April 4, 2019

When Restaurants Become Tech Businesses

If you’ve ever worked in hospitality then you will have, at least once, mocked the sector’s resistance to embracing new technologies and digital transformation. If a picture tells a thousand words then Trail’s ‘paper chaos’ stand at the Casual Dining Show this year sums up what we’re talking about.

For years, the big global consulting firms such as PwC have highlighted hospitality as a laggard when it comes to digitisation. And whilst still have some way to go, it is clear that we have collectively progressed towards being more adventurous in making technology part of who we are.

One of the reasons that our industry is becoming more open to digitisation is in response to the bold tech companies who have developed solutions for their own deployment within the sector.

People with limited hospitality experience are building their own restaurant business off the back of their tech solutions and what you, your employees and your customers once considered a typical restaurant business is becoming more and more tech-powered, but still food led.

A great example of a tech-powered restaurant operator is SweetGreen, the American salad chain founded in 2007 and now operating in over 100 locations with an estimated worth of more than $1 BN.

From using blockchain in their supply chain management to developing their own in-house mobile delivery platform, their commitment to maintaining direct relationships with their suppliers and customers has been pivotal in their successes and can be largely credited to their willingness to embrace tech.

But we are also seeing some of the biggest brands commit to big changes.

Last week McDonald’s announced that they have acquired tech company Dynamic Yield in a $300 million deal in order to provide their customers with more personalised experiences, this week they acquired a 10% stake in Plexure a New Zealand based app developer. It’s difficult to deny their commitment to gaining a competitive edge through tech and digitisation.

Ahead of the curve, McDonald’s know that restaurants of the future know their customers, with CEO Steve Easterbrook acknowledging their Dynamic Yield acquisition as key in the speed with which McDonald’s will be able to implement their vision of creating more personalised experiences.

From our view, this has set a new standard within the industry and a new direction for best practice in terms of digitising your business when it comes to customer experience and transitioning into a more digital era.

But what is driving restaurant businesses to become more digitised?

Customer demand

Arguably, the most compelling reason to embrace technology is to appease your customers. Being deep in the digital age means that tech is no longer an optional add-on for many operators — it is a competitive edge in a very crowded marketplace.

Technology enables hospitality and restaurant businesses to satisfy consumers, who are becoming ever more demanding. As stated by Brian Moore on our podcast:

“there is no way [companies] can calm the savvy consumers nowadays”

The public, in large, wants value and an exceptional experience every time, they want to know where their food comes from, what’s in it, and they want to be able to customise to their unique taste and requirements.

Customisation, choice, transparency, instant gratification and personalisation are all high on your average consumer’s agenda because they are accustomed to such treatment in other sectors, which Kamila Sitwell also explains on our podcast and her new book Bespoke. And similarly to in the worlds of commerce, travel and entertainment — this is best facilitated via digital solutions.

Industry profitability & knowledge

As great as tech can be at propelling the guest experience, there would be little incentive for operators to take the plunge if it didn’t favour the bottom line.

The industry’s perfect storm burdens many hospitality operators with profit margins of as little as 2–5% and digital solutions can provide scope to offset at least some of these financial challenges.

Sweetgreen’s operating system shows how tech can favourably serve the bottom line by empowering managers to make better decisions. Weather, events and other relevant trends can all be taken into account by the GM in real-time; contributing towards reduced food waste and more effective employee scheduling. And whilst the impact of such may seem to appear incremental, the savings quickly mount up over time when extrapolated between their 100+ sites.

As Nick Popovici of Vita Mojo recently highlighted on our podcast (coming soon here), it’s common for operators to feel an exacerbated burden when their long-tenured General Managers leave due to the knowledge they take with them.

The ‘sixth sense’ that they acquire through years of experience cannot be transferred easily to their successors, but this is where technology can bridge the gap by providing inexperienced employees with actionable insights based on data. It takes the gut out of decision making, which can often lead to poor decisions due to the lack of tangible facts taken into account.

And whilst technology can require a significant investment, many operators see a clear ROI when they implement the right solution correctly with the frontline. Under such circumstances, they not only save or make money but also free up employee time so that they can focus on providing greater levels of service and hospitality to the customers.

A desire for less complexity in our hospitality businesses

Running a hospitality and restaurant business can be complex and success lies heavily on maintaining high levels of standards when it comes to basics such as food quality, service and hospitality.

Over the years we’ve met, interviewed and observed many leaders who understand the commercial environment that they are operating in, live their values day-in-day-out whilst communicating their business purpose clearly throughout the whole organisation.

They invest a huge amount of time and resources into systems that minimise unnecessary complexities in their leadership, people and operations systems. And this results in their unique blueprint that is nothing short of a competitive edge which has a compound effect that we call the ‘Power of Consistency’.

With the perfect storm in full force even thriving hospitality businesses are feeling the wrath of tough market conditions. Whether it is finding good people, controlling and monitoring the cost or scaling or finding new growth avenues; the perfect storm adds new layers of risk to growing a hospitality and restaurant business.

Making technology work poses new challenges to organisations in this time-poor industry of ours.

