Taco Bell’s AI Adventure

Taco Bell is experimenting with replacing the human order taker in its drive-thrus with artificial intelligence.

The Irvine-based fast-food franchise is taking the lead this year among the four restaurant chains at parent company Yum! Brands Inc. (NYSE: YUM).

Taco Bell, which has more than 8,500 restaurants, plans to integrate voice AI technology in hundreds of its drive-thru locations in the U.S. by the end of 2024.

Yum! began developing and testing the technology about two years ago, according to Taco Bell’s Chief Digital and Technology Officer Dane Mathews.

“With something like voice AI, it’s something to start early and iterate often,” Mathews told the Business Journal. “Our role in this is helping to solidify and make it real on behalf of our brand and our business.”

Voice AI technology is integrated in more than 100 drive-thrus already “to enhance back-of-house operations for team members and elevate the order experience for consumers,” Yum! said in a statement.

The AI bot greets customers and takes their orders. The bots also upsell. Customers can speak to them as if they’re talking to a human. A Taco Bell employee listens to the conversation and can jump in at any time if the bot runs into any trouble.

“There’s a new team member,” he said. “We’re looking for thoughtful ways to incorporate automation and believe there’s a powerful opportunity to leverage technology to elevate restaurant team members’ experiences. The expansion [is] designed to complement and enhance the roles of our team members, not replace them.”

Mathews added that the technology has shown an increase in order accuracy, a reduction in wait times and in some cases employee retention.

The acceleration of the technology comes after these past two years of “fine tuning and testing” along with input from franchisees, according to Yum!

“I have pure pride. The fact that I get a chance to represent this technology, get it out in the marketplace, even take some lumps early on, it means the world to me and our team,” Mathews said. “We’re very focused on how it works well within the Taco Bell system.”

A Better Solution

It’s still early days, Mathews noted, adding that the company is not yet satisfied with the performance.

“When you start to roll out into hundreds and soon to be thousands [of locations], there’s all these little iterations that you have to take into account,” he said of the project’s learnings.

“Some of them make sense – different dialects, approaches and languages. All the restaurants are almost like fingerprints, in these different contextual areas.”

Mathews will also keep an eye on how customers “meet” the menu in the drive-thru when Taco Bell is consistently launching new menu items.

“We are excited with what it’s starting to deliver already,” he said. “Across restaurants in different spaces, scopes, shapes and sizes – all have different dynamics – we’re really focused on using this moment and expanding our stores to learn.”

This is also where Taco Bell’s franchisee relationships became critical to the technology’s growth with many of the independent owners involved from the beginning, according to Mathews.

“Each of them sit in different regions, zones and contexts, and they’ve been helping us create a better solution,” he added.

Mathews said the team built an extremely flexible approach to voice AI, which allows an easier way to iterate and improve the technology.

“We know it’s going to take some time, some energy and it’s going to take us using a real agile approach to how we develop and future-proof this technology along the way.”

Doubling Digital

“Yum! Brands is integrating digital and technology into all aspects of our business with exciting new capabilities, and AI is a core piece of that strategy,” Yum! Chief Innovation Officer Lawrence Kim said.

Yum! Brands said that the AI technology will add to Taco Bell’s “strong drive-thru customer experience ecosystem” driven by the restaurant chain’s digital menu boards, POS system and the incoming iteration of its rewards loyalty program.

The parent company reported digital business has more than doubled since 2019. Following the Taco Bell rollout, Yum! aims to implement voice AI in drive-thrus across the rest of its brand portfolio down the line.

Yum! expects to surpass 60,000 companywide locations this year.

Taco Bell’s U.S. system sales grew 7% to $4 billion in the second quarter of 2024.
By sales, Taco Bell is the largest restaurant chain based in Orange County, according to Business Journal research.

The chain’s own restaurant technology has ramped up in the last five years with the introduction of two different digital-forward restaurant models, further accommodating mobile orders and contactless deliveries and introducing kiosk ordering in-stores.

Taco Bell’s Go Mobile and Defy restaurant concepts were designed to rely on digital features by operating as drive-thru only locations. Part of the plan is to ensure voice AI can deliver good experiences in those spaces too.

“I came to Taco Bell because I felt that I wanted to be part of a brand that knew two things. It knew innovation is the life blood of growth and that the role of technology was the way to grow in the future,” Mathews said.

Innovative Lives

Taco Bell’s focus on innovation also extends outside its restaurants to a group of people the fast-food chain calls “young changemakers.”

The company’s nonprofit arm Taco Bell Foundation gears its philanthropy to providing funds and resources to innovative youth via grants and scholarship programs centered on professional development and education.

“It’s for the ‘other kids,’ not the athletes, not the academics but youth who have passions and dreams and want to do good, but they don’t have access usually to traditional scholarships,” Julie Davis, Taco Bell’s chief legal officer and the executive sponsor of the foundation, told the Business Journal.

Known for its annual Live Más Scholarships, the foundation has been growing a new platform to support social ventures thought up and led by the younger generation.

The organization, partnered with the entrepreneurship firm Ashoka, invited its second class of participants back to Irvine this year for the latest iteration of its pitch competition dubbed Ambition Accelerator. It first held the event in 2022 backed by a $100 million funding initiative from parent company Yum! Brands Inc.

Applications increased this year with over 370 coming in, and the foundation chose 50 individuals to visit Taco Bell’s Irvine headquarters for three days of mentoring and networking that culminated in the competition. Five finalists were selected to pitch their social, environmental or financial program to a panel of judges for a chance to win $25,000 in funding.

Each semi-finalist received $1,000 in seed funding, and the four remaining ventures were awarded an additional $5,000.

“They are all coming away, fans of Taco Bell or not, with a positive impact and will go back to create more positive opportunities in their communities,” Davis said.

The program is also expanding internationally this year with an Ambition Accelerator competition set for India in September.

Debt-Free

The 2024 winner was 24-year-old Victoria Lamar, who spoke about her Atlanta-based initiative Securing Degrees, a national scholarship coaching program that helps students secure a debt-free education.

She started Securing Degrees six years ago after winning $3 million in scholarships during her senior year of high school. Lamar said she was rejected over 30 times before she won her first scholarship, and her journey of storytelling, perseverance and accountability is now imbedded in the program.

The challenge she now faces is exposure.

“One thing we need is introductions,” Lamar told the Business Journal.

She will use the $25,000 prize to hire a college outreach coordinator intern and to cover expenses to booth at the National College Resources Foundation’s Black College Expo that reaches 100,000 families each year. Lamar plans to host free seminars and give away scholarships at the expo.

The young CEO tells students that “this is the only time in their life where they can press submit and win thousands of dollars.”

“We’re debt-free students teaching other students how to be debt-free,” Lamar said. “Our energy, our expertise and the knowledge behind us doing it ourselves is what’s motivating other students to pursue higher education.”

Lamar spoke fondly of the workshops and support sessions that the Taco Bell Foundation provided throughout the application process and during the Ambition Accelerator.

“As someone in the scholarship space, I know how to take advantage of all the things that they offer. I don’t see things as optional,” Lamar said.

Meet Pepper – Chipotle’s AI BOT

Taco Bell is part of a wave of national and local chains that are investing in robotics and artificial intelligence, including Newport Beach-based Chipotle Mexican Grill (NYSE: CMG).

Chipotle, Orange County’s second-largest restaurant chain by sales, has invested in automation and robotics to boost digital sales, improve in-house operations and “make prep even more efficient,” former CEO Brian Niccol told analysts in February. Niccol left the company this month to become the chief executive of Starbucks.

Many of these new innovations are battled-tested in the company’s Cultivate Center, a design lab and test kitchen, in Irvine.

In 2019, around the same time Niccol debuted the Chipotlane drive-thru model, Chipotle rolled out voice AI to all restaurants for phone orders. A year later, the company extended its digital ordering to Facebook’s messenger platform and the Chipotle app as a bot named Pepper.

Pepper remains as the app’s digital helper.

Chipotle is about to start testing the “Autocado,” which slices and smashes avocados for its guacamole, in one of its restaurants.

The chain partnered with tech firm Hyphen in 2023 to develop an automated digital makeline that assembles bowls and salads. The marketline and Autocado “continue to progress through Chipotle’s stage-gate process,” according to a spokesperson.

The company has more than 3,500 restaurants as of June and reported second-quarter revenue of $3 billion, up 18%. Digital sales account for 35% of Chipotle’s total food and beverage revenue.