By Austin Wade-Vicente

 

“‘Just call the guy.’” The verbatim managerial command to call a Taylor Company approved technician to fix the infamously broken McDonald’s ice cream machine.[1] In 2017, A former employee of the fast-food giant told The Wall Street Journal that routine maintenance and timing is the source of this sweet treat trouble. “‘Customers who come in during [maintenance] may encounter a longer wait time or soft-serve dessert unavailability.’”[2] However, while franchisees were vocal that the machines were “temperamental and expensive to repair,” their creator, Taylor Company (Taylor), declined to comment on the matter.[3] Today, it is precisely Taylor’s repair practices and intriguing response to innovative solutions solving their blatant dairy dilemma that has now landed the company in the middle of a Federal Trade Commission (FTC) investigation.[4]

       I.   Taylor’s C602 McDonald’s ice cream machines are built to maintain a maintenance monopoly.

Until 2017, McDonald’s restricted its franchisees to the C602 ice cream machine because it was, and is, “manufactured exclusively for McDonald’s.”[5] However, this agreement benefits Taylor more than the McDonald’s franchisees purchasing the machines. Though failure is infamously frequent, McDonald’s franchisees are contracted to rely on Taylor to perform recurring parts and maintenance requests, which generates nearly 25% of Taylor’s total annual profits.[6] To maintain the revenue stream, Taylor produced one service manual for McDonald’s employees and one exclusive to Taylor authorized technicians. The latter withholds “critical operating parameters for the machine” from the former.[7]

Nearly every page of the McDonald’s employee troubleshooting guide section features the phrase “call a service technician.”[8] Meanwhile, the service technician guide reveals a secret access code, 5231, and the sequence of cryptic icon inputs used to access an exclusive service menu.[9] The code 5231 empowers only the Taylor authorized technician to accurately diagnose and solve even the most mundane hitches—keeping machines ‘broken’ and Taylor paid.[10] This secret service menu, not mentioned one singular time in the McDonald’s employee guide, effectively forces employees, managers, and franchise owners to “just call the guy” as their only hope for machine repair.[11]

       II.   McDonald’s corporate is nearly unaffected by Taylor’s maintenance monopoly.

The website, McBroken, tracks and collects data on all malfunctioning McDonald’s ice cream machines across the U.S., U.K., and Germany in real-time.[12] I personally purchased a vanilla cone from a designated green restaurant and failed at a marked red location using this application. McBroken appears to hover at an average 10% failure rate for McDonald’s ice cream machines around the world yet has U.S. States that sometimes double or even triple that number.[13] “What widespread industrial machine has a failure rate of 30%? Or even 11%? That is an absurd rate of failure,” remarked video journalist Johnny Harris from NPR’s The Indicator from Planet Money podcast.[14] If McBroken is correct that Taylor’s C602s have an average 10% failure rate, why does McDonald’s put up with it?[15]

Firstly, McDonald’s wants to maintain its long-running good relationship with Taylor, who supplies McDonald’s restaurants with their vital grills.[16] Secondly, the 93% franchisee-owned restaurants bear the cost of thousands of dollars a year in Taylor maintenance contracts, not McDonald’s corporate.[17] According to franchisees, the bulk of maintenance comes from “[l]eaving the machine with a bit too much or too little ingredient mixture in its hoppers, accidentally turn[ing] it off or unplug[ging] it at the wrong moment or fall[ing] victim to myriad other trivial errors or acts of God,” causing the machine to shut down with no hope outside of “just call the guy.”[18] The result is years of lost profits, especially in March when people go gaga for the Shamrock Shake.[19]

Regardless, with repairs in 2017 costing franchisees $80 million in the U.S. alone, and years of public outcry, McDonald’s chose a perfect public relations solution that same year.[20] Since 2017, McDonald’s now permits franchisees to purchase Italian Carpigiani FDM 312 machines, which McDonald’s claims, “require less downtime to clean and dispense[s] more flavors.”[21] However, this permission was simply a PR bandage on Taylor’s monopolistic wounds plaguing McDonald’s franchises.

The FDM 312 is more user-friendly and better designed, both mechanically and in its manual. However, it is still an expensive replacement for franchisees that requires up to a week to get Italian replacement parts.[22] Essentially, franchisees have the option to scrape together thousands of dollars to move from the devil they know to the devil they do not. Though the switch from Taylor machines is slow, a startling solution arrived in 2020 to save McDonald’s Taylor C602 franchisees and threatened to end Taylor’s maintenance monopoly.

