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McDonald's Just Spent $300 Million on New Drive-Thru Tech

By Steve Symington – Updated Apr 16, 2019 at 9:30AM

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The fast-food juggernaut is embracing personalization to drive growth.

As part of its "Velocity Growth Plan" launched in early 2017 to re-accelerate domestic growth, McDonald's (MCD 1.99%) spent roughly $1.5 billion last year modernizing around 4,500 of its U.S. restaurants with more contemporary designs, including features like digital menus and self-order kiosks. And earlier this year, the company outlined plans to dedicate nearly $1 billion more to update another 2,000 locations.

It's unclear, however, whether the cost of strategic acquisitions counts toward that total. But on Monday, McDonald's unveiled a doozy to that end with its purchase of Dynamic Yield, a leader in personalization and decision logic technology.

Exact terms weren't disclosed, but sources familiar with the deal have pegged its value at over $300 million, making it McDonald's largest acquisition in 20 years.

McDonald's digital menu listing popular items

IMAGE SOURCE: MCDONALD'S.

"Technology is a critical element of our Velocity Growth Plan, enhancing the experience for our customers by providing greater convenience on their terms," added McDonald's CEO Steve Easterbrook. "With this acquisition, we're expanding both our ability to increase the role technology and data will play in our future and the speed with which we'll be able to implement our vision of creating more personalised experiences for our customers."

Taking personalization to the next level

In particular, McDonald's goal is to use Dynamic Yield's technology "to make [its] customer experience even more personal." That effort will start in the U.S. in 2019, then expand to top international markets later on with customized drive-thru displays that show different menu options depending on factors from the time of day to current restaurant traffic, trending menu items for each location, and even the weather.

And McDonald's isn't recklessly launching this initiative without precedent for its success. The company says it tested the technology at several domestic restaurants last year. What's more, over 300 brands worldwide already use Dynamic Yield's solutions, which extend across multiple industries -- not only to digital kiosks, but also to websites, apps, call centers, email, and connected Internet of Things (IoT) devices.

Check out the latest earnings call transcript for McDonald's.

Looking ahead

So while McDonald's will begin by integrating Dynamic Yield's products with its drive-thru customer interactions, it seems safe to expect the tech to eventually be extended to every digital touchpoint through which consumers interact with the iconic brand.

Still, following the close of the acquisition, Dynamic Yield will remain a stand-alone company that continues to serve its current client base while working to attract new businesses. McDonald's, for its part, has also pledged to continue investing in Dynamic Yield's core products along the way.

Over the long term, if those investments can aid in effectively revitalizing McDonald's growth as it hopes, this should prove to be money well spent. 

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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