When farmers and farm equipment dealers talk about right-to-repair (R2R), the conversations focus on tractors, sprayers and combines. But there are broader R2R concerns with cars, trucks, construction equipment and numerous machines used daily by both business owners and consumers.
We’re taking this moment – during national ice cream month, no less — to examine an unusual R2R fight going out there involving the Golden Arches and the non-workable soft-serve ice cream machines found in 13,509 U.S. McDonald’s fast-food outlets.
As many customers know, there’s no difficulty in buying a burger and fries at McDonald’s (other than skyrocketing prices), but walking out with a soft-serve cone or shake is another story. The ice cream machines are broken so often that customers are told their ice cream order can’t be filled at all due to the downtime of the poorly serviced equipment. (Full disclosure, my son Mike and I walked out of a McDonald’s on a business trip in Michigan this week upon learning – to no surprise – that its shake machine was down.)
What is interesting about this McDonald’s situation is the extent to which companies will go to fight R2R issues. In the case of McDonald’s, this includes using illegitimate tactics, such as raising safety concerns, voided warranties, equipment that wasn’t sanctioned by the supplier and support for their own products or those of a preferred vendor.
We’re sharing the McDonald’s story because of its similarities with the farm equipment R2R situation and how these R2R concerns led to a suit against McDonald’s for $900 million.
Shaken by Breakdowns
As outlined in an article published on allrecipes.com, McDonald’s has enjoyed a long-time partnership with the Taylor Co., which manufactures the soft-serve machines found in most of the company’s 40,275 worldwide fast-food outlets. It’s a serious business for McDonald’s franchisees, when a typical week showed 19% and 28% of the McDonald’s machines were down in San Diego and the New York City area respectively, according to mcbroken.com.
Prior to 2017, anyone who opened a McDonald’s franchise could only purchase a Taylor-branded machine to make ice cream, milkshakes, sundaes and McFlurries. Since then, franchisees have been able to purchase competitive soft-serve machines made by the Italian company Carpigiani, although Taylor still commands the most market share.
While Taylor makes soft-serve machines for other fast-food brands such as Wendy’s, Chick-fil-A and Dairy Queen, they offer a specific model for McDonald’s that requires an extensive 4-hour daily cleaning process. These machines have the most breakdowns, are difficult to operate and more complicated and costly to fix.
“In a typical week, 19-28% of the soft-serve machines didn’t work…”
Each night, the soft-serve machines are programmed to go into an automatic 4-hour heat-cleaning and sanitizing cycle that kills bacteria. But when the machines malfunction, the machines shut down until they can be repaired by a technician. Since the machines are responsible for 60% of McDonald’s dessert sales, owners are concerned about high maintenance, costly downtime and lost dessert sales.
As the fast-food outlets open in the early morning, workers often find an error message indicating the machine didn’t clean properly and requires re-cleaning. With no error specified, the user is forced to try the cleaning process again with no knowledge of what went wrong. After another 4-hour cleaning cycle, it’s not uncommon to get yet another undefined error message, which leads to a call for a technician to make the needed repairs.
Some franchisee owners have speculated that Taylor engineers purposely designed these faulty machines so the company can charge exceedingly high amounts for repairs. Part of their argument is that only Taylor-trained technicians are allowed to fix the machines.
Taylor’s 2018 financial statements stated that 25% of company revenue came from parts and services business. Taylor maintains they do not make any money off servicing these machines, as repairs are handled by a network of independent distributors. However, Taylor does charge to train these technicians.
While the Carpigiani soft-serve machines from Italy don’t break down as often, parts often take several months to reach the U.S. As a result, most McDonald’s franchisees prefer the Taylor machines since repair technicians are local and they won’t have to wait as long for a fix, even if the cost often exceeds $500 for a technician visit.
A start-up company formed by two entrepreneurs came on the scene in 2020 that offered a way to solve many of the concerns with the McDonald’s machines. The newly formed company named Kytch had designed a small computer that is attached to the front panel of the Taylor soft-serve machines to provide real-time data that addressed dozens of potential machine errors. The device showed the specific reason for the machine’s breakdown and offered remote-control options that let a manager at home in the middle of the night restart the machine with their phone.