        III.   As Taylor’s maintenance monopoly slips, so too does its dedicated repairman facade.

Taylor employs 1,700 technicians in the U.S. under an ethos of “what can I do to help either the customer or somebody that is helping the customer.”[23] Taylor Vice President of Operations Balaji Suresh proclaims the company does, “whatever it takes to get the job done.”[24] Yet it was Jeremy O’Sullivan, founder of startup Kytch, that delivered on this proclamation in 2020. O’Sullivan argued Taylor was committing “nothing short of a milkshake shakedown,” so his company responded with the eponymous device Kytch.[25]

Install the small, paperback book-sized, Wi-Fi connected device directly into your Taylor machine, and it would soon display the ice cream machine’s once hidden diagnostics and troubleshooting solutions through a user-friendly phone app.[26] It would even learn your store’s schedule to find the best downtimes to start the necessary and lengthy dairy pasteurization process.[27] After selling many units to McDonald’s franchisees, Taylor unveiled its competing device alongside McDonald’s corporate emails stating Kytch is a breach of “confidential information” that threatens “serious human injury.”[28] Despite many franchisees abandoning Kytch, the cat was out of the bag for the public that Taylor was not exactly doing “whatever it takes to get the job done.”

        IV.   Amid an FTC investigation after a damaging lawsuit, the innovative Kytch device could spell trouble for Taylor and McDonald’s corporate.

O’Sullivan sued Taylor, alleging “corporate espionage and the extreme steps one manufacturer has taken to conceal and protect a multi-million-dollar racket.” The complaint further claimed that Taylor had attempted to reverse engineer Kytch out of millions of dollars.[29] Despite Taylor arguing it only analyzed Kytch to assess whether “the radio frequency of the Kytch device would interfere with our software signal,” the Superior Court of the State of California for the County of Alameda ordered Taylor to turn over all ill-gotten Kytch devices within 24-hours.[30]

Even worse, subpoenaed emails reveal that McDonald’s may have orchestrated Taylor’s unsavory attempts to reverse engineer and mimic Kytch.[31] A 2020 email from Taylor president Jeremy Dobrowolski stated, “‘McDonald’s is all hot and heavy’ about Kytch’s growing presence at their franchises.” The FTC has also taken notice of its new presidential-approved crusade against anti-competitive repair schemes.[32] Biden’s Executive Order on Promoting Competition in the American Economy has spurred the FTC to both scrutinize manufacturer repairs and push for “the right of consumers to repair devices like smartphones, home appliances, cars, and even farm equipment.”[33]

The FTC has reportedly sent franchisees letters inquiring about the machines and their repair.[34] Though the commission has declined to comment, this investigation demonstrates the FTC takes the evidence against Taylor seriously and is “looking harder into franchising issues or right-to-repair concerns or both.”[35] Kytch Co-founder Melissa Nelson argues, “‘it’s past time to end shady business practices that create hundreds of millions of dollars of unnecessary repair fees from ‘certified’ technicians.’”[36] It is unclear where the case will go from here, how McDonald’s will be impacted, or if Taylor and McDonald’s will face further legal trouble. What is certain, however, is that the Kytch innovation, and others inspired from it, could soon allow us all to enjoy a McFlurry much more consistently without requiring franchisees to defeatedly spend millions a year to “just call the guy.”

 

[1] The Indicator from Planet Money, Why Are McDonald’s Ice Cream Machines Always Broken?, NPR, at 4:05, (Jan. 11, 2022), https://www.npr.org/2022/01/11/1072164745/why-are-mcdonalds-ice-cream-machines-always-broken.

[2] Julie Jargon, Why Is The McFlurry Machine Down Again?, The Wall St. J. (Jan. 19, 2017), https://www.wsj.com/articles/six-horrifying-words-the-mcflurry-machine-is-down-again-1484840520?mod=article_inline.

[3] Id.

[4] Heather Haddon, McDonald’s McFlurry Machine Is Broken (Again). Now the FTC Is On It., The Wall St. J. (Sept. 1, 2021), https://www.wsj.com/articles/mcdonalds-mcflurry-machine-is-broken-again-now-the-ftc-is-on-it-11630522266.

