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The Courts Technology

Ice Cream Machine Hackers Sue McDonald's for $900 Million (wired.com) 83

Posted by msmash from the fighting-back dept.
For years, the tiny startup Kytch worked to invent and sell a device designed to fix McDonald's notoriously broken ice cream machines, only to watch the fast food Goliath crush their business like the hopes of so many would-be McFlurry customers. Now Kytch is instead seeking to serve out cold revenge -- nearly a billion dollars worth of it. Wired: Late Tuesday night, Kytch filed a long-expected legal complaint against McDonald's, accusing the company of false advertising and tortious interference in its contracts with customers. Kytch's cofounders, Melissa Nelson and Jeremy O'Sullivan, are asking for no less than $900 million in damages.

Since 2019, Kytch has sold a phone-sized gadget designed to be installed inside McDonald's ice cream machines. Those Kytch devices would intercept the ice cream machines' internal communications and send them out to a web or smartphone interface to help owners remotely monitor and troubleshoot the machines' many foibles, which are so widely acknowledged that they've become a full-blown meme among McDonald's customers. The two-person startup's new claims against McDonald's focus on emails the fast food giant sent to every franchisee in November 2020, instructing them to pull Kytch devices out of their ice cream machines immediately.

Those emails warned franchisees that the Kytch devices not only violated the ice cream machines' warranties and intercepted their "confidential information" but also posed a safety threat and could lead to "serious human injury," a claim that Kytch describes as false and defamatory. Kytch also notes that McDonald's used those emails to promote a new ice cream machine, built by its longtime appliance manufacturing partner Taylor, that would offer similar features to Kytch. The Taylor devices, meanwhile, have yet to see public adoption beyond a few test installations.
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Ice Cream Machine Hackers Sue McDonald's for $900 Million More

Ice Cream Machine Hackers Sue McDonald's for $900 Million

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  • need to sue Taylor over the maintenance contracts that they force onto McDonald's

    also in an case like this the legal bill may be big as this will need an big team an a lot of party's in the mix.
    Like
    Taylor
    McDonald's
    mcdonald's franchise's (I think at least one rated them out to McDonald's)
    Taylor's owner middleby
    etc

    • Re: (Score:3)

      by fermion ( 181285 )
      There are a whole slew of unfair provisions in any franchise contract these exist only to maximize profits and the corporate level while transferring risk to the franchise. Fortunately a firm that kills all of it franchises by not providing support, like Quiznos, also tends to die.

      But that is the game. Leverage the franchise or open your own store. Ideally we would adjust the legal environment so independents have an equal shot and there is less incentive to franchise. But owning a franchise is an intent

      • "What I would not do in put in a object to transmit my confidential business details."

        Never heard of a remotely monitored security system huh? Glad to know you don't have one. What's your address?

      • Re: (Score:2)

        by Rhipf ( 525263 )

        It was McDonald's that said the Kytch's device transmitted confidential information but did they really? How much confidential information can you get from an ice cream machine anyway?

        • Re: (Score:2)

          by bws111 ( 1216812 )

          Sales data is usually considered confidential.

          • Re: (Score:2)

            by taustin ( 171655 )

            That same data can be derived from examining the historical data on orders for the stuff it's made of, which most certainly comes from McDonald's corporate.

            • Re: (Score:2)

              by bws111 ( 1216812 )

              So you're saying that every quarter the sales of all items are the same? Nonsense. CURRENT sales data has much more value. At the very least. current sales data (which is not available to the public) makes it easier to predict earnings and buy/sell stocks accordingly (inside trading). This applies not only to McDonalds stock, but to the stock of McDonalds suppliers.

              • Re: (Score:2)

                by taustin ( 171655 )

                So you're saying that every quarter the sales of all items are the same?

                Are you illiterate? Hallucinating? How could anyone possibly get that idea from what I posted.

                If a franchisee buys enough stuff to make xxx McFlurrys in a given month, it's a good bet they made approximately xxx McFlurrys that month, minus whatever waste there is routine cleaning and maintenance.

                Actual data from the machine would be more accurate, but not by a lot.

                • Re: (Score:2)

                  by bws111 ( 1216812 )

                  Your original post made more sense than this one. 'Historical' data (which is what you said) at least has a chance of being publicly available. Why on earth would you expect that how much a franchisee purchases is any less confidential than how much they sell? And WTF does the fact that the supplies 'most certainly come from McDonald's corporate' have to do with anything?

