US | The $900 Million Soft-Serve Saga

A tech startup selling a device to fix McDonald’s perennially broken ice cream machines has filed a lawsuit seeking a reported USD$900 million in damages, charging the quick-service chain with business interference, false advertising, deceptive trade practices and trade libel.

Kytch Inc., a software company co-founded by Jeremy O’Sullivan and Melissa Nelson, filed the lawsuit in the U.S. District Court for the District of Delaware.

In the complaint, Kytch outlines a scheme in which McDonald’s and the ice-cream-machine manufacturer Taylor attempted to force Kytch out of the marketplace, and as a result ensure that franchise operators continue to pay for costly repairs.

The Kytch Solution was an IoT device with proprietary software that allowed restaurant operators to control the soft-serve machines remotely and troubleshoot. In the complaint, the startup contends that McDonald’s destroyed Kytch’s growing business by instructing franchisees not to use the device and falsely claiming publicly — even warning competitors like Burger King and others — that the Kytch Solution posed a safety risk.

Kytch’s, meanwhile, which in 2020 was in in talks with a venture capital firm to raise $10 million on a $50 million valuation, said in the complaint its business has dried up and was forced to abandon its plans.

The company’s valuation has plummeted to as low as $3 million, court documents said. The $900 million in damages is the value Kytch’s co-founders say the company would have if McDonald’s had not interfered.

“McDonald’s owes it to our customers, crew and franchisees to maintain our rigorous safety standards and work with fully vetted suppliers in that pursuit,” McDonald’s USA said in a statement.

“Kytch’s claims are meritless, and we’ll respond to the complaint accordingly.”