these investments requires us to incur costs before we see the benefits, we are increasingly confident in the wisdom of our decision to do so."
At the time, Panera's goal was to grow sales with customer-facing access points, like the web, mobile devices and kiosks. By the end of 2015, 16% of company sales were attributed to digital utilization and 23% of sales in cafes converted to Panera 2.0. By Dec. 27, 2016, before the fast casual chain went private, Panera 2.0 was "constructively complete with the roll-out," according to Panera Bread's 2016 annual report.
What are the quick wins?
Panera's board initially shied away from implementing new technologies because it feared it would be too costly and outdated by the time they are deployed, said Allen.
Think of full service restaurants "putting those clunky tablets at the table" or the old pager system, said Allen. "It's hard to look cool if you've got a pager that was from the 1980s still in use."
Kiosks, mobile apps, omnichannel solutions and delivery were once forwarding-looking concepts. Delivery is a relatively quick way to pull in technology that will yield fast gains, like Applebees and IHOP, said Allen.
There is a tradeoff for restaurants using delivery because it's "not a technology that they own," said Allen. "They're basically teaching the guests to go there" and use delivery options.
Delivery is great initially because it means companies don't need heavy capital or a large infrastructure investment.
"Make it as easy as possible to take money from your guests," said Andrews, but "you can't always pick the medium how your guests want to interact with you."
Chris Andrews
CIO of Pei Wei
Restaurants are "now at [the] mercy" of Uber Eats and GrubHub, natives to the delivery space who transformed it, said Allen.
Restaurants are at a turning point of reinvesting in internal systems, pulling guests back to their services. But innovation and disruption is not risk-free.
While Panera Bread was one of the first restaurants to have kiosks available to customers, it's still trial and error for other fast casual restaurants.
"Make it as easy as possible to take money from your guests," said Andrews, but "you can't always pick the medium how your guests want to interact with you."
Build smarter, not harder
Building technologies in-house is a risk. Some are more inclined to take the risk, like Domino's, where it "wants information technology to think big" and "forget cubicles and silos," according to its IT hiring site.
Building technologies in-house is "almost an impossible mission," said Berthelsen, "I think very, very few have the deep pockets and an understanding to do that well."
Typically skilled CIOs enlist the support of vendors instead of building solutions. Otherwise "you have to be at the scale of McDonald's and even they struggle," said Berthelsen.
The players that are growing, like McDonald's, have invested in proprietary technologies, which lead to short-term improvements in sales and guest satisfaction, but it doesn't guarantee future sustainability or dependability.
Pei Wei replaced a fully custom online ordering application because "you have two schools of thought," said Andrews, buying off the shelf or build around a company's own specific needs.
Andrews determined the Pei Wei custom application was "very unstable, very costly," so he issued a request for proposal and selected an industry leader in online restaurant ordering, Olo.
But many restaurants were built on systems and vendors that were very specific to their industry, even if they weren't the best of breed. Vendors "found a way to lock restaurants in to the hardware and the software," said Allen.
The lock-in makes it difficult to change, scale and modernize at the same rate of consumer technology. That led to difficult integrations, said Andrews.
Over the last three to five years, however, more POS vendors are opening ecosystems to more solutions providers.
The evolution of legacy POS systems is all part of the greater digital narrative. If a restaurant doesn't have a clear digital transformation plan, they are "fundamentally missing something," said Berthelsen.