          • Re: (Score:2)

            by Rhipf ( 525263 )

            So you hook up one of Kytch's devices to the McFlurry machine and you get sales data that location of McDonald's? The most you would get is the number and size of the McFlurries the machine made (this is not necessarily the same as the number sold though) and what time they were made. I'm not sure that the Kytch device would even give you that data though.

    • I smile at the irony that Mcdonald's, as we know it now, was founded by Ray Kroc. Kroc, being the mixer salesman who visited the McDonald brothers restaurant because they had ordered additional machines.
      https://en.wikipedia.org/wiki/... [wikipedia.org]
      So the mixers have been central to McD's profits from the very beginning. It shouldn't be too surprising then that the relationship between McDonald's and their mixer maker might be more symbiotic than just supplier and customer.

    • Re: (Score:2)

      by Rhipf ( 525263 )

      Kytch has no standing to sue McDonald's over maintenance contracts though. 8^)

    • Like
      Taylor
      McDonald's
      mcdonald's franchise's

      Burma-Shave.

  • Have a niche product that shows promise, then litigate when that business plan falls apart. Do they even have a patent?

    In a democratic world McDonalds is free to control how it's own property is used.
    • But the franchise owner bought the machine. They should be able to monitor it
    • Franchisees buy the equipment from McDonalds... Also - their warranty claim in that email is a violation of Magnussen Moss.

      • why does McDonalds not want working ice cream?
        Why are they ok with long downtimes waiting for an Taylor tech to fix an easy issue if there was some readout about what is not working?

        • Why are they ok with long downtimes waiting for an Taylor tech to fix an easy issue if there was some readout about what is not working?

          Probably because of a shitty legal contract with Taylor

          • It really must be something like that. Based on the admittedly anecdotal evidence of the unreliability of these machines, McDonalds is losing a MASSIVE amount of revenue because of Taylor's inability to adequately engineer and/or service their machines properly.

            • Re: (Score:3)

              by Pascoea ( 968200 )
              Nothing anecdotal about it. https://mcbroken.com/ [mcbroken.com] And it's nothing to do with Taylor's inability to service their machines properly, that's the crux of the story. These machines are literally engineered so that they can't be troubleshot/fixed by the owner. Even the usual "it failed to clean itself because it was too full" requires a call to the service tech. I have no clue if the engineering that causes it to fail its cleaning cycle is the result of incompetence or malice.
          • I either read an article or watched a video about this ages ago, and it all comes down to this elaborate financial circlejerk between Taylor and McDonalds, which basically soaks franchisees for cash and both McDonalds and Taylor get paid. I forget the nitty gritty details, but the only people who would benefit from changing it would be people who like ice cream, and the franchisees, so it’s not getting changed.

        • >why does McDonalds not want working ice cream?

          Because they own the company that sells the repair services for the ice cream machines so they get to shake down the franchises each time it breaks.

          • Re: (Score:2)

            by Xenx ( 2211586 )
            That isn't correct. McDonald's has contracts with Taylor for the machines, but does not own Taylor.

            As an aside, it looks like since 2017 restaurant owners can buy Carpigiani machines instead of Taylor. From what little I've seen they're all around better machines. It just costs a lot to replace equipment like that.

            • Re: (Score:2)

              by Moryath ( 553296 )
              McDonalds and Taylor are cross-owned by a large number of the same entities holding stock. So...

              • Re: (Score:2)

                by Xenx ( 2211586 )
                And? That still doesn't mean McDonald's owns Taylor. At absolutely best, you could argue it makes them sister companies. Given the percentages of stock held by the companies that hold both, I would say it's a bit of a stretch. Having large investing companies invested in large companies is pretty much the norm. In reality, the only thing it really means is that those holding companies like it when McDonalds and/or Taylor make money.

        • Re: (Score:2)

          by suutar ( 1860506 )

          Because they have a financial interest in Taylor. It's just a way to siphon money from franchisees back to corporate. Taylor makes machines for other restaurants as well, but the McDonalds model specifically has a much worse track record.

        • Most likely McDonalds make a lot of money in a side deal with Taylor. Taylor themselves have reported increasing revenue from maintenance and not sales of machines

    • Re:Ahh the modern day entrepreneur. (Score:4, Informative)

      by Pascoea ( 968200 ) on Wednesday March 02, 2022 @01:44PM (#62319433)

      In a democratic world McDonalds is free to control how it's own property is used.

      That's the crux of the problem. These machines, for the most part, ARE NOT owned by McDonalds. They are purchased, owned, and maintained exclusively by the franchisee.

