Predicting fast food demand

30 August 2004

The drive-through appears to be a hothouse for many new innovations.  In July, I discussed outsourcing order-taking at the drive-through windows of fast-food restaurants.  Now comes a report in the September 2004 issue of Technology Review of a company that can predict drive-through orders.   HyperActive Technologies of Pittsburgh has equipped eight fast-food restaurants in Pennsylvania and Ohio with cameras and software that analyze incoming traffic and predict likely food orders. 

Predicting fast food demand

src: hyperActivetechnologies.com

Here’s how it works: Cameras monitor the vehicles waiting to order at the drive-through.  They identify the number and type of vehicles as well as the number of passengers.   Based on this information, a software program estimates food demand at the drive-through for the next few minutes and transmits cooking instructions to display screens at the grills and deep fryers.

For example, minivans will order kid’s meals, while pickup trucks order double cheeseburgers.  So drive-throughs equipped with HyperActive’s technology will schedule production of more double cheeseburgers when there are a lot of pickup trucks in line.

HyperActive’s co-founder Craig Coulter says this technology has cut customers’ waiting time by as much as one-third, reduced food waste at restaurants, and improved the freshness of its french fries.  

What I find especially intriguing about the HyperActive system, however, is the hypothesis that your car type can predict your food preference.  HyperActive management claims there’s a proprietary algorithm inside their software.  I can understand how a larger car with more people in it means a bigger order; but do people in Hondas really eat differently from people in Hummers?

Comparing outsourcing with predicting

Both outsourcing orders and predicting orders require similar kinds of business decisions on the part of franchise owners.  In both cases, the owner must purchase new software and technology.  Based on the four factor model of innovation effectiveness, however, I’d invest in outsourcing over improved prediction.  Here’s how the two approaches compare:

Both approaches promise higher benefits, but for outsourcing, these benefits come in the form of increased productivity, which has a direct impact on costs.   HyperActive’s predictive system yields increases in customer satisfaction – lower waiting times and fresher food.  This is great, but less bankable than increased productivity.

Outsourcing excels in its low barriers to adoption.  It is very easy to integrate into operations, since it removes activities involved in order-taking and thus simplifies the drive-through process at the site.  Implementing the HyperActive forecasting approach, on the other hand, would require a change in the way franchisees operate their food preparation system, so it adds an element of complexity and a barrier to adoption.

Process Innovation at the drive-through

Both outsourcing orders and predicting orders represent process innovations.  In most process innovations, the customer receives the same product or service both before and after the innovation is adopted.  The innovation delivers increased efficiency, allowing customers to receive their product more quickly or at lower cost. 

Most companies treat these kinds of process innovations as trade secrets -- they are rarely made public.  Toyota, for example, manufactures many of its own machine tools in order to keep some of its process innovations outside of public view.  

Franchise operations are an exception to this secrecy rule.  It’s easy to get information about all sorts of franchise process innovations, like outsourcing or improved forecasting.  

There are two reasons why process innovations should be so public and frequent around franchise operations like drive-throughs:

1.      Making fast food has already been highly systematized. When someone buys a franchise, they buy a food preparation system, which is well-documented and consistent from one location to the next.   This allows innovators to specify the areas where new technologies may be applied without having to understand the idiosyncracies of individual operations. 

2.      There is a large and easily identifiable market.  The top ten food franchisors have more than 80,000 operations throughout the world, and the owners of each outlet are striving to increase sales and reduce costs.  Publicity is an inexpensive way for independent innovations to reach these potential customers.

Because process innovations are hidden in most industries, changes in the operations of franchisors, like fast foods and retail stores, provide a public measure of the pace of innovative activity.  The more risk and change franchisors are willing to undertake to improve their performance, the higher the pace of innovative activity.  Let’s see what happens to the sophisticated innovations proposed by HyperActive technologies and order outsourcing.

More Information:

1.                          Hyperactive Technologies http://www.innovationworks.org/html/portfolio/alphaDetail.jsp?restrictids=coName&restrictvalues=HyperActive+Technologies

2.                          Hyperactive technologies home page:  www.hyperactivetechnologies.com

3.                          The article in Technology Review, September 2004, is only accessible if you’re a subscriber.  Here’s a link: http://www.technologyreview.com/articles/04/09/innovation50904.asp

4.                          My update on drive-through outsourcing from 26 July 04 is here: http://www.biz-architect.com/breakthroughs_at_drivethroughs.htm