The company founders say the Kytch add-on was a hit with McDonald’s owners who tested it, even getting a thumbs-up from the head of the franchise owners’ equipment team. The owners felt the device could reduce complexity in their restaurants and help drive cash flow by keeping the machines running.
However, its success was short-lived, as McDonald’s told franchisees that installing the Kytch unit would void the machine’s warranties. And unbeknownst to Kytch, Taylor was developing a similar device and was reverse-engineering the Kytch product to mimic its features.
The Feds Get Involved
A Wall Street Journal report indicated the federal government’s Federal Trade Commission (FTC) had questions for franchise owners who've tried to correct problems with their chronically out-of service soft-serve machines. This was part of a larger R2R inquiry into whether several manufacturers had hampered owners’ attempts to make repairs to certain products.
The FTC asked McDonald’s for information on how they review suppliers and equipment and whether restaurant owners were allowed to work on their own machines. In response, McDonald’s listed a number of reasons why the Kytch programs should not be used. They stated that the program was not sanctioned by McDonald’s, voided warranties, didn’t meet the company’s stringent food standards and were a safety hazard. They also noted they were working on a comparable device with fully vetted partners.
So far, the FTC has not taken any further action on these R2R issues.
$900 Million Lawsuit
In late 2020, McDonald’s emailed the owners of all 13,000 U.S. franchises and told them not to use the Kytch device. They cited the possibility of the device causing serious injury, a statement that was said to be false.
The McDonald’s memo stated that the Kytch remote-control feature could make the machine start running while someone was cleaning or maintaining it, endangering an employee’s fingers. In a rebuttal, Kytch explained that once the door to the ice cream maker was opened, the device was not operable. The company fought back, stating that the only danger was to Taylor’s own bottom line.
After the McDonald’s memo went out, the Kytch business dried up and the company soon shut down. This led to Kytch filing a lawsuit in 2021 against Taylor and a McDonald’s franchise owner. The $900 million suit claimed the franchisee gave Taylor access to Kytch’s software so its staff could reverse-engineer Kytch’s software and create their own program.
The lawsuit also claimed the Taylor machines were designed to prohibit users from accessing the technician’s menu that operates the machines. The Taylor machine menu also contained confusing messages that left McDonald’s franchisees frustrated and unable to operate the machine, causing them to call a Taylor-trained technician even for minor problems.
“13,000 McDonald’s outlets were told not to use the new device…”
In the lawsuit, Kytch co-founder Melissa Nelson states McDonald’s had tarnished its name, scared off customers and ruined their business.
“They were anti-competitive,” she adds. “They lied about a product that they said would be released. McDonald’s had every reason to know that Kytch was safe and didn’t have any issues. It was not dangerous, like they claimed. And so we’re suing them.”
In the lawsuit, she states that Taylor had a significant reason to keep the machines broken, since 25% of Taylor’s revenue in 2018 came from repair and maintenance contracts. Nelson points out how Taylor had tried to reverse-engineer the Kytch product and accuses them of trade secret theft.
In the lawsuit, Kytch’s attorneys state, “McDonald’s conduct was intended to intimidate and scare Kytch’s customers and prospective customers into ceasing to do business with Kytch and to instead adopt Taylor’s forthcoming competing product or to continue using Taylor’s costly replacement parts and repair services at an astronomical and unnecessary rate.”
McDonald’s calls the lawsuit “meritless” and Taylor says it’s “built on false allegations.” But in September of 2022, a California judge rejected McDonald’s request to dismiss the lawsuit. Since the lawsuit is ongoing, McDonald’s franchise owners are still stuck with their broken soft-serve machines.
R2R Concerns Everywhere
As you can see from this article, R2R issues are being taken seriously by manufacturers, distributors and dealers involved in many different industries. Whether it’s a $1.09 soft-serve cone or a $700,000 combine, R2R issues are a growing concern.
More on R2R Issues
Over the last several years, Farm Equipment editors have delivered extensive coverage on both sides of the R2R issues in the farm equipment field. To see all we’ve produced on this topic, click here.