It’s a new year and technology continues to drive innovation in restaurants in myriad ways. Here are five of his trends to pay particular attention to.
1. Major digital restaurant brands will increasingly look like e-commerce companies
As restaurant-guest engagement is digitized and anonymous transactions become known guests, restaurants will start a new gear with the data these transactions generate. Restaurants are turning into e-commerce companies. Fulfillment doesn’t come from somewhere in DC, but from a local restaurant, but the digital interface and interactions with restaurants are very similar to what you’d find in e-commerce.
Already in the process of digitizing restaurants, every new innovation reflects something of e-commerce five or ten years ago.We’ve been fans of Larry Ingrassia’s books for a long time Billion Dollar Brand ClubIn this book, Ingrassia explores the development of direct-to-consumer brands in the CPG and apparel spaces. If you read it and put into words the various consumer goods he talks about, restaurantit’s easy to see where you’re going.
As an example, Karl’s company, Juicer, applies dynamic pricing to the restaurant industry. It exists in e-commerce today. Amazon has been doing it for years. When the consumer goes to the cart, Amazon says, “This item has changed by 27 cents.” In many ways, restaurants are lucky because dynamic pricing is happening all the time in other verticals, and the digitization of the industry is the last. So restaurants can take all these successful ideas and bring them to the food industry.
To accommodate all these innovative ideas, what we have seen in other industries is the creation of platforms. Platforms are the primary place restaurants use to acquire most of their technology. Then other companies with great features will plug into the platform. It can also take the form of an app store where you can choose what you want to add. Sometimes it happens invisibly behind the scenes when a large company licenses a smaller company’s API and introduces its capabilities.
The great news for restaurant brands is that they don’t have to have a million different technology partners to deliver the functionality consumers expect from other verticals. It doesn’t have to be the same as years past in the restaurant industry. I need this subscription and this subscription and this and this subscription.
2. E-commerce metrics are key to managing a great restaurant brand
Assuming restaurants are more like e-commerce companies, it’s clear that they’ll also need some e-commerce metrics. Terms such as customer lifetime value (LTV), customer acquisition cost (CAC), search engine optimization (SEC), and conversion rate optimization (CRO) are words that become part of restaurant terminology.
Delivery marketplaces help restaurants get there. Restaurants see how customers move through the ecommerce funnel, from viewing restaurants on third-party menus, to navigating to restaurant menus, to selecting items and adding them to cart can also do. Then abandon cart. (That’s another metric!) So, as transactions become more digital, these ecommerce funnel measurements will become more common in the restaurant industry. Even non-market transactions are digitized enough to create data, whether they’re first-party direct or made at a store kiosk or tablet at the table.
Restaurants will also start demanding more and more of these kinds of metrics from tech companies. Just take a quick look at the backends of the biggest marketplaces out here and compare them to what you can get from, say, your Google dashboard, and you’ll quickly see that you don’t always get the same level of digital. We provide marketing information similar to that of established large companies like.
3. Restaurants start talking about the percentage of their sales they spend on technology
Restaurant brands today have fairly complex tech stacks. They combine traditional systems with new channels with innovative capabilities present in one-off technology. Most sophisticated restaurants run 15-20 different pieces of software to make all this omnichannel digital selling work. In an inflationary environment, or worse, a recessionary environment, you’ll probably notice things start to shrink.
If you look at the average digital restaurant chain today, 2-4% of sales are spent on technology. Traditionally, it is very difficult for restaurants to measure how much they spend. Some occur in stores, some occur above stores, some are CAPEX, some are OPEX. Part of it is the actual technology subscription. Some of that is probably utility-based fees, or even people who work in technology.It exists in so many different parts of the P&L that it’s very difficult to track and therefore difficult to measure as a percentage of sales. Very difficult. But restaurants will become more focused on spending on technology and will understand it.
4. Restaurant demand for technology ROI combined with interest rate environment drives consolidation among technology providers
As restaurants start to look at their spending and compare it to the value they get from investing in technology, they start asking if they can do this in a better way.
Many tech stacks, especially stitched together, are somewhat complex in the sense that they don’t always communicate with each other. If they don’t communicate with each other, you’ll have to create a cumbersome interface to help. They either talk to each other or spend time without talking to each other.
This means that a natural consequence of looking at the ROI of individual tools will likely lead to more consolidation. 2022 saw acquisitions from DoorDash, Olo and Toast. These major players are likely to do more of the same as restaurants aim to become the central place to get all the different things they need to go digital. As technology advances, we may see headless APIs adding functionality to other large platforms.
Ultimately, the industry must address the root cause of the complexity problem. It’s just that we’ve innovated rapidly and put all these pieces together and Frankensteined them. That’s what led to the clunky tech stack. The only way around it is to take a step back and go back to the first principle. Now that you know what you need for a digital restaurant, if you were to build it from scratch instead of cramming all of this together, how would you build it? You may see the whole thing recreated. Meredith’s company, Empower Delivery, is doing just that. Built from the ground up to deliver.
5. 2023 will be the year of restaurant delivery normalization
We are bullish that deliveries are still a big part of our industry. It may have felt like By 2023, restaurant deliveries will reach equilibrium, with a more steady rate of growth rather than hyper-growth driven by consumer adoption.
While delivery feels like a luxury many cannot afford in the face of inflation, it is important to remember the total cost of use that comes with delivery. They do so because it means they don’t have to hire one, or because it means they’re consuming a bottle of wine at home instead of buying it at markup at a restaurant. Do not have. Delivery allows you to live a great lifestyle without the need for a car. Think about the savings if someone brings your car to you instead of buying it. Especially those who have Dash Pass, Uber One and GrubHub Plus will continue to order large quantities of deliveries.
That being said, consumers can be much more sensitive to promotions. Restaurants and delivery marketplaces will also step up their promotional efforts. As a result, check growth slows, but transactions continue.
Meredith Sandland and Carl Orsbourn wrote:Enabling Digital Restaurants: A Roadmap to the Future of FoodAfter spending more than 20 years each on corporate strategy and retail food, Meredith and Carl conclude that American food is changing. They left their corporate jobs in search of innovations that would transform the restaurant industry. Ghost kitchens, virtual brands, digital marketing, the gig economy and lean operations are central to their vision of the future. Their next book, Delivering the Digital Restaurant: The Path to Digital Maturity, will be published this winter. Subscribe to our newsletter and podcasts at Serving digitalrestaurant.com.