McDonald’s – The OM Blog by Heizer, Render, & Munson

OM in the News: McDonald’s Gives Its Restaurants an AI Makeover

McDonald’s is giving its 43,000 restaurants a technology makeover, starting with internet-connected kitchen equipment, artificial intelligence-enabled drive-throughs and AI-powered tools for managers, reports The Wall Street Journal (March 5, 2025).

McDonald’s is introducing new technology in part to drive better experiences for its crews. “Our restaurants, frankly, can be very stressful,” said the CIO.

The goal? To drive better experiences for its customers and workers who today contend with issues ranging from broken machines to wrong orders. To accomplish that, McDonald’s tapped Google Cloud to bring more computing power to each of its restaurants—giving them the ability to process and analyze data on-site. The setup, known as edge computing, can be a faster, cheaper option than sending data to the cloud, especially in more far-flung locations with less reliable cloud connections.

McDonald’s is also exploring the use of computer vision (see Chapter 7), the form of AI behind facial recognition, in store-mounted cameras to determine whether orders are accurate before they’re handed to customers.

Additionally, the ability to tap edge computing will power voice AI at the drive-through. Edge computing will also help its restaurant managers oversee their in-store operations by creating a “generative AI virtual manager,” which handles administrative tasks such as shift scheduling on managers’ behalf.

AI will be able to help McDonald’s tailor its promotions and offers by using customer data such as prior purchasing history, and even linking it with weather data. “A customer who we know loves our sweet treats could get an offer through the app for a McFlurry on a hot summer day,” said the firm’s CIO.

Despite its first-mover advantage, McDonald’s will still face challenges including cost and the difficulty of rolling out the same technology across franchises and corporate-owned locations. But, compared with some of its quick-service restaurant peers, McDonald’s has been relatively aggressive at investing in new digital technologies. That, combined with the vast amount of data it has collected on its customers, gives the fast-food giant a leg up on figuring out how to improve customer loyalty.

Classroom discussion questions:

What is “edge computing” and why is it a powerful tool for OM?
Summarize the technology makeover being undertaken. Why is the firm going down this expensive path?

OM in the News: McDonald’s Decides No More Dry Burgers

In 1948, brothers Richard and Maurice McDonald retooled their original San Bernardino, Calif., restaurant around a slim menu selling burgers for 15 cents. Their restaurant, called McDonald’s, would go on to provide the blueprint for the fast-food business. They shrunk down the patties to make them more affordable, and served them with ketchup, mustard, onions and two pickles—no substitutes, to keep service fast. The concept was a hit.

Assembling the revamped burger in a test kitchen.

Burgers last year accounted for around 40% of U.S. fast-food sales, and most chains can’t make it without a strong contender. Some 68% of Americans eat burgers at fast-food restaurants at least once a month.

The problem for McDonald’s is that it came in 13th among U.S. chains based on the number of customers (28%) calling their burgers desirable, reports The Wall Street Journal (Dec. 1, 2023). White Castle led the list with 72%, and Burger King followed at 52%.

With increased competition in the burger market, McDonald’s executives decided to revamp many of the industrial-scale techniques that have produced cheap, uniform burgers. In some cases, the firm is reviving practices it scrapped long ago in a push for efficiency. “We can do it quick, fast and safe, but it doesn’t necessarily taste great. So, we want to incorporate quality into where we’re at,” said a top exec.

Deciding it’s had enough with dry patties and squishy buns, the firm made more than 50 tweaks on its burgers adding up to the biggest enhancements in decades. They started by cooking the beef with the onions on top of the patty, added room-temperature cheese that melted faster and put it all on the shinier brioche-style bun, a moister bread to better hold heat. They found cooking 6 burgers at a time instead of 8 improved consistency and delivered fresher patties. They calibrated the gap on the metal clamshell that presses burgers on the grill down to the millimeter, to avoid pressing too hard and squeezing out all the juices.

For a chain with tens of thousands of restaurants, the overhaul posed a massive undertaking. Restaurants would have to retrain workers to look out for quality measures like when grills were running too hot and drying out patties. McDonald’s needed to ensure bakeries across the world could comply with its new specifications for buns. The plan has taken 6 years to implement.

