Why McDonald’s might sell part of Dynamic Yield

The burger giant, which bought the technology company two years ago, is considering a sale of the business that works with other clients.
McDonald's Dynamic Yield
Photo courtesy of McDonald's

McDonald’s might sell a part of Dynamic Yield, as the company’s digital ordering technology has been expanded into more of the burger giant’s markets around the world—but demand from outside the company continues to increase.

The Chicago-based chain acquired Dynamic Yield for $300 million less than two years ago, with the idea of upgrading its menu boards and later its kiosks and smartphone app. The technology works with menu boards, kiosks and apps and uses artificial intelligence to recommend items based on the time of day or what’s popular in a specific market.

At the time, the Israeli-based tech company had clients outside of McDonald’s. That non-McDonald’s business has grown since then.

McDonald’s has stressed that it has yet to make a decision on a possible sale, but representatives noted that it may be time to give the non-McDonald’s business a more natural owner.

“The potential sale of the non-McDonald’s part of our business has been discussed from the outset and now feels like the right time to explore that possibility,” Liad Agmon, founder and CEO of Dynamic Yield, said in aa statement. The Wall Street Journal first reported on the possible Dynamic Yield sale.

McDonald’s acquisition of Dynamic Yield has helped usher in an era of major technological change in the nation’s drive-thrus. Many of the chain’s competitors—notably Burger King—have started adding similar technology to their own menu boards.

At the same time, there could be a financial benefit to selling the business now. Restaurant technology companies have been popular among investors of late. Third-party delivery service DoorDash went public last year and is trading at $160 a share. The online ordering company Olo is considering an initial public offering of its own.

That could give McDonald’s an opportunity to generate a return on its $300 million investment in the company.

McDonald’s has likely generated at least a partial return thus far. The timing of McDonald’s acquisition was fortuitous, coming a year before a pandemic led to widespread closures of dine-in service and made the drive-thru a vital source of sales.

Company executives have indicated that improved ordering speed and suggestive selling have helped operating results—same-store sales rose 5.5% in the last three months of 2020, for instance, and McDonald’s generated a somewhat surprising 0.4% same-store sales growth for the full year despite steep declines last spring.

McDonald’s has added the Dynamic Yield technology to drive-thrus in the U.S. and Australia and is adding them in Canada. It has also started integrating them in kiosks in Australia and views the technology as a vital part of the loyalty program it’s currently testing.

“A key focus of our growth plan, “Accelerating the Arches,” is building on our digital presence to bring fast, easy and more personalized experiences for our customers,” a McDonald’s spokesperson said in a statement. “The implementation of Dynamic Yield technology is enhancing the customer experience at McDonald’s drive-thrus and kiosks in a number of markets around the world and we’re continuing to deploy more. As with any plan to accelerate technology innovation, we’ll continue to leverage research and learnings and test new approaches to best adapt to the changing needs of customers.”

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