Every Fast-Food Chain Is Opening a "Smart" Restaurant. How Smart Are They, Really?

The point is to win young people back, but it may have little to do with being "cool."

Well, now that every industry is talking about "consumption upgrading," terms like "1.0" and "2.0" — coined to describe how internet products iterate — have spread everywhere. The fast-food business, too, hopes this kind of digital upgrade will win young people back.

Last week, the restaurant McDonald's calls 2.0 officially opened. The one it remodeled is the Guanghua restaurant at Shenzhen's East Gate, the first store McDonald's opened when it entered the mainland Chinese market; the symbolism speaks for itself. That day the company flew in more than a hundred media outlets and self-media accounts from across the country to look at the new equipment, dishes, service and decor, and promised that by the first half of next year, 40% of its restaurants will have finished their "digital groundwork."

This is China's answer to a global strategy. "McDonald's will continue to expand Experience of the Future, upgrading digital facilities such as self-order kiosks and the mobile app, to deliver an experience-driven strategy," McDonald's CEO Steve Easterbrook said on the investor call after the third-quarter earnings release.

If the McDonald's in your city already has a dual-point counter (ordering and pickup split apart, with some stores running order numbers across a digital screen) and touchscreen self-order kiosks, 2.0 may not feel like much of a change. Compared with five or six years ago, though, eating at McDonald's is nothing like it was.

McDonald's is not the only fast-food brand busy making its restaurants smart. This year could be called the year the concept stores arrived all at once: KFC's "KFC Original+" in April, Dicos's "Shushi+" in August, and Pizza Hut's "ph+" in November.

See? "+" and "concept store" are the standard naming kit for this sort of smart restaurant. Beyond that, we found the following things they have in common.

1. WeChat, Alipay, Apple Pay — of course they all have to work

When the grandpas and grandmas selling jianbing guozi on the sidewalk can tell you exactly where the payment QR code is pasted and ask you to show them the screen once you've paid, a chain fast-food restaurant has no excuse for not taking mobile payments. Leaving the house without a wallet is now a habit for plenty of young people.

Deloitte's 2015 China Mobile Consumer Behavior report found that restaurants are where consumers use mobile payment most often, and that the younger they are, the more willing they are to use it: among respondents aged 18 to 24, 76% said they would.

So mobile payment comes first. Besides, whether you order at a touchscreen kiosk, talk to a robot, or place the order through a third-party system, you can hardly pull out cash and ask the robot to count it.

Mobile payment is more visible in ordinary stores too. McDonald's says 40% of its sales now go through it. The third-party systems each brand accepts keep multiplying: WeChat, Alipay, QQ Wallet, Baidu Wallet, Apple Pay, ICBC's QR code. Behind all of it is a mobile-payment war.

2. They call it DIY, which sounds like you can do whatever you want, but…

Last year McDonald's opened its first concept store on Wangfujing and introduced the build-your-own burger, Create Your Taste (CYT). You can find the system in some McDonald's locations in Beijing, Shanghai, Guangzhou and Shenzhen: at a dedicated touchscreen kiosk you combine 24 ingredients however you like and build your burger in six steps, though it starts at 42 yuan.

It looked a little upscale, and when it first appeared plenty of people went specifically to eat one and post the photo to Moments — hardly any of them for the burger itself. Once the novelty wore off, few people ordered CYT. McDonald's own staff admit the price is too high to draw many customers.

In November, meanwhile, McDonald's quietly dropped the build-your-own burger in the United States and replaced it with a "classic menu," cutting the topping list from more than 30 choices to seven (three meats, four vegetables). McDonald's says this does not affect the Chinese market for now.

Still, McDonald's has not given up on DIY that easily. At the "Future 2.0" concept restaurant it worked with a two-Michelin-star chef on a "personalized custom star burger." Phyllis Cheung, CEO of McDonald's China, explained that judging by how CYT ran, burgers customers put together themselves might not taste very good. In plain terms: you can no longer mix and match at will, but McDonald's has settled on two recipes it thinks taste good, and you can adjust them a little.

McDonald's has also launched a personalized custom dessert — again, three desserts to start from, which customers then adjust.

DIY looks like a popular gimmick. Pizza Hut has a custom pizza of its own. Its "ph+" concept store has a 65-inch table that is also a screen — picture the iPad you order from grown to the size of a table.

On the screen you change the toppings to your taste and build your own pizza. Customizing mostly means poking at it and pinching two fingers to zoom the pizza in and out. Once you've ordered, you wait for the kitchen to make it and bring it to this table.

The technology behind the custom pizza is not sophisticated. It is a piece of software running on Windows, and it crashes now and then. The store has only this one table, so customers who want to try it have to book ahead, which is a little awkward.

Every brand has to think about one thing, though: not every customer is a culinary genius, what they make themselves may not taste good, and in the end they are likely to blame the store for failing to guide them rather than blame themselves.