Classroom discussion questions:

Other products and services have been around for many years, like the Big Mac, and have also had continued success through enhancements. Identify one such product.
Why did it tale McDonald’s so long to improve its burger?

OM in the News: The Changing Layout Landscape at McDonald’s

We open Chapter 9 (Layout Strategies) in our text with a Global Company Profile featuring McDonald’s and its continuous changes to achieve competitive advantage through innovative layout. Its most recent model a few years ago was an unprecedented redesign of the layout of all 30,000 stores to create a contemporary dining area (at an average renovation cost of $300,000-$400,000 per outlet).

McDonald’s last major layout change gave a fresh dining room appearance.

But Americans are eating their burgers, fries and nuggets at home, in their cars and at the office—increasingly anywhere but at the fast-food restaurants themselves. At McDonald’s and Burger King, booths are often empty. Customers pick up their orders and head out. People sitting at tables sometimes are workers on their breaks. Dine-in customers now represent less than 10% of visits in most U.S. McDonald’s restaurants, compared with around a quarter of domestic sales before the Covid pandemic, reports The Wall Street Journal (Aug. 8, 2023).

The pandemic accelerated a shift toward to-go that was already under way. Owners serving the bulk of their orders to-go found that they were more profitable and efficient to run, needing less maintenance work and staff. (It is often cheaper and less labor-intensive to pack food into bags to be eaten elsewhere than keep a dining room clean).

Some franchisees say the fast-food business is permanently shifting toward drive-through, delivery and to-go orders. They started speeding up investments in drive-throughs and online ordering. McDonald’s and other chains are developing new restaurants centered around drive-throughs and carryout, with very little or no dine-in option. “You don’t necessarily need the big dining rooms that you needed in our traditional restaurants,” said McDonald’s CEO last month.

A number of U.S. McDonald’s operators in 2018 formed an independent group to help advocate for franchisees’ interests. The group has pushed back at the burger chain on some of the remodeling requirements. U.S. franchisees are expected to freshen up their dining rooms, front counters and bathrooms with approved designs every 10 years.

Classroom discussion questions:

Why are most fast-food restaurants reluctant to give up on the dining room?
What will be the design of the next generation McDonald’s?

OM Podcast #4: Strategic Decision Making at McDonald’s

Welcome to our latest Operations management podcast! Today, Jay Heizer and Barry Render discuss the strategic decision making at McDonald’s that has made it such a successful company. We hope you enjoy hearing about some of the interesting operations advances that firm has made in its products (Chapter 5), processes and technology (Chapter 7). and layout (Chapter 9) to give it a competitive advantage.

And don’t forget to join us at the POMS meeting on May 22nd at 4:30 pm for a “meet the authors” ice cream social.

Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM. Contact your Pearson rep to learn more! https://www.pearson.com/us/contact-us/find-your-rep.html

We will be slowing down our podcasts in the summer to one a month, so we will see you for our next podcast June 12th for a discussion about NASCAR pit stops..

OM in the News: The Fast Food Revolution

McDonald’s has a new Texas restaurant with no tables or seats or bathrooms for customers and a conveyor belt that routes food to drivers who order ahead. Chipotle also offers no place for customers to sit inside an Ohio restaurant that only takes digital orders. Taco Bell is evaluating a new design that features 4 drive-through lanes, double the typical two. Starbucks, which long described itself as a “third place” for customers to gather after home and work, plans to add 400 U.S. stores with only delivery or pickup service in the next 3 years.

Taco Bell is testing a 4-lane drive through in Minnesota

America’s biggest restaurant companies made a bet during the pandemic that you would rather eat the food cooked on their premises someplace else. Now they are gambling you will want to do so for years to come. The strategy from these giant chains is to orient their operations around drive-throughs and online ordering while testing new restaurant concepts that only serve food to go, reports The Wall Street Journal (Jan.28-29, 2023). They say these designs will make them more profitable and efficient since restaurants that bring fewer customers inside cost less to build, maintain and staff.