[5] Julie Jargon, McDonald’s Customers Scream, and Get New Ice Cream Machines, The Wall St. J. (Mar. 2, 2017), https://www.wsj.com/articles/mcdonalds-customers-scream-and-get-new-ice-cream-machines-1488476862; see Soft Serve/Shake Combination Freezer Taylor Model C602, TCMCD.co, https://www.tcmcd.co/MANUALS/C602op0.pdf (last visited Feb. 4, 2022).

[6] Taylor Acquisition Overview, MiddlebyCorporation.gcs, at page 2, https://middlebycorporation.gcs-web.com/static-files/5bd70207-96b1-48bd-a4a2-70dce00a247a (last visited Feb. 4, 2022).

[7]See generally Service Manual 057888-S, static-pt.com, https://static-pt.com/modelManual/TAF-C602_spm.pdf?v=1562905832341 (last visited Feb. 4, 2022); Soft Serve, supra note 5.

[8] Soft Serve, supra note 5.

[9] Service Manual, supra note 7.

[10] See Andy Greenberg, They Hacked McDonald’s Ice Cream Machines—And Started A Cold War, Wired (Apr. 20, 2021), https://www.wired.com/story/they-hacked-mcdonalds-ice-cream-makers-started-cold-war/.

[11] See Id.; The Indicator, supra note 1.

[12] Is The McDonald’s Ice Cream Machine Broken?, McBroken.com, https://mcbroken.com/ (last visited Feb. 4, 2022).

[13] See generally Id.

[14] The Indicator, supra note 1 at 3:23.

[15] See generally Id.

[16] Greenberg, supra note 10.

[17] Id.; How McDonald’s Makes Money, Investopedia.com, https://www.investopedia.com/articles/markets/032015/how-mcdonalds-makes-its-money-mcd.asp#:~:text=As%20reported%20in%20their%202019,%2Dterm%20goal%20of%2095%25 (Sept. 6, 2021).

[18] Greenberg, supra note 10; The Indicator, supra note 1.

[19] Greenberg, supra note 10.

[20] Jonathan Maze, McDonald’s Operators Get An Ice Cream Headache, Rest. Bus. Online (Sept. 2, 2021), https://www.restaurantbusinessonline.com/financing/mcdonalds-operators-get-ice-cream-headache.

[21] Jargon, supra note 5.

[22] See Greenberg, supra note 10; see generally FDM 312 US Shake/Ice Cream Combined Machine User’s Manual, carpiserve.net, http://www.carpiserve.net/uploads/1/2/3/9/123940898/um_fdm_312_us_v08_en.pdf. (last visited Feb. 4, 2022).

[23] Taylor Company, Built to Serve, YouTube, at 1:50-2:10, (Oct. 23, 2019), https://www.youtube.com/watch?v=jOEDEq3bS6U.

[24] Id.

[25] Greenberg, supra note 10.

[26] Id.

[27] Kytch, https://kytch.com/landing (last visited Feb. 4, 2021).

[28] Greenberg, supra note 10.

[29] Compl. for Damages, Injunctive Relief and Demand for Jury Trial at 1, 23–25, Kych, Inc. v. Jonathan Tyler Gamble, et. al., 2021 Cal. Super. LEXIS 10047 (No. RG21099155).

[30] Matthew Gault, Why the McFlurry Machine Company Just Got Hit with a Restraining Order, Vice (Aug. 9, 2021), https://www.vice.com/en/article/93ymbp/why-the-mcflurry-machine-company-just-got-hit-with-a-restraining-order.

[31] Gillie Houston, What Newly Revealed Emails Mean For McDonald’s Ice Cream Machine Lawsuit, Mashed (Jan. 12, 2022), https://www.mashed.com/673599/what-newly-revealed-emails-mean-for-mcdonalds-ice-cream-machine-lawsuit/?utm_campaign=clip.

[32] Exec. Order No. 14,036, 86 Fed. Reg. 36987 (2021); Emily Matchar, The Fight for the “Right to Repair,” Smithsonian (July 13, 2016), https://www.smithsonianmag.com/innovation/fight-right-repair-180959764/.

[33] Aishvarya Kavi, The F.T.C. Votes to Use Its Leverage to Make it Easier for Consumers to Repair Their Phones, N.Y. Times (July 21, 2021) https://www.nytimes.com/2021/07/21/us/politics/phones-right-to-repair-FTC.html.

[34] Maze, supra note 20.

[35] Id.

[36] Gault, supra note 30.

Image Source: https://www.eatthis.com/mcdonalds-new-soft-serve/

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