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The Second Wave

Restaurant technology's second act

What was

The future is really predicated on prior events and it assumes we learn and evolve. Fair enough. I believe that as do many people I talk with about change and the forces that provide the energy for such change. Reflection is good and these learnings help us discover and invent what's next. There is no second act without a first. That, in my timeline started in 2007, about a decade ago, with the advent of the smartphone; Apple's iPhone was game changing and is the reason Apple today is the most valuable company on earth. Freedom, access and immediate connection to the world in the palm of your hand. It was pretty powerful when Steve Jobs announced it then and near magical now, in 2017.

So what was state of the art in restaurant technology like in 2007? Well, for serious operators, that would include a POS terminal and a fax machine. For serious operators in higher-end restaurants, maybe adding Open Table, a pioneering reservation system that used ethernet cable to connect to their black box. This was state of the art then. Sadly, there are tens of thousands of restaurants that still don't even have this "stack" in 2017.

The first wave of technology innovation and adoption focused on solving primarily consumer problