New Technology Estimates Fast-Food Demand
CHARLES SHEEHAN / AP 8sep04
PITTSBURGH - Do you want fries with that? Never mind, we already know. A Pittsburgh startup, HyperActive Technologies Inc., is testing technology at area fast-food restaurants designed to give kitchen workers a good indication of what customers want before the hungry souls even get close enough to place an order.
The system, known as "HyperActive Bob," is in place in several restaurants around Pittsburgh in a primitive form: It tells employees when they are about to get busy, even how much food to put on the grill.
The system uses rooftop cameras that monitor traffic entering a restaurant's parking lot and drive-thru. Currently, the system is all about volume: If a minivan pulls in, there's apt to be more than one mouth to feed.
By this time next year, HyperActive Technologies expects to have in place software that keys on the type of vehicle entering the parking lot to determine whether the customers they bear are inclined to order, say, a burger over a chicken sandwich.
As it is, the currently installed technology — the predictive system is only running simulations for now — has wowed some seasoned veterans.
"I've been a manager for 28 years," said Pat Currie, a manager at a McDonald's in Chippewa Township. "It's the most impressive thing I've ever seen."
HyperActive Bob is now at seven area McDonald's, a Burger King and a Taco Bell.
It was installed at Currie's restaurant two years ago. Since then, waste has been cut in half and wait times at the drive-thru have been reduced by 25 to 40 seconds per consumer, Currie said — an eternity in the fast-food industry.
Profit margins for fast-food franchisees are built and busted in seconds. Store managers must calculate demand and make their best guess as to how long that window of demand will last.
If they underestimate either, the lines begin to form and it's too late — it's no longer fast food. If a manager overestimates, profits head for the trash along with food that has a very short shelf life.
It's not enough to know that your restaurant sells 120 burgers during the lunch hour on week days. Managers must know during which 20 minutes the kitchen will go into high gear during that hour and it's always a shifting target, Currie said.
"We can get 65 (orders) in the first 20 minutes," he said. "This allows us to cook very precisely."
The fast-food environment could be the perfect environment for recognition software because the limited menu increases the odds of predicting correctly, said Kerien Fitzpatrick, president of HyperActive.
And it doesn't have to be perfect for it to work, he said.
"Let's say we know that there's a Big Mac promotion and we know that if there are five cars in the drive-thru through in six minutes. We know that there is a 100 percent likelihood, based on collected data, that someone will order a Big Mac within the next three minutes," he said. "Each location is different and those decisions are partly based on whether there are minivans or cars, or pickup trucks, what has happened in the past, and what is going on in real time."
HyperActive Bob has a memory that bases future predictions on what it has learned at a particular restaurant, but it remains to be seen if the technology can be used in mass scale, Fitzpatrick said.
Company officials flew to Florida last week to set up the system at two more restaurants that serve far more meals than the ones near company headquarters.
Officials at McDonald's headquarters outside Chicago said franchisees have wide latitude in how to run restaurants, and said there are no plans as of yet to use HyperActive Bob on a larger scale.
"These are entrepreneurs who are always looking for ways to maximize efficiencies and they are very creative," said spokesman Bill Whitman. "Our franchisees have begun initiatives to run all of our restaurants better and changed the menu with things like the Big Mac and the Filet-O-Fish."
The time it requires to train new hires has been reduced from three months to just over a week when using the system, Currie said.
"You can imagine the stress it takes off my people in the kitchen," he said. "I've got five people in there cooking all these different products and they're all yelling, 'I need this.' 'I'm down to two of these.' A lot of that is gone."
Cutting the fat
HyperActive technology aims to improve food quality, reduce waste
MARIA GUZZO / Pittsburgh Business Times 28may04
A local technology startup has caught the attention of four of the nation's largest fast food chains.
HyperActive Technologies Inc. vice president R. Craig Coulter said his firm has begun testing its robotics-related technology at eight local franchises in two burger chains and is in talks with two other quick-serve restaurant groups.
In an effort to improve food quality and reduce waste at restaurants, Mr. Coulter said HyperActive's roof-mounted cameras, which are linked to artificial intelligence software, count cars coming into the parking lot. Inside the store, the software displays on touch-screen computers how many burgers, fries and chicken products employees should make, eliminating guesswork that can become chaotic at crunch, or lunch, times, he said.
Because of nondisclosure agreements, Mr. Coulter cannot name the restaurants, though he mentioned them during a recent presentation to potential investors.
HyperActive is closing on its first $400,000 round of investment from private individuals by the end of the month. In preparation for raising another $2.5 million this summer, Mr. Coulter made his pitch last week to members of the Southwest Pennsylvania Angel Network, a private investors forum. InnovationWorks, the Hazelwood-based nonprofit technology business investment organization, already has invested $200,000 in the firm.
Mr. Coulter and three other cofounders attribute their success to networking and tenacity. Mr. Coulter worked as a burger franchise grill chef for six months learning the challenges of the fast food process. After fine-tuning the product further, they contacted the owner of a local fast food franchise through the franchisee's golfing buddy, who was the business partner of a friend. After four months of persuasion, the franchisee let them install the technology at his store.
"The hardest part was getting that first restaurant," Mr. Coulter said. "It could cost them an enormous amount of money lost if we screwed up. But we systematically built credibility."
After just a few days, the technology produced results, Mr. Coulter said, reducing waste and improving food quality. Normally, restaurant managers use educated guesswork to determine how much food the cooks prepare based on what traffic they notice. But with the camera always noting new arrivals, there is no surmising. What's more, the technology has the future capacity to distinguish between a truck and a minivan, which could prompt the computer to make either burgers or children's meals.
When the burger chain's parent company did its monthly undercover drive-through test at the franchise where HyperActive was installed for testing, the corporate tester unwrapped his burger several miles down the road and found steam rising from it.
"That launched an investigation (by the parent corporation)," Mr. Coulter said. "It took seven visits by corporate with the v.p. of operations for North America flying in to find out why their burgers were so hot."
Since then, HyperActive has contacted other chains and each has become interested after finding out what their competitors were up to.
That's normal for the industry, according to Reid Paul, managing editor of Hospitality Technology, a New Jersey-based trade magazine.
"In our research, we've seen restaurants like to watch what others are doing," Mr. Paul said. "Once they see a good idea, they wait until others have done it before implementing it."
HyperActive has started a yearlong testing program at the chains and plans to test its technology at stores across the nation to ensure that the results are not just a Pittsburgh-area anomaly. When testing is complete, there's a chance to sell HyperActive's system at more than 13,000 locations in one chain alone.
Hospitality Technology's Mr. Paul said quick-serve restaurants do a lot of testing of different technologies, but are slow to adopt them across the board.
"That they're in testing, in and of itself doesn't mean they have an in," Mr. Paul said. "It doesn't mean it's not a good technology and it won't catch on, but it's the first step in a very long process."
On the bright side, Mr. Paul said he has not seen any other companies offering a product like HyperActive's. He said there is software available for staffing, not for production, that uses historical forecasting based on how many and what menu items sold when.
"In quick-serve, the speed at which they get you through is critical," Mr. Paul said. "If they can speed up the drive-through by seconds, it makes a dramatic change on (revenue)."
Mr. Coulter said statistics indicate that each six-second improvement in speed of service generates an extra 1 percent of sales. That's an extra $60,000 in sales a year per restaurant, or $3 billion a year to the largest chain.
Fast food restaurants have slim margins, but HyperActive's technology is reasonably priced. The hardware costs $3,000 and HyperActive's software license fee is at least that much annually. The firm has not yet set a final price for its system. Dell Computer Corp. has invested $25,000 in HyperActive and is its hardware partner, supplying the computers. That way, Mr. Coulter said Hyperactive can concentrate on its software strengths.
HyperActive made inroads at Dell because CEO Michael Dell was once a student of HyperActive's board chairman Robert Sullivan, who had been Carnegie Mellon's business school dean when Mr. Coulter attended school there.
HyperActive's founder and president Kerien Fitzpatrick got the idea for HyperActive's technology in 1992 after a bad food, slow-service experience at a fast food restaurant. Both men and the third founder hold Carnegie Mellon robotics degrees and were researchers at the school's Robotics Institute.
"He wondered how could this not be amenable to automation," Mr. Coulter said of Mr. Fitzpatricks' experience.
At the time, however, hardware costs to implement such a system would have been cost-prohibitive. Now that PC costs have come down, Mr. Coulter said they decided to start up two years ago.
The four founders funded the firm's first $750,000 worth of research and development by spending their savings, cashing in their 401(k)s and taking out second mortgages on their homes. They also went without pay for the first 18 months. Currently, there are seven employees.
In listening to HyperActive's pitch last week, SPAN member Mel Pirchesky, head of Shadyside-based Eagle Ventures, a private equity investment firm, said he was impressed by the corporations with whom HyperActive is involved.
"They must have some good technology that they got these big names to give them the trial run," he said.
However, he said he and a few others at the event expressed concerned that the management team -- while strong on technology -- was not as experienced business-wise.
"The technology has promise, however, I'd want to make sure the company is led by someone who is well-versed in the business of business," Mr. Pirchesky said. "It's just a cautionary concern, and I'd want to see that before I'd get interested."
Prior to founding HyperActive, Mr. Fitzpatrick was CTO and Mr. Coulter was CEO of TPresence, a Wexford-based peer-to-peer distributed software firm that is now defunct. In 1994, Mr. Fitzpatrick co-founded the National Robotics Engineering Consortium at Carnegie Mellon in an effort to bridge the gap between university research and industry.
MS. GUZZO may be contacted at firstname.lastname@example.org.
source: http://pittsburgh.bizjournals.com/pittsburgh/stories/2004/05/31/story6.html?t=printable 8sep04