Of all orders placed at U.S. fast-food restaurants in 2022, 85% were taken to go. That is down from a high of 90% during 2020 but up from 76% prepandemic. Among full-service restaurants, 33% of orders were to go in 2022— double prepandemic rates.

The concept of taking food and beverages to go took root in the years after World War II, as Americans embraced an automobile culture. In the 1970s the industry fully bought into the to-go idea. Wendy’s introduced its “pick-up” window in 1970, with the first McDonald’s drive-through in 1975. (90% of McDonald’s business is now drive-through).

The most distinctive feature of the new McDonald’s in Texas is an automated delivery system for customers who order ahead on an app. When you pull up to the window in the “order ahead” lane, a conveyor delivers your food with help from a robotic arm that pushes the bag out to the waiting car. Starbucks’ CEO has acknowledged its cafes now are often clogged with pick-up, drive-through, delivery and cafe orders all at once. The result: long lines and frustrated customers. His plan is 700 more U.S. stores in the next 3 years with drive-throughs as the primary means of sales.

Classroom discussion questions:

What operations issues will management face with this revised concept?
What dangers are there in making such changes? Consider a SWOT analysis as in Chapter 2.

OM in the News: McDonald’s Unveils First Automated Location

McDonald’s opened its first automated restaurant, with machines handling everything from taking orders to delivering the food – and dividing opinions everywhere, reports Fox Business (Dec. 24, 2022).

OM in the News: McDonald’s Un-Location Decision

Fewer people want to eat their meals at Walmart, writes The Wall Street Journal (April 10-11, 2021). For years Walmart and large restaurant chains like McDonald’s enjoyed a mutually beneficial relationship. The retailer delivered a steady stream of diners, and the eateries provided rental profits and a reason for shoppers to stick around stores. Walmart and McDonald’s first started working together around 1994. At one time, Walmart allowed McDonald’s to be the exclusive restaurant when it was present in a store.

But those bonds have frayed as more shopping goes online and fast-food restaurants depend more on drive-through windows for sales, a feature Walmart locations don’t have. The pandemic has made indoor dining unappealing—or prohibited—for many shoppers, accelerating the split.

mcdonald's

So McDonald’s is closing hundreds of restaurants located in the huge retailer’s stores, the last vestiges of a 30-year-old experiment between the companies. (At its peak, there were 1,000 McDonald’s restaurants inside Walmarts). The closures could pose a challenge for Walmart, which has long counted on revenue from restaurants leasing space inside its stores. That is different from some competitors such as Costco, which runs its own restaurant space selling inexpensive pizza and hotdogs. Retailers hope food service inside store walls draws shoppers to linger longer or give workers a place to eat while taking a break.

McDonald’s locations inside Walmart stores are generally less profitable than stand-alone restaurants, in part because they lack a drive-through, the main source of McDonald’s sales. And customers at times loaded up on refills and condiments, diluting margins. Even before the pandemic, Walmart shoppers increasingly preferred to shop and leave or buy online. Around a third of restaurant sales inside stores come from Walmart employees.

To compensate, Walmart plans to open more Domino’s, Taco Bell, Ben’s Soft Pretzels, and Ghost Kitchens Brands locations to fill the space.

Classroom discussion questions:

Why is McDonald’s un-locating?
Are there any downsides to replacing McDonald’s with chains like Domino’s or Pizza Hut?

OM in the News: The Pandemic and the Drive-Through

The pandemic is sparking a boom in an often-overlooked type of property, the drive-through, reports The Wall Street Journal (March 3, 2021). Food halls and restaurants have taken a big hit from frequent limits on seating capacity during the Covid-19 crisis. But chains such as Chick-fil-A, McDonald’s, and Checkers & Rally’s said they are enjoying a sales uptick at stores with drive-through lanes, which have become more popular during the pandemic. As we discuss in the Chapter 9’s Global Company Profile on layout at McDonald’s (pages 368-9), drive-throughs have been ubiquitous since the 1970s. Now they are critical. “You can pull up in your car and stay socially distant,” said one industry CEO.