      In case you haven't been paying attention here's the 2c summary: McDonalds (corporate) forces the franchisee to purchase a certain brand/model ice cream machine. The machines are engineered to be piles of shit that need constant attention. They (Taylor and McD's corporate) will not give the owners access to the documentation and tools needed to keep them running. Kytch came along and offered a solution that bypassed the need to call a service guy every time the machine "breaks down". (I say "breaks down", because a high percentage of the time the "fix" was to not overfill the tank and re-run the overnight maintenance cycle.) Now McD's corporate and Taylor are threatening these business owners with trumped-up bullshit claims if they use the 3rd party solution.

      • Re: (Score:2)

        by Sloppy ( 14984 )

        Could franchises "solve" this with two machines? Buy the required one and put into a storage, never to be used again, and no money spent to repair or maintain it: a one-time expense as the cost of doing business, rather than a recurring parasite. But then also buy a competitive, working one from the real ice cream maker market, to use for actual production. Sell ice cream.

        • Re: (Score:2)

          by Pascoea ( 968200 )
          That I don't know. I would assume (this is a big assumption, as I have zero inside info) that if they were to be "found out" they could have their franchise revoked.

        • Franchise agreements can be pretty tricky. Who knows what they have in them. There might be some requirement that for it to be called a McFlurry (which is trademarked) it must be made on the "certified mcflurry" machine. Then there are possible insurance implications. Maybe your insurance carrier requires that you only use McD's approved and certified equipment. Much of this is, of course, the result of Amercans' preference to have the courts resolve every dispute.

          From what I've read, a lot of the McDonalds

          • >he real juicy part will be if their lawyers find out some people at McDonalds were getting kickbacks or had some kind of financial interest in maintaining the broken machines.

            That's exactly what was found. Check out the Adam Ruins Everything video on this topic.

            • Indeed, the machines are owned by the franchizee, but the franchizee is owned by McDonalds.

              The franchise agreements are actually rather simple. You do what you are told.

      • Are they purchased or are they leased and licensed?

        • Re: (Score:2)

          by Pascoea ( 968200 )
          That's actually a really good question. I couldn't find a reliable answer, the closest I came was this: https://www.mymoneyblog.com/mc... [mymoneyblog.com] "Equipment and Pre-Opening Costs: Typically these costs range from $944,352 to $2,172,045. The size of the restaurant facility, area of the country, pre-opening expenses, inventory, selection of kitchen equipment, signage, and style of decor and landscaping will affect new restaurant costs. These costs are paid to suppliers." That would seem to indicate that the equip
      • Also: Only Taylor made machines are approved to make soft serve ice cream by McDonalds. For other franchises like Burger King and Wendys, there are multiple manufacturers for soft serve. If Taylor pulled this with a Wendy’s, they would just buy from another manufacturer.

      • Re: (Score:2)

        by mjwx ( 966435 )

        In a democratic world McDonalds is free to control how it's own property is used.

        That's the crux of the problem. These machines, for the most part, ARE NOT owned by McDonalds. They are purchased, owned, and maintained exclusively by the franchisee.

        In a democratic world companies would be free to force others into a restrictive contract that dictates not just that all services go via them but also all consumables must be purchase through them. This is entirely legal (see printer ink, DRM, et al). It's not democracy that protects us from being abused in that fashion, it's regulation. Regulation permits us to get our cars repaired by 3rd parties, allows us to bypass the restrictions printer manufacturers put in to use 3rd party ink... it also prevents u

  • Magnuson-Moss Warranty Act issues are at play as (Score:5, Interesting)

    by Joe_Dragon ( 2206452 ) on Wednesday March 02, 2022 @01:21PM (#62319321)

    Magnuson-Moss Warranty Act issues are at play as well.
    If Taylor is trying to say that any non Taylor service / tools / repairs void the warranties.

  • This is what right to repair is all about so you are locked into the manufacturers service and tools.

  • Went too far? (Score:3)

    by LatencyKills ( 1213908 ) on Wednesday March 02, 2022 @01:40PM (#62319409)

    It seems to me (IANAL yadda yadda yadda) that McDonalds may have been within their contractual rights to demand the devices be removed under the basis of violating warranties and proprietary information, but the claim that it could harm customers, unless McDonalds has some kind of testing data indicating the devices pose a threat, seems imminently defamatory. That I would think could be their downfall.

