You want Wi-Fi with that?

McDonald's wireless network sizzles with thousands of consumer hot spots and juicy apps for franchisees.

There's something in the air at McDonald's these days, and it's not just the wafting scent of Big Macs and french fries. Wireless Internet access is on the menu in a growing number of locations as the world's largest fast-food restaurant chain seeks to give its famous Golden Arches a more digital flavor.

McDonald's is three years into its big Wi-Fi push, which so far has brought wireless connectivity to more than 7,500 of the company's 13,700 restaurants in the United States.

The Wi-Fi project is part of a huge re-imaging campaign McDonald's launched in 2003 to bolster its brand association, which had hit an all-time low. The nation faced an obesity epidemic, and some vocal critics and overweight customers were holding fast food in general - and McDonald's in particular - largely responsible for it.

McDonald's addressed the food issues by mixing salads and grilled chicken in with its traditional burger fare, but the company's much bigger challenge was a cultural shift into an increasingly intangible economy with its digital culture. Facing a world in which experiences are becoming as real and economically valuable as steel and automobiles - much less Quarter-Pounders with Cheese - McDonald's sees Wi-Fi as a way to add a fourth dimension - digital services - to its traditional offerings of food, convenience and price.

"People are using restaurants very differently these days as lifestyles have changed," says Tom Gergets, director of technology and infrastructure for McDonald's U.S. operations in Oak Brook, Ill. "We've really had to contemporize and create modern, relevant in-restaurant experiences."

In other words, McDonald's is trying to morph from a drive-through to a destination - a place where people go to meet and socialize or play, or even get some work-related e-mail done.

Becoming a destination involves quite a transformation. When the first Wi-Fi pilot started, 60% of McDonald's business was done at the drive-through window, and people who came inside only because the drive-through line was too long accounted for a big chunk of the remaining 40%.

Part of this transformation is happening through a major remodeling of sites that results in more comfortable seating, segmented areas for children, teens and adults, better lighting and floors, and even an occasional fireplace. Even more is riding on a digital overhaul that provides state-of-the-art wireless technology.

Doing business in the experience economy

It's a tall order but a necessary one, says B. Joseph Pine, co-author of The Experience Economy and co-founder of business consultancy Strategic Horizons. "The key differentiator between offering a service and creating an experience is time. If you view spending time with your customers as costing you money, and your customers want to spend as little time as possible with you, you are becoming a commoditized service," he says.

"But if you view spending time with your customers as opportunities, and your customers love to spend more time with you, you can stage a valuable experience. And the more time they spend, the more money they spend - that's the basic strategy behind putting Wi-Fi in restaurants and other retail locations. McDonald's has created a venue where customers can come and have access to the experiences they want, when and how they want them," Pine says.

McDonald's began its Wi-Fi experiments with a few in-restaurant pilot installations based on a model that integrates value-added applications, such as e-mail access for customers, with core services, such as business applications for franchisees. Then came the challenge of implementing that model across an organization the size and scope of McDonald's.

In 2004, the company set out to test the concept and evaluate potential service partners in three metropolitan-area markets: Cometa Networks and AT&T in New York, Toshiba in Chicago, and Wayport in the San Francisco Bay area. It compared such criteria as business models, service levels, ability to attract customers and impact on core operations.(See related story on McDonald's recommendations on how to select a service provider.)

Wayport won a very public bake-off; third parties, such as AT&T and Nintendo, signed up; and McDonald's rapidly began deploying the service to restaurants. Today walk-up customers can pay $2.95 for two hours of wireless Internet access. Alternatively, customers can get unlimited-use of the entire Wayport network for $29.95 per month, or access via participating vendors, such as AT&T.

Nintendo DS users have given the network's Nintendo gaming utility rave reviews, and franchisees have begun enjoying the benefits of a major infrastructure upgrade that streamlined business operations.

The Wi-Fi service being sold to customers "is just a small part of the benefit," says Don Armstrong, a 27-year veteran of McDonald's franchisee team who has 11 restaurants in the Beaverton and Hillsboro areas of Oregon. "The real benefit was getting a high-speed infrastructure to access the business information we need to manage the restaurants better."

Armstrong is a member of McDonald's Store Technology Board, an elected group of franchisees that serves as a sounding board for the company's restaurant-systems development efforts. Board members are drawn from among the more technologically savvy franchisees, and yet the pre-Wayport network infrastructure in Armstrong's restaurants consisted of "just telephone lines and Sneakernet" - a fairly typical arrangement across all franchisee locations at the time.

The rollout was well underway by the time McDonald's celebrated its 50th birthday in 2005, but ongoing deployment of the Wayport Wi-Fi solution depends on franchisees' wishes and requirements, and may never reach 100%. Some 2,400 McDonald's restaurants are in locations that can get broadband access only via satellite connections, which do not support the Wi-Fi infrastructure.

Getting franchisees on board

Before its 2003 nadir, McDonald's had focused its growth efforts on adding new locations. Since then, its emphasis has shifted to building more sales at existing locations. The availability of wireless access is intended to attract more people to its restaurants and keep them there longer.

