QSR Disruptor – Dragontail Systems’ Increasing Conviction Among QSR Industry Players

Dragontail Systems Limited (ASX: DTS)

AI-powered systems and services developer, Dragontail Systems, is disrupting the conventional Quick Service Restaurant market with its unique offerings. Its offerings allow a restaurant operator to achieve productivity improvements and operational optimisations.

AI-Tech (Source: DTS Presentation)

Algo Nationwide Rollout

In an exchange release on 27 December 2019, the company announced that the master franchisee for Pizza Hut in Australia – Pizza Pan Group Pty Ltd, has given the nod for the nationwide rollout of Algo Platform.

This development would see the installation of Algo Platform in around 250 Pizza Hut stores operating in Australia, and the completion of the rollout is anticipated by Q2 2020. The move by the pizza giant comes after a successful demo in initial stores, which helped to improve performance and customer satisfaction.

As a result, the management of the Pizza Hut stores was convinced to employ disruptive technology in the nationwide stores. DTS and the pizza giant remains committed to delivering markets with innovative modules and unique technologies to underpin favourable outcomes.

Now, the Australian market of the QSR disruptor adds to the lists of its nationwide deployment mandates, which includes the UK, Singapore and Canada markets.

The UK Roll Out

Early last month, Dragontail notified that it had gone live with its Algo Platform in some Pizza Hut stores in the UK, and the company was vying to complete the nationwide rollout of its technology by early next year.

For Dragontail, the UK mandate is the first nationwide mandate in a large European market, and it was noted that the number of contracted stores had increased to 3,814 stores after the contract win.

And, the number could go higher now as the company has secured contracts to rollout its systems in nationwide stores of Pizza Hut in Australia. The contracted stores’ count was 2,191 in Q4 2018.

Partnership with Yello

In September, the company reported that it has partnered with a leading a domestic fast food delivery aggregator in Australia – Drive Yello Pty Ltd. Yello is a last-mile delivery services platform, allowing businesses to optimise deliveries, search for qualified and rated drivers, and book a Yello pick up ‘on demand’.

DTS says such collaborations increase the combined value for QSR customer that could use its systems to decide on delivering the food through stores drivers or aggregate driver available through such platforms.

As a result, this could allow the QSR operators to achieve optimal delivery mechanism while improving customer satisfaction and minimising the cost of deliveries. Further, the company’s customers have an option to utilise driver sharing module, which allows nearby stores to use the same pool of drivers.

US Food Aggregator – Postmates & more

In September, the company reported that a partnership was agreed with Postmates Inc. – one of the leading food-delivery aggregators in the USA. The development was a part of the company’s intention to expand in the US market and acquiring new potential large customer, who would be utilising the company’s suite of products.

The partnership with Postmates followed a similar partnership that was completed by the company with DoorDash Inc. - a logistics and delivery company, which is active in the North American markets.

A similar partnership was executed with Kin Shun Information Technologies PTE Limited – a Singapore based company, offering customised delivery solutions in the Asia-pacific markets.

Q3 FY19 Quarterly Update

In October, Dragontail Systems provided the Q3 FY 2019 updates for the period ended 30 September 2019. It was noted that the company had demonstrated an impressive scaling up of activities earlier in the year with stores contracted and stores installed growing by more than 50% and 250% respectively.

Although, the growth in stores installed faced a delay due to customer’s internal operation requirement and other factors. However, the company said that the customer remains excited to install its technology to underpin operational optimisation in the stores.

For FY 2020, DTS has ambitions to continue growing its installed base and capitalise on opportunities presented in the US and European markets, and the company believes that there is significant opportunity to scale up the business globally.

In Q3 2019, the company’s operating cash payments were $2.5 million, down 9% compared to the forecast, demonstrating its SaaS-driven services that allow to scale-up revenue without a substantial increase in operating costs.

DTS said, it continues to focus on research and development through investments, and these investments would improve the existing product suite along with complementary modules that could deliver customer value.

And in the September quarter, the company invested significant resources in advancing strategic opportunities and expanding into the US and European markets. Meanwhile, the net cash used during the period was $2.1 million lower than management’s expectations.

The company completed the installation of QT camera across more than 800 Domino’s restaurant in the ANZ region in May 2018. And, its Algo Platform continues to deliver over 5 million global orders in a quarter, and QT camera has assessed the quality of millions of pizzas.

During the period, the company initiated the deployment of its ‘Total Technology’, which is believed to be carrying the potential to double the revenue from each store through the full solution and service technology suite to the restaurant operators.

It was noted that installation in the first stores had begun in North America, and the ‘Total Technology’ includes all products by the company, including point of sale capability. DTS also launched its first cross-brands shared drivers, allowing driver sharing between branches of different branded stores.

On 30 December 2019, DTS was trading at $0.120, surging up by 21.212 per cent (at AEDT 3:18 PM).

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