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McDonald’s said it is considering selling part of Dynamic Yield, the artificial intelligence company it acquired in 2019.
The purchase was McDonald’s biggest acquisition in 20 years, a step it took to modernize restaurants for the digital age. Dynamic Yield specializes in personalization and decision logic technology. The technology allows menus at McDonald’s drive-thrus to change based on different factors including weather, current traffic and more. The deal was valued at more than $300 million.
McDonald’s doesn’t breakout the financial performance of Dynamic Yield’s business.
Dynamic Yield has additional clients in the retail space, and McDonald’s said the potential sale would be related to the third-party business, not what the company does for the fast-food giant.
McDonald’s said the potential sale is exploratory and preliminary at this point and it is possible it might not happen. The possibility of a sale was first reported by The Wall Street Journal.
“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. We look forward to our continued relationship while continuing to expand the use of Dynamic Yield’s technology at McDonald’s restaurants around the world,” said Liad Agmon, founder and CEO of Dynamic Yield, in a statement.
McDonald’s has weathered the pandemic with strength, reporting U.S. same-store sales increased 5.5% in its latest earnings report, thanks in part to marketing investments and promotions. It also just launched a highly anticipated lineup of chicken sandwiches, which has boosted franchisee sentiment, even as tensions remain high with management. Restaurant owners have been pushing back against technology fees, separate from Dynamic Yield, that McDonald’s says are owed due to a lag in billing in 2017, and the end of a longstanding subsidy for Happy Meals.
On its latest earnings call, CEO Chris Kempczinski told analysts that he was confident that U.S. President Joe Erlinger and franchisee leadership would be able to work through the disagreement.
In a February email from owner advocacy group the National Owners Association to members that was viewed by CNBC, the NOA board said the company has not proven franchisees owe technology fees of $423 a month on past uncollected dues that amount to $70 million. McDonald’s has agreed to engage Ernst & Young for an independent audit in an attempt to resolve the dispute.
“What we do not do, is allow our suppliers to dictate to us what we owe and what we don’t owe other than on the basis of services rendered. If we find ourselves in this type of relationship, we find a different supplier,” the email to owners from the NOA board said.
The email added that McDonald’s founders and leaders warned against the company becoming a supplier to franchisees. NOA said: “There is no reason that McDonald’s should be our third party technology provider nor that they should administer technology in the manner they do.”