We are operating in a time where there are many piecemeal solutions and all the white noise of tech can make it difficult for hospitality decision-makers to make sound investments. They know there are tools that do the heavy lifting for managers and employees, but the best solutions for their unique situation can be difficult to distinguish; make purchasing tech a daunting endeavour.

In our view, most worthwhile tech solutions can be put into two categories:

1 — Solutions that indirectly enhance the guest experience. They free up manager and employee time and consequently create more opportunities to delight guests:

- Tech solutions that improve internal communication, such as Ziik and Yapster;

- Staff scheduling platforms, such as Quinyx and BizSimpley;

- Smart checklists for paperless operations, such as Trail;

- L&D platforms, such as Vidleos;

- Data analytics, business intelligence & data warehousing, such as Taholaand Yumpingo;

- Talent and workforce solutions like Harri that helps managers to attract, hire, admin and developed people.

2 — Solutions that directly enhance the guest experience and improve sales:

- Customer-facing front of house platforms, such as Vita Mojo Os and Kobas;

- Click and collect ordering systems, such as Mobi2Go, Orderswift & Preoday;

- Online delivery platforms like City Pantry.

Hospitality and restaurant leaders should actively seek out solutions that fit into either of the above categories, with confidence that the chosen solutions will boost productivity and minimise complexities in their operation that do directly add to the guest experience.

In addition to reducing complexity and benefiting the guest experience, there are many trickle-down benefits on offer, including:

- Increased average sale;

- Increased dining frequency;

- Increased customer loyalty;

- More favourable employer value proposition;

- More informed employees;

- Reduced risks — e.g. greater food safety accountability and keeping up with compliance.

So what should you do about this?

The first thing to do is recognise that tech is not all about taking the human element out. As we talk about the future of restaurants continuing to become more tech-empowered we are not referring to countless FOH screens and electric kiosks. Whilst these will become increasingly popular amongst large food retail businesses, the technology we consider becoming more widespread is working in the background within the restaurants’ hidden infrastructure — helping you to develop and boost your organisation's performance.

If like many others you are working with a tight budget then we recommend investing in platforms that help you better track and reduce your costs. This could include:

- POS software that provides accurate sales projections and customer behaviour;

- Labour management software that helps you to schedule your employees more effectively or;

- Food tracking/ inventory software that gives you clarity on what your food costs actually are and how you should manage your inventory (this is particularly valuable if you are regularly dealing with expensive ingredients);

- Communications solutions that help you interact with your frontline employees;

- Checklist tools that facilitate a more consistent and paperless organisation.

What to look for

Flexible subscription models tend to be the best option in terms of payment since you are able to determine whether the outcome is worth the monthly fee.

It is also worthwhile vetting products for how well they will integrate with your current and future tech systems and infrastructure (take everything into account — think operating system) whilst being cautious of enterprise pricing models as these can have unclear/ high costs.

In order to make sure that any investments in tech are a success, hospitality leaders must ensure that they not only choose the right solution for their business but also that they make it sticky in the implementation phase. This means to ensure that any employee-facing digital tools are integrated into their everyday tasks in a way that enables and encourages them to work more effectively.

If you are looking to digitise your restaurant businesses it is important that you begin by understanding the greatest priorities to your unique situation. It is crucial to have top management wholeheartedly onboard and not just delegate the project to one department since we are talking about the process of managing change.

Get started now

Is not just about getting started and do what all the others are doing — you need to find your unique recipe for your digital transformation. To get you started here are some key questions we ask our clients to answers to help them on this journey — it helps them to get clarity and make better decisions;

1. How digital is our organisation on a scale of 1–10 (back of house/ front of house)?

2. What are our peers in our industry having success with when it comes to tech?

3. How are employees’ and customers’ expectations changing, and what companies are currently catering to such expectations (from within or outside of our industry)?

4. Where seems like the most likely avenues that we could save time & money without having a negative impact on the guest experience?

5. What are the first 3 steps we could take to become more digital?

6. How does the tech solutions fit with our current business priorities and strategy?

Once you have identified the key priorities in your organisation, you can then design strategies that will navigate you through the process of digital transformation. Remember that digital transformation & strategy should not stand independently from the other areas of the business and that it must be integrated into the overall business strategy

Be sure not to start implementing digital tools without being completely confident that it makes sense for your employees, customers and the bottom line.

Like anything else, nothing good comes of poor implementation. Getting people from the frontline involved from the outset is paramount in creating a digital workforce as they are the ones that are going to bring it alive.

If you wish to receive further insight from this article or just a conversation about hospitality and restaurant tech please reach out.

Oliver is a business graduate with over five years experience working for globally recognised restaurant chains. Besides when he’s surrounded by food, Ollie is in his element when he’s rethinking operational systems with the primary focus of enhancing employee and guest experiences.

Michael is a heart-centred operations and people specialist, who believes and lives by building hospitality and restaurants businesses from the inside out. When your employees love your company, your customers will love you — brand nirvana. He helps leaders and operators to build unique blueprints and business systems that create strong employee and customer experience through implementation, which translate into improved sales, profits and positive impact.