Even restaurant chains that have never offered drive-through options are rolling out lanes. Shake Shack is building its first drive-through this year in Orlando. Some restaurant chains that already rely on drive-throughs are bulking up with even grander versions, in part to help meet a rise in digital orders. Burger King unveiled plans for future restaurants designed with triple drive-through lanes. One of the lanes would be reserved for customers who order online.

Many Checkers & Rally’s restaurants feature double drive-through lanes.

Chipotle Mexican Grill Inc. is expanding a similar strategy. The company plans to add 200 locations this year, with many offering customers the option to pick up digital orders via drive-throughs the company calls Chipotlanes. Starbucks just said that it expects to open about 800 stores annually, particularly in suburban locations with drive-through lanes. The company added that stores with these lanes drove half of net sales last year, up more than 10% from pre-pandemic levels.

Classroom discussion questions:

Is building a 3 lane drive-through the right long-term decision?
What location issues (Ch. 8) must be considered in adding this layout to a restaurant?

OM in the News:McDonald’s Improves Operations with a Smaller Menu

McDonald’s plans to keep dozens of items off U.S. menus for the foreseeable future, after sparer operations implemented during the coronavirus pandemic led to improved service times and better margins. Salads, bagels and yogurt parfaits are among around 100 items that they removed from menus after the pandemic hit the U.S. to simplify store procedures and supply. The changes mean operators will have to stock fewer goods in their restaurants.

Many restaurant chains stripped down their menus during the pandemic in light of supply and labor constraints, reports The Wall Street Journal (June 19, 2020). Some, including Red Robin Gourmet Burgers, have reported improved operations as a result of the more limited menus, including faster service times and less waste.

McDonald’s executives said such changes had a bigger impact than they anticipated. Drive-through times fell by an average of 25 seconds during the pandemic, and customers reported in surveys that their food was better and their orders were more accurate. “Our menu strategy really has been focused as a result of Covid and the success we’ve had with a limited menu,” said McDonald’s CEO.

McDonald’s menu had ballooned in recent years as the company tried to attract new customers. That caused drive-through times to increase to levels that troubled executives, prompting the chain to test forms of automation and remove some more-complicated items. McDonald’s began offering breakfast all day in 2015, one of its biggest operational changes in years. The change improved sales in the U.S. for a time. It now allows owners to choose what breakfast items to serve all day to simplify their operations.

Classroom discussion questions:

In Ch. 5 of your Heizer/Render/Munson text, we describe 5 ways to design more efficient service systems. Which approach(es) works best at McDonald’s?
What are the advantages and disadvantages of the more limited menus?

OM in the News: McDonald’s to Add Automated Drive-Thru Ordering

McDonald’s is making a bet it can automate the task of taking drive-thru orders, reports New Equipment Digest (Sept. 10, 2019). The world’s biggest restaurant company is buying startup Apprente, a developer of voice-recognition technology for use in the restaurant industry, to help speed up lines. The idea is to eventually have a machine, instead of a person, on the other side of the intercom to relay orders to kitchen staff. Chicago-area restaurants are testing the system.

McDonald’s sees Apprente helping it move cars through the drive-thru lane more quickly and take orders more accurately than employees. The company is also investing to add ordering apps and kiosks in its restaurants and digital menu displays. Fast-food companies are looking for an edge amid intense competition.

Apprente says its technology can accurately interpret conversational language — such as a customer ordering a hamburger with no onions and extra sauce. McDonald’s already is testing the technology in its drive-thru lanes, which makes up about 70% of the company’s business. It plans to roll Apprente’s technology out nationwide, and predicts it will have a “positive impact on more than half of our customers.”

McDonald’s also spent $300 million on Dynamic Yield Ltd. this year, a company which helps retailers improve performance by collecting personal data from customers to fine-tune sales pitches and promotions. McDonald’s uses Dynamic Yield’s tools to suggest food and drinks to diners based on factors such as time of day, weather and traffic.

Classroom discussion questions:

Why is this an important OM tool for McDonald’s?
Compare this to the 7 other major changes described in the Global Company Profile on McDonald’s that opens Chapter 9.

