IBM Acquires McDonald’s McD Tech Labs to Seal Drive-Thru AI Partnership

McDonald’s has sold McD Tech Labs to IBM for an undisclosed sum, kicking off a partnership to develop an automated drive-thru service. The restaurant chain formed McD Tech Labs in 2019 after acquiring voice tech startup Apprente and bringing its AI research in-house. IBM’s contribution may accelerate the rollout and upgrades to McDonald’s voice assistant-operated drive-thrus just as experiments with the concept are starting to proliferate.

IBM McD

McD Labs applies the voice and speech recognition developed by Apprente to understanding and converse with people ordering food at the drive-thru. McDonald’s had worked with Apprente to run field tests of its Automated Order Taking (AOT) tech at a single McDonald’s ahead of the acquisition. This year, McDonald’s installed a voice assistant in 10 drive-thrus around Chicago, though Kempczinski said it was only 85% accurate at the time, with one in five orders still requiring a human to take the order. The rollout was followed immediately by a class-action lawsuit claiming the voice assistant violates the Biometric Information Privacy Act of Illinois. Nonetheless, McDonald’s and IBM seem to believe the technology has been successful enough to warrant a joint investment and cooperation in augmenting alloying what McD Tech Labs built to IBM’s AI work, particularly with Watson AI.

“McDonald’s development and testing of AOT technology in restaurants has shown substantial benefits to customers and the restaurant crew experience. Moving forward, IBM’s expertise in building customer care solutions with AI and natural language processing will help scale the AOT technology across markets and tackle integrations including additional languages, dialects and menu variations,” IBM and McDonald’s explained in a joint statement. “The acquisition of McD Tech Labs will complement IBM’s existing work to develop and deliver AI-driven customer care solutions with IBM Watson. Businesses across industries from financial services and healthcare to telecommunications and retail are using Watson to drive business outcomes.”

Drive-Thru Strategies

McDonald’s has many obvious advantages over smaller quick-service restaurants, but the race for drive-thru AI is rapidly heating up among big chains and smaller companies. Colorado-based Valyant AI added a voice assistant into Denver’s Good Times Burgers & Frozen Custard in 2019 and has been expanding ever since, aided by a $4.5 million funding round late last year. Fellow drive-thru AI startup ConverseNow brought in even more cash with a $15 million funding round in July. The tech is starting to appear in many pilot programs like the Hi Auto-built AI at Ohio chicken restaurant chain Lee’s Famous Recipe Chicken Restaurant. And SoundHound added a voice assistant to some White Castle and Sonic restaurants last year. Most recently, Wendy’s started to move in the same direction as McDonald’s, partnering with Google Cloud as its tech provider for creating a voice assistant.

Still, the sale and IBM agreement fit the strategy McDonald’s CEO Chris Kempczinski has previously described. The company acquires a tech startup, pumps resources into it for McDonald’s plans, then releases it in a sale or spin-off to a partner for scaling up. The restaurant refers to its digital and drive-thru tech efforts as part of the “Accelerating the Arches” strategic growth plan and estimated it can incorporate voice AI as part of every McDonald’s over the next several years. McDonald’s pegged the number of people leaving for IBM’s cloud and cognitive software division at fewer than 100 and not enough to make an impact on the quarterly financial statement. As Apprente only had about 15 team members when it was acquired, the rest must have been hired by McD Tech Labs, which still had job openings listed as of Wednesday.

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