    • The original machines likely (almost certainly but I don't have access to documentation) were UL tested for safety. Modifying them invalidated the UL testing. So did Kytch go back to UL and retest the machines with their devices installed? Unlikely they did that. A big thing UL tests for is electrical shock hazards. Since McDonald's are full of metal surfaces and often damp floors, it is valid to say there actually is potential for customer or employee harm here. To address this Kytch need to get UL certif

      • Re: (Score:2)

        by Pascoea ( 968200 )
        FTA: "Kytch argues, however, that the safety warnings McDonald's has leveled against the startup have never held up. In its legal complaint, Kytch points out that its devices were certified to meet Underwriter's Laboratory safety standards by the product testing firm Intertek." I'm not knowledgeable enough to know how having the ancillary device tested/listed affects the listing of the "host" device.

        • If the Kytch device is wiring itself into the host machine they have to be tested as a pair.

          • Re: (Score:2)

            by Pascoea ( 968200 )
            What if it's something that plugs in via something like a serial or USB? I vaguely recall this thing just having to be plugged in to the machine's service port.

            • It is mounted inside the unit, how is it getting its power? there is not enough info available to know if it is ok or not.

              • Re: (Score:2)

                by Pascoea ( 968200 )
                Unreal how hard it is to find info on this stuff... There's a pic on their website showing the device in its packaging. (Lol. It's a damn Raspberry Pi in a custom enclosure with a couple USB cables.) Only pic I could find of installed is here: https://media.wired.com/photos... [wired.com] Looks like a couple USB to Serial converters, and getting power from who knows where. Definitely installed inside the machine, though. I have so little exposure to the UL process I really have no clue the requirements, I apprecia

                • It will have been tested in context.

                  UL is a company, but the name (underwriters laboratories) gives you the clue that's it's an organization set up by the insurance companies and for electrical certifications, they are primarily concerned with fire since that's what costs the insurance companies the most. This is apparent when you compare EU CE requirements with UL requirements. The CE stuff is much more focussed on safety in general compared to UL which is focussed on fire first with a little bit of safety

          • If the Kytch device is wiring itself into the host machine they have to be tested as a pair.

            Which no doubt UL will have informed them about. I suspect they were tested as a pair.

        • I'm not knowledgeable enough to know how having the ancillary device tested/listed affects the listing of the "host" device.

          Obviously...because this concern is way off base.

          Kytch is a thing that's plugged into a diagnostic port, somewhat akin to an ODB2 scanner/code reader that you can pick up for $20 on Amazon to clear out Check Engine codes on a car. It's not a permanent modification to the unit, nor is it something that involves more power than the average flash drive.

          Essentially, what these Taylor machines do is that they have to hit a specific range of temperatures to run the sanitation cycle. The McDonald's versions of thi

          • Re: (Score:2)

            by Pascoea ( 968200 )

            Oh, I absolutely understand the underlying bullshit from Taylor and McDs. It really is a fascinating story, and from my understanding your summary is spot on.

            I was commenting specifically on this thread about the part of the e-mail from McDs stating that the devices posed a security hazard. Which is obviously a BS claim, but the post I was replying to is potentially a good point. From a liability perspective, if the system (ice cream machine+Kytch) isn't UL listed there could be issues if someone actual

            • That is not true if the device has been installed inside a UL listed device with exposed AC circuity inside, which this ice cream maker likely has. For example -- is that custom case enough to stop AC from arcing through it if water/high humidity gets inside the machine? That is the kind of stuff UL tests.

              This is equivalent to you opening up the UL list power supply inside your PC and playing with the circuits inside of it. Not something I recommend doing unless you are an electrical engineer.

              • This is equivalent to you opening up the UL list power supply inside your PC and playing with the circuits inside of it. Not something I recommend doing unless you are an electrical engineer.

                It does not change the circuitry at all. It looks like an enclosed Raspberry Pi device connected via USB to talk to the machine and with its barrel type power plug. Kytch says that it can be installed in 20 minutes without the need of a technician. It does not sound like any electrical engineering is involved.

          • Re: (Score:1)

            by JPeMu ( 942971 )
            As I understand it, the device (or RPi or whatever you like) doesn't *just* connect to "diagnostic" ports, but actually operates in a "man-in-the-middle" mode between the front control panel and the machine's controller (i.e. able to "press" the buttons and intercept the SPI/I2C data from the LCD display). This enables it to automatically enter the "hidden" diagnostic menu, obtain the cryptic information contained within (by automatically going through the obtuse sequence of button presses required to do so
      • Except that Kytch devices doesn’t not affect machine operation. They attach to the machines via the service data ports (which are meant to be used during operation) and read the data codes. That would be like saying a computer is not UL listed if I attached an HDMI device between the computer and the monitor.