OM in the News: The McDonald’s Menu Goes Digital

McDonald’s, in its largest acquisition in 20 years, is buying an Israeli decision-logic technology company to better personalize menus in its digital push, spending more than $300 million on Dynamic Yield Ltd., reports Fortune (March 26, 2019). With the new technology, McDonald’s restaurants can vary their electronic menu boards’ display of items, depending on factors such as the weather—more coffee on cold days and McFlurries on hot days, for example—and the time of day or regional preferences. The menus will also suggest add-on items to customers.

Since 2015 the 38,000 store burger chain has pushed technology—including self-order kiosks, digital menus boards and delivery— to boost sales and help McDonald’s stand out among rivals. Since the firm seldom carries out acquisitions, the purchase of Dynamic Yield shows the company’s desire to leverage technology to speed growth in the fiercely competitive restaurant industry. The move will make McDonald’s one of the first companies to integrate decision technology into the customer point of sale at a brick and mortar location.

“Technology is a critical element of our velocity growth plan,” says the McDonald’s CEO. “We are expanding the role that technology will play in McDonald’s future and the speed with which we’ll be able to implement our vision of creating more personalized experiences for our customers.” The company said it would roll out the technology at restaurants in the U.S. in 2019 and then expand the use to other top international markets.

Classroom discussion questions:

What was McDonald’s largest acquisition before Dynamic Yield?
What other technologies have entered the restaurant industry?

OM in the News: In Russia, McDonald’s Serves Local Fries and a Side of Realpolitik

A new potato-processing plant is working to produce french fries to McDonald’s exacting specifications.

McDonald’s became a leading ambassador of American culture after opening its first restaurant in Moscow in the twilight of the Soviet Union, writes The Wall Street Journal (Nov. 8, 2018). Now, as Russia-U.S. tensions rise and pro-Kremlin politicians call to close the U.S. chain, management is taking a new tack: Go Russian. This year, the company boosted the share of Russian suppliers its restaurants use to 98%. McDonald’s has succeeded world-wide in part by finding local suppliers wherever its restaurants operate, shortening supply chains.

The local focus appears to be paying off. The number of McDonald’s restaurants in Russia grew 6% this year. The firm sees Russia as a high-growth market able to offset the saturated U.S. market. The company opened its first restaurant on Pushkin Square in 1990, where it served 30,000 hungry Soviet Muscovites on its first day.

U.S.-Russian ties have frayed in recent years. The first shots against McDonald’s were fired in 2014 after the U.S. sanctioned Russia following Moscow’s annexation of Crimea. Russian authorities at the time closed 12 restaurants nationwide, including the Moscow flagship, and subjected hundreds of others to snap health inspections. The temporary closures had little effect on sales, but management used them as an opportunity to refurbish restaurant interiors and start digitizing processes.

After that experience, McDonald’s focused on boosting purchases from local producers for almost everything it served. Critically, McDonald’s signed a contract to buy its french fries from a Russian producer—a first in its almost 30-year history. The agreement ends one of McDonald’s most fraught endeavors here: finding the right supplier to reliably deliver fries up to the company’s standards. And McDonald’s advertising strategy is focused on getting the word out. Delivery trucks are painted with a large “98%,” signifying the company’s share of local suppliers.

Classroom discussion questions:

What makes the Russian supply chain so difficult for the firm?
Why are the French fries an issue?

OM in the News: Product Design at McDonald’s

McDonald’s is dropping the Minute Maid apple-juice box from its Happy Meals and replacing it with a watered-down organic juice with less sugar made by Honest Kids. The change is the latest step in the evolution of the Happy Meal toward healthier options as parents are increasingly turning away from 100% fruit juice in favor of water and other drinks with less sugar.

Amid a backlash against the fast-food industry for contributing to America’s obesity problem, McDonald’s six years ago reduced the size of its french fry servings in Happy Meals by more than half and added sliced apples. Later, the chain stopped promoting soft drinks as an option in children’s meals and instead started including juice, low-fat milk and water on its menu boards and in its advertising.