"We are starting to see people coming into the restaurants to get online and just buying a drink," says Allen Benton, a second-generation McDonald's franchisee with 18 locations in the greater Austin area.

These customers have lots of hot spots to choose from in such a technology-intensive area, so Benton woos them by providing coupons for free Wi-Fi access. "We want to be their convenient choice for Wi-Fi," he says. Employees are told to keep an eye peeled for laptops and pass out the coupons. Similarly, a big Nintendo tournament was aimed at the younger customers.

Technology changes, however, can't be forced on the more than 3,000 franchisees that own and operate some 85% of McDonald's U.S. restaurants. The McDonald's corporate group has to sell them on any new technology and convince them that its benefits fit their needs and outweigh the costs and risks involved.

Some franchisee cooperatives, which traditionally focus on purchasing and advertising, had dabbled in deploying technology before McDonald's Wi-Fi venture, but deployments were spotty and inconsistent. With the Wayport-based technology, McDonald's is offering a standard, turnkey Wi-Fi infrastructure all franchisees can use for back-office and customer-facing applications, as well as hot-spot Internet access.

"McDonald's is a bit of a consulting and sales organization for its franchisees," Gergets says. "We don't dictate technology to franchisees. Rather, we develop new services they can adopt."

Armstrong acknowledges that adoption of the Wayport solution was "a big undertaking," but likened it to the installation of water and sewer lines: "Once they are in, the real work can begin," he says.

The other side of the hot spot

Inevitably, some franchisees have trouble seeing the value of the wireless experience to their customers. Traditional restaurateur thinking revolves around table turnover rather than encouraging customers to hang around. This newfangled fourth-dimension stuff could blow a winning business formula to smithereens.

A key driver of wireless at McDonald's, however, was the strong demand from franchisees with cash-only restaurants who wanted to start accepting credit and debit card payments from customers. That a way to do this could be overlaid on the Wi-Fi infrastructure got their attention very quickly. Although the customer-access side of the Wi-Fi implementation met with some skepticism, franchisees could see the immediate benefits of a flexible, high-speed network for their customer-facing and back-office applications.

"One of our goals was to ensure that the network could be used for multiple applications, and support new applications in the future," Gergets says. "The customers and employees can share the same infrastructure securely. We had to comply with the very high standards of the payment card industry, so we had to implement a very secure solution." Gergets declined to provide details, but said the services were audited by third-party entities.

The Wi-Fi infrastructure also allows rapid deployment of new tap-and-go-card payment technologies, including the Arch Card that McDonald's introduced last fall. Instead of a magnetic strip that has to be scanned and can become unreadable, the cards contain embedded RFID chips that transmit information more quickly and reliably. The point-of-sale solution is independent of the in-restaurant Wi-Fi network, but shares the Wayport connection for transport and authorization.

"We had wanted to take credit and debit card payments for a long time, and the Wayport infrastructure enables this," Armstrong says. The ability to pay electronically "brings new customers into the restaurants who might otherwise have gone elsewhere."

Faced with the technology expectations of his Austin-area customers, Benton already had implemented in-restaurant Wi-Fi access and electronic payments based on MegaPath Networks services. However, the MegaPath solution had no fallback capability when the broadband connection was down. Payment transactions had to be stored locally and uploaded when the connection was restored, resulting in losses for the restaurants when payments were refused. In contrast, Wayport offers dial backup.

Benton also uses the Wayport infrastructure to run specialized enterprise software that lets supervisors access and analyze business variables, such as daily sales and drive-through speeds.

McDonald's franchisees can deploy other applications on top of their Wi-Fi infrastructure: sales data reporting, IP telephony, kiosks, mobile-worker access, digital publications and e-learning. Armstrong's franchise operation uses the wireless network to deliver employee training and support video surveillance. If there is an incident in a McDonald's restaurant, management can access the location remotely and see what is going on.

The perfect venue

With its Wi-Fi project, McDonald's is trying to take that most recognizable of all corporate logos and influence people to associate it with interactive experiences that are useful, informative or just plain fun. Yet what Wi-Fi does for McDonald's, very well could be dwarfed by what Wi-Fi - and ubiquitous broadband wireless connectivity in general - get from McDonald's. After all, it's something of a maxim in the restaurant business that when McDonald's jumps on board something, it's officially a trend.

Consequently, some view the McDonald's Wi-Fi venture as an important way station on the road to pervasive connectivity. Truly pervasive connectivity requires that municipalities and service providers blanket communities with broadband wireless coverage, and that is still a lot more promise than reality.

"Eventually, McDonald's may be swamped by the fact that a service provider is delivering wireless access and just including McDonald's real estate because it is so ubiquitous," Pine says. As Wayport CEO Dave Fucina remarked when the Wayport-McDonald's partnership was announced in April 2004, "The broadband family needs a seamless extension of home and office connectivity, and McDonald's is the perfect venue to meet that need."

In the meantime, McDonald's is providing a point of access and showing customers -including a lot of young people who will be reshaping our culture - that they can get connected at a lot more places.

Breidenbach is a freelance technology writer based in Reno, Nev. She can be reached at sbreidenbach@usa.net.

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