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As quick-service and full-service restaurants continue fighting for market share from fast-casual players, they are increasingly turning to tech, unveiling mobile order apps, bill-splitting technologies, and delivery to engineer more convenience into the dining experience (and add to their bottom lines in the process). Still, not all chains are on board. In fact, entire segments (paging Casual Dining Restaurants) still lag behind. A Deloitte survey of restaurant customers and executives revealed that guests are looking for more than just delivery or mobile-ordering, though. In fact, the modern restaurant guest wants technology to hit every major point of the restaurant experience from the moment they walk, until they leave (and even after). Forty percent want to order online (and spend more when they do); a bulk want spending flexibility (i.e. the ability to split the check); and a full 84% say they will return to a restaurant that responds to their feedback directly. Below, we round up some of the best restaurant technology trends of recent history so far — and take a look at how chains have continued to integrate technology into their business in recent months.
Some restaurants rely almost entirely on delivery and takeaway. The share of 100% delivery/takeaway restaurants (think of establishments such as Domino’s) in the global foodservice industry is estimated to be 3% — representing some estimated $90.97 billion in 2017. The relevance of this segment varies depending on the geography, ranging from 6.3% in Australasia (close to twice the global average), to only 1.8% in Eastern Europe. In terms of Average Unit Volume, North America takes the lead with $696.7k; in the other extreme, the AUV in Latin America is about a quarter that of North America.
Still, online food delivery currently comprises just five percent of its overall addressable market in the US, according to Morgan Stanley research. That $210 billion market opportunity means that more restaurants are likely to begin rolling out delivery options. Some will partner with the massive crop of third-party restaurant delivery companies, like UberEATS and GrubHub. Others, though, will make a go of it on their own. At the Global Restaurant Leadership Conference in October 2017, Shake Shack CEO Randy Garutti told attendees that the chain was planning on utilizing electric vehicles to test delivery in Seoul, where it currently has three locations. Though it would certainly require an investment, taking risks has long been a part of the burger chain’s success. At the same conference, Garutti said Shake Shack’s motto was to “do those things that everyone else is unable or unwilling to do.” Investment firm Cowen has forecast that, in the US alone, food home delivery will surge some 79% over the next five years. Perhaps even more interesting is that delivery isn’t just trending among Millennial-aged consumers. In fact, Cowen’s research shows that online delivery usage is also surging among the 35-44 age group.
McDonald’s, Taco Bell, and Chick-fil-A followed the path forged by Starbucks in rolling out apps that allow guests to order and pay via a mobile phone app before picking up their food from the physical restaurant. Pizza Hut, Papa John’s and Domino’s all credit about half their sales to mobile orders. The ability to quickly and seamlessly order food via smartphone is becoming widespread, though thousands of chains still haven’t gotten on board. That is sure to change, though, with some of the largest players investing millions into mobile order technology.
Despite the fact that so many chains are now offering it, mobile order-ahead is still in its infancy. And it still isn’t without its unique set of challenges. By 2020, though, it is expected to be a $38 billion industry — one that accounts for 10.7% of total sales in the quick-service industry, according to Morgan Stanley. Its continued growth will be driven by adoption among more QSRs, along with the growth of mobile commerce and loyalty programs.
Payment flexibility has always been important to restaurant guests, but who among us hasn’t been met with a “We can only split the bill for parties of 8 or more” when visiting a restaurant? With apps like Venmo (which allows users to easily send money to others with just the touch of a button) growing in popularity, it makes sense that restaurants would offer easier ways for guest to go Dutch. There are a number of apps aiming to allow restaurants to deliver a more customized payment experience, including Divvy, Billr, and Plates. Venmo’s popularity is exploding, particularly among millennials. In December 2016, the app crossed the $2 billion total payment volume threshold in a single month — just a few months after it had broken its first record, crossing the $1 billion threshold in a single month. The ability to split the check is just one aspect of payment flexibility, though. Of those polled in the Deloitte survey, 54% say they want payment flexibility with take-out orders and 53% said they wanted it with drive-thru. Nearly half (48%) want the ability to use their phone to pay for food purchased in the drive-thru lane; 31% want to pay digitally even when dining in-house.
Numerous studies have shown that, when customers are close to receiving a loyalty reward, they spend more. Couple this with the fact that retaining customers is often much less expensive than attracting new ones (which is anywhere from five to 25 times more expensive), and it makes sense that restaurant chains continue turning to rewards and loyalty programs. The latest reward and technology programs integrate with both restaurant POS systems and customer smartphones, allowing guests to check their account status anytime, from anywhere. According to recent research, consumers utilize rewards programs for more than just, well, rewards — in fact many use them to create a more personalized experience. Seven out of 10 restaurant guests have said they want personalized offers that give them a sense that a restaurant “knows them,” with a masssive 80% saying they’d like a restaurant to use its app to inform them of deals and allow them to provide feedback. Even more (84%) of those surveyed said that, if they did give direct feedback to a restaurant and received a response, they would return to dine there again.
The Future of Restaurant Technology
Though it might seem tempting, restaurant companies shouldn’t implement new technologies simply because they are trendy. Some trends, however, will be more than a flash in the pan and could ultimately prove profitable to chains. Restaurants that can bring responsive, integrated digital experiences to every customer touch point will not just build deeper relationships with their guests, but will see technology drive customer loyalty, guest check, and a differentiated experience. Moving forward, restaurants will need to carefully evaluate which technologies are truly worth the investment. Robust business plans and tests will help lower the risks associated with trying new ideas and ultimately increase the speed of innovation. Those who can learn from those tests and smartly innovate will likely find not just promise, but profits, in the future of restaurant tech.
About Aaron Allen & Associates
Aaron Allen & Associates is a leading global restaurant industry consultancy specializing in growth strategy, marketing, branding, and commercial due diligence for emerging restaurant chains and prestigious private equity firms. We work alongside senior executives of some of the world’s most successful foodservice and hospitality companies to visualize, plan and implement innovative ideas for leapfrogging the competition. Collectively, our clients post more than $200 billion, span all 6 inhabited continents and 100+ countries, with locations totaling tens of thousands.