Taco Bell, Pizza Hut Are Going 'AI-First' --- Data restaurants share is 'secret sauce' for digital sales, new tech officer says

"Yum Brands has a vision for "AI-powered" fast-food in which artificial intelligence shapes nearly every aspect of how its Taco Bell, Pizza Hut, KFC and Habit Burger Grill restaurants are run.

Led by Joe Park, Yum's new chief digital and technology officer, the fast-food giant has been increasing its investment in technology and automation. Some 45%, or about $30 billion, of Louisville, Ky.-based Yum's sales are digital, Park said, roughly double the level in 2019.

"Our vision of [quick-service restaurants] is that an AI-first mentality works every step of the way," Park said in an interview. "If you think about the major journeys within a restaurant that can be AI-powered, we believe it's endless."

The company declined to say how much it is spending on technology. A Feb. 7 earnings report showed $21 million last year, up from $11 million in 2022, for charges associated with a resource-optimization program Yum said helped reallocate resources to "accelerate our digital, technology and innovation capabilities."

Since the pandemic, fast-food chains have increased investing in technologies like digital ordering and in drive-throughs, betting those trends will last. Now, pressured by higher labor costs -- including California's new minimum-wage law -- and inflation-weary customers, more fast-food operators are banking on AI to drive sales and lower costs.

The explosive growth of generative AI, which has made its way into sectors like healthcare and retail, is further accelerating fast-food chains' embrace of cutting-edge technologies.

Park joined Yum in 2020 as its first chief innovation officer, before moving to Pizza Hut Global, where as chief digital and technology officer he oversaw the rollout of tools including Dragontail, an AI-based kitchen-management and delivery platform. He took on his current role in March, succeeding Clay Johnson, now a senior adviser. Park reports to Chief Financial Officer Chris Turner.

Park said he sees a future where AI is in every aspect of Yum's restaurants, with generative AI -- the technology behind ChatGPT -- in the pockets of franchisees.

Yum's SuperApp, a mobile app for restaurant managers to track and manage operations -- Park calls it "a coach in your pocket" -- is testing a generative AI boost, he said. Team members can ask the app questions like "How should I set this oven temperature?" rather than turning to training materials or tapping through an app interface.

"A lot of that gets automated in the future, where you don't have to interface directly with the technology," he said. "You can do it through generative AI."

The goal is for SuperApp, now in use in more than 8,700 Pizza Hut and KFC locations, to connect technology systems so franchisees can order ingredients and schedule shifts without leaving the app, Park said.

SuperApp can also be updated as features are developed, such as with an augmented-reality tool for teaching employees how to make new products like Pizza Hut Melts.

Tech fees paid by franchise owners help fund Yum's AI investments, Park said. Yum declined to say how much it charges franchisees.

Like its competitors, Yum is testing generative AI's use for customers, such as voice AI for drive-through orders. The company is also looking into image-recognition AI to count cars and waiting times in a drive-through, as well as digitally linked and managed kitchen appliances, Park said.

While the introduction of AI and robots has raised concerns of displacing humans, a Yum spokesperson said its employees will always play a critical role, though there is "powerful opportunity to leverage technology to elevate restaurant team members' experiences."

Customers haven't always been impressed with AI at drive-throughs, and Wendy's faced a backlash for testing menus using AI to adjust pricing. A spokesperson said Yum doesn't specifically use "dynamic pricing" and an "intelligent menu pricing recommendation" discussed in a recent earnings call is "an AI engine designed to analyze and optimize menu offerings and product pricing based on consumer behavior and competitive data."

While quick-service restaurants have traditionally lagged behind other sectors in technology adoption, that is quickly changing, said Robert Hetu, a Gartner analyst focused on retail and restaurant tech. Fast-food chains must keep pace with increasingly tech-savvy consumers, while keeping labor and other costs in check, Hetu said.

But many fast-food chains still use outdated and disparate technology systems, making it difficult to introduce new technologies. "It's prevalent across the restaurant industry, where since COVID, there's so many different technology solutions," Park said.

A cornerstone of Yum's strategy, set in 2019, was to bring its primary restaurant technology systems -- SuperApp, labor and inventory management, point-of-sale and kitchen and delivery management -- in-house, Park said.

That was partly driven by need. Yum's e-commerce vendor couldn't handle more than 700 Taco Bell orders a minute. Park said the alternative Yum built can handle more than 4,600 orders a minute.

Park, previously Walmart's vice president of associate digital experience and enterprise architecture, also worked to consolidate data among Yum's four brands, so information on Pizza Hut customers can be combined with data on Taco Bell, KFC and Habit Burger Grill customers.

Sales and inventory data between KFC and Taco Bell, for instance, is also merged to improve machine-learning models telling restaurants what to order, Park said: "A lot of our attention is going into getting the data right and being able to work cross brands to see where we have commonality."

Better data also allows Yum to create customer profiles and serve personalized offers, with the ultimate goal to increase visits and ticket sizes, upsell and bring in new customers. Data shared across brands, Park said, is the company's "secret sauce."

Around half of Yum's stores rely on loyalty customers, Park said.

"We understand that loyalty is going to be a very important part of Yum's future," he said. "Every time we grow that digital sales number, it comes with accompanying customer data."" [1]

1.  Taco Bell, Pizza Hut Are Going 'AI-First' --- Data restaurants share is 'secret sauce' for digital sales, new tech officer says. Lin, Belle.  Wall Street Journal, Eastern edition; New York, N.Y.. 02 Apr 2024: B.4.