3. However bad the app is, you have to have one

How loyal would you have to be to download a fast-food app, especially when delivery platforms are this convenient?

Yet KFC and McDonald's both treat the app as a must. One reasonable explanation: they want to hold more consumer data themselves.

The apps differ a lot. KFC's has the most features right now. You can order on it and choose to pick up in five minutes or book a pickup window. Beyond that: coupons, member deals, toys, nearby stores. Any feature you can think of is in there.

It looks like less trouble, until the location is wrong and you trusted the technology too much to read the address. A while later you discover your food is waiting at another KFC a few hundred meters away and you have to walk over and get it, which is not a pleasant experience.

Pizza Hut's app does less: take a number, top up, pay, member perks. The top-up feature asks a lot of a customer's loyalty — amounts come in 200, 300, 500 and 1,000 yuan, the money sits inside the app, and it can't be refunded.

McDonald's already has an app and plans a new one. The current McDelivery app feels like a trip back ten years; the new one looks better and works much like the app it is preparing to launch in the United States, Britain, Canada and elsewhere, with mobile ordering and payment. It is still in testing, and not all of its features are settled.

At Pizza Hut's "ph+" store, the company went with the 2Dfire restaurant-ordering system: scan the QR code on the table and you can order, add dishes and pay on your phone without downloading anything. That may be the more practical, faster improvement.

On the whole, though, none of these fast-food apps are pleasant to use.

4. Don't want to deal with the staff? Here's a giant ordering machine

At McDonald's, KFC, and Taco Bell, which just opened its first store in Lujiazui, you may now run into several enormous ordering machines.

For people who dread small talk, the touchscreen kiosk is a savior at mealtimes: the dream of getting through a meal without speaking to anyone. If you know your way around it, ordering at a kiosk is a bit like cutting the counter line, and you don't end up ordering something at random because the cashier is hurrying you along or giving you what looks like an impatient stare.

That is the ideal, of course. In practice you always meet someone who has no idea how to use it, or who freezes in front of the choices — five minutes to order one burger.

McDonald's, which uses these kiosks most widely, answers that by posting staff beside them early on to help. Phyllis Cheung says it generally takes three months to train customers. The machines are now in about 800 restaurants, and 20% of dine-in orders go through them.

Some customers don't want help from staff at all. A consumer in Shenzhen told QDaily that on her last visit to McDonald's an employee came over to teach her how to use the kiosk, which only made her tenser: "I'd rather McDonald's didn't teach a young person like me how to use a self-order kiosk." That is how prickly young people can be.

5. You can also play video games and watch clumsy robots

A concept store has to offer a few things you'd never find in an ordinary branch.

At KFC and Pizza Hut, that means robots. KFC's robot is Baidu's "Duer": in a designated ordering area you hold down a round button, face Duer and speak your order. In Baidu's vision, artificial intelligence will one day replace human waitstaff across all kinds of service. In the concept store, even ordering from the robot needs a human employee to walk you through it, so that future is still some way off.

Pizza Hut's robot can show customers to their table. It walks ahead of you after you enter and wishes you a pleasant meal once you sit down. A server in the store says it can also carry dishes, though that is still being tested.

The robot is cute but very slow. Some customers, seeing the store half empty, walked straight to their table with the robot trailing behind them. It can't talk either — when another customer blocks its path, all it does is insist that it is working, which makes it feel like a mascot with no real job.

When your parents took you out for fast food as a child, the restaurant might have had a play area for kids, with a slide and the rest. Both of McDonald's concept stores now have interactive video-game zones, as if the play area had been digitized. That obviously takes a fair amount of space and would be hard to roll out widely.

All of this is meant to win young people back, because the fast-food business has not looked good for years. Before Yum split off its China unit, its third-quarter results showed same-store sales in China falling 1% at KFC and 4% at Pizza Hut year on year. Yum blamed the protests set off by the South China Sea dispute; without that, its CEO said, "the China division would have achieved five straight quarters of growth."

McDonald's global same-store sales rose 3.5% in the third quarter, though it released no China figures. All-day breakfast rescued the business in the United States, but Wall Street still thinks McDonald's has to change how the brand is seen.

Whatever the brand, all of them are pushing to make their stores more digital. Phyllis Cheung hopes the Future 2.0 model can "disrupt" McDonald's own model, and Joey Wat, CEO of KFC China, has said the company will keep investing in digital marketing and menu development.

If they want to keep growing in China, young people are the customers they have to win. They all say these digital devices help lift sales, which is why they all stress that the investment will continue.

It may buy better financial numbers in the short run. But it is still a long way from the kind of cool young people actually want.

Cover image from McDonald's and shot by our reporter; unless otherwise noted, other images are screenshots and photos by our reporter.