McDonald’s also has added low-fat yogurt and clementines as side options, and last year removed artificial preservatives, colors and flavors from its chicken nuggets. McDonald’s could, of course, still do more to make Happy Meals more nutritious, perhaps by offering vegetables and rotating in different fruits to expose children to a variety of healthy items. But a company spokeswoman said the company is proud of the changes it has made and that, “We are committed to continuing our food journey for the benefit of our guests” (The Wall Street Journal , Sept. 16-17, 2017).

Product design is an ongoing process at McDonald’s, just as it is at Apple, 3M, Honda, and other industry leaders that we discuss in Chapter 5.

Classroom discussion questions:

Is product design the most important of the ten OM decisions?
What other major product design changes has McDonald’s made in the past two decades?

OM in the News: Maintenance, Reliability and the McFlurry

Employees often just say the machine is down rather than reassembling it. Here an employee spills ice cream mix all over herself while trying to fill the machine.

Why is the McDonald’s McFlurry ice cream machine down again? “The interruption in ice cream, milkshake and McFlurry service is so widespread that it has spawned an avalanche of social-media complaints in the U.S. and abroad—and conspiracy theories,” writes The Wall Street Journal (Jan. 20, 2017).

“I’m convinced there’s no way an ice cream machine would be down all the time with no replacement or repair of the machine,” says one NY college student. After experiencing downed machines numerous times, another student had a meltdown, which she captured on Facebook. The video rant received 1 million views and 5,000 comments, many of which came from customers with the same complaint.

Fans say they love the texture of the McFlurry’s hard, crunchy candy and smooth, creamy, vanilla soft serve. (A 16-ounce McFlurry contains 930 calories and 128 grams of sugar, more than three 12-ounce cans of Coke, by the way.)

In the years since the McFlurry made its debut on the menu in 1998, it has garnered a cult following. And the cravings for it often come on suddenly and late at night. That may be part of the problem.

McDonald’s requires the machines to undergo a nightly automated heat cleaning cycle of up to 4 hours to destroy any bacteria in them. Getting the machines ready for the cleaning cycle is an 11-step process that involves combining a sanitizing mix with warm water, removing and rinsing 7 parts, brushing clean 2 fixed parts for 60 seconds and wiping down the machine with a sanitized towel. Once the heat cycle begins, it can’t be interrupted because the product is hot and under extreme pressure.

One survey found 25% of the restaurants weren’t serving ice cream because the machines were reported not to be functional. Downed ice cream machines is now the most common service-related complaint among McDonald’s customers.

Classroom discussion questions:

What are the OM issues here?
Have students had similar complaints? Suggestions?

OM in the News: McDonald’s New Dining Experience

Steve Easterbrook, McDonald’s chief executive, demonstrating how ordering is done at a self-service kiosk in NY — Steve Easterbrook, McDonald’s CEO, demonstrating a self-service kiosk in NY

McDonald’s just announced changes that could reshape the diner’s experience, saying that it would expand its digital self-serve ordering stations and table service to all of its 14,000 American restaurants. The company said once people order at one of the stations — sleek, vertical touchscreens — they will get a digital location device and can take a seat. When their burgers and fries are ready, the technology will guide a server to the table to deliver the food with a big smile and a thank you.

Customers will still be able to order food the old-fashioned way, at the counter. But the move to self-order systems and table service is one way to address one of the biggest problems the company’s restaurants have faced in recent years: slower food delivery to customers, caused by more items on the menu. The thinking is that customers will be more willing to wait if they are sitting at a table instead of waiting at a counter.

“McDonald’s has tested the order system in 500 revamped restaurants,” writes The New York Times (Nov. 18, 2016), and is now introducing it around the globe. Some 44,000 customers have been served at tables using the new system, with families and groups being the biggest users so far. The self-serve stations seem to make it easier to customize an order. Many of the company’s customers, though, do not enter the restaurant. About 60-70% of sales come from its drive-through lanes.

The vast majority of McDonald’s locations are owned by franchisees, and they will be responsible for paying for the changes. Equipment and installation of the 8 order screens cost upward of $56,000, and franchisees are often loath to make such investments at a time when sales are stagnant.

Classroom discussion questions:

Draw a process chain network (see Ch.5) for this system.
How has the company added “service efficiency”?