        • That is not the same problem. Those HDMI cables are specifically designed to be safe for you to plug things into. The ice cream machine likely has exposed AC circuity inside. If you modify the insides of your PC's UL listed power supply -- then obviously is it not going to be UL approved anymore.

          • Again, a data port is designed to read data. It does not attach to anything that changes the control of the machine. It reads data. There is no changing of electrical signals. On a PC that has an HDMI port. On a PC that is a USB port.

            The ice cream machine likely has exposed AC circuity inside.

            Not factually true. Again data port, not exposed wiring.

            If you modify the insides of your PC's UL listed power supply -- then obviously is it not going to be UL approved anymore.

            Again none of your speculation is true. It reads the data. It does not change the power supply.

    • Re: (Score:2)

      by tlhIngan ( 30335 )

      It seems to me (IANAL yadda yadda yadda) that McDonalds may have been within their contractual rights to demand the devices be removed under the basis of violating warranties and proprietary information, but the claim that it could harm customers, unless McDonalds has some kind of testing data indicating the devices pose a threat, seems imminently defamatory. That I would think could be their downfall.

      It's got nothing to do with it.

      Taylor and McDonalds are buddy-buddy. Taylor was basically started by McDona

    • Re: (Score:2)

      by taustin ( 171655 )

      but the claim that it could harm customers, unless McDonalds has some kind of testing data indicating the devices pose a threat, seems imminently defamatory. That I would think could be their downfall.

      Only if it's not true. It isn't hard to imagine scenarios where it is actually true. (It's also not hard to imagine scenarios where it isn't.)

    • I was thinking the same thing. How is there danger to the consumer when the consumer can't consume a product that can't be produced because the machine...you know...broke down....again! Until the new device made actual real advertize-able production possible!? Jus sayin'
      • This kinda ties into right to repair. I mean, McDs made them buy the machines with the purchase of the franchise. The Franchise is about a mutual agreement to produce product that matches with the corporate Advertising and Marketing efforts. But the machine can't produce... and the franchise owner owns a worthless machine, and incurs dammages financially from the fact the machine doesn't work. ONLY the machine maker can make it work again! It's unholy to me and I would hack the damn thing and stuff an A

  • Good context (Score:4, Informative)

    by jacks smirking reven ( 909048 ) on Wednesday March 02, 2022 @02:06PM (#62319543)

    It's popular but if anyone hasn't seen it I first learned of this whole affair from Johnny Harris on Youtube who has an excellent 30 minute mini-doc on the situation, the machines and how Kytch helped alleviate the problem.

    The REAL Reason McDonalds Ice Cream Machines Are Always Broken [youtube.com]

    • logged in to mention this.

      You will not be bored watching this!

      Taylor + McD fucked the franchisees!

    • That mini doc is excellent and Johnny Harris covers story quite well. The Wired article about Kytch is great too.

      https://www.wired.com/story/th... [wired.com]

      What I find interesting was that Taylor was onboard with Kytch in the early days when they were doing the autonomous froyo thing with Taylor machines. And it's only when they pivoted to helping McDonalds franchises with their machines it was suddenly a problem. Watching this unfold in the courts could be really interesting particularly exposing how buddy buddy Tay

  • They should just write the check now.

  • This company really deserves to be taken down a peg. They should just accept that coming across as draconian doesn't help their image with either their potential labor force or most of their customers. I won't go there except as a last resort-- most of their competitors have better values, as well as more healthy & more ethical products. Their workers shouldn't have to put up with customer abuse because they're too stupid to improve their supply chain on a popular menu item until someone else does it

  • I worked fast food and we would just tell people that it was broken so we wouldn't have to clean it.

    • Re: (Score:1)

      by ebvwfbw ( 864834 )

      There is a whole long line of complaints on the new machines. Machines that McD's required their Franchise owners to buy. Once operational it's clear that they break a lot. There's a whole writeup on the BS associated with it in the name of perfect ice cream. Cleaning, and so on. If it doesn't cycle right then the trouble starts. That happens all the time.

      McD's is all about product and money. No product, it costs a franchise a LOT of money. This appears to be all Taylor's fault and McD's should be suing the

  • I'd be reasonably certain that the "confidential information" consists of a machine ID and an error code. Perhaps it also transmitted usage data, but quite obviously the franchisee and owner of the actual machine knows that, so it's not confidential.

    If you want to get an idea of how pathetic these machines are, 'there's an app for that" (website actually). Visit https://mcbroken.com/ [mcbroken.com] .

    9.25% broken nationwide and almost 25% broken in New York City!

    I'm lovin' it!

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