IBM to end McDonald's AI drive-thru test

• IBM's AI drive-thru test run at McDonald's has been concluded in over 100 restaurants.
• According to a memo sent to franchisees last week, obtained by CNBC, the technology will be shut off no later than July 26.
• In the future, McDonald's intends to incorporate AI into its drive-thrus, as stated by the company to CNBC.

is changing course on its AI plans.

The fast-food giant will end its AI drive-thru technology partnership with the Automated Order Taker in more than 100 restaurants by July 26, as per a memo sent to franchisees last week, obtained by CNBC.

In 2021, a global AI partnership was established, with the goal of streamlining and accelerating operations through voice-activated ordering using combined technologies from both companies.

"Although there have been achievements so far, we believe there is potential to expand voice ordering solutions further, according to a memo from Mason Smoot, SVP and chief restaurant officer for McDonald's U.S. "Following careful consideration, McDonald's has decided to terminate our current partnership with IBM on AOT. IBM remains a valued partner and we will continue to utilize many of their other products throughout our system.""

Restaurants such as Del Taco, Chipotle, and Panera have been utilizing AI in various ways to optimize their operations. Additionally, these companies have been at the forefront of investing in robotics and AI technology.

McDonald's has not ruled out the possibility of implementing AI-driven drive-thru systems in the future, despite ending its partnership with IBM.

"Moving forward, our collaboration with IBM has given us the confidence that a voice ordering solution for drive-thru will be a part of our restaurants' future," the company stated. "We see significant potential in enhancing our restaurant technology and will continue to assess long-term, scalable solutions to make an informed decision on a future voice ordering solution by the end of the year."

IBM announced that it will collaborate with McDonald's on various projects after the test concludes.

IBM is currently in talks and testing AOT technology with several Quick-Serve Restaurant clients who are interested in it, the company stated.

In 2021, McDonald's sold its McD Labs technology, formerly known as Apprente, to IBM, and Dynamic Yield, a predictive ordering technology, to Mastercard in late 2021, after a splashy acquisition in 2019 that was part of its modernization plans for restaurants.

McDonald's AI plans for the future are uncertain, but Google Cloud will be closely watched. McDonald's announced a partnership with Google Cloud at its investor day in December, but neither company has disclosed the details of the partnership.

Sundar Pichai, CEO of Alphabet, stated that they are thrilled to see how McDonald's will utilize their generative AI, cloud, and edge computing tools to enhance their renowned dining experience for their employees and customers worldwide.

In a note this spring, Peter Saleh of BTIG wrote that franchisees were frustrated with the automated order taker in the drive-thru, as updates were infrequent and the demonstration at the worldwide convention was underwhelming, with all of the orders witnessed there being incorrect.

Despite not having undergone a comprehensive test, accuracy remains in the low-to-mid 80% range and operating costs are high.

There were rumors that Google might become McDonald's' AI vendor at the April Worldwide Convention in Barcelona, as some speculated that IBM would be replaced.

Saleh stated on CNBC on Monday that accuracy is the top priority. He emphasized that the technology must be at least 95% accurate and should save franchisees money compared to having a person in the drive-thru. However, he pointed out that the current design does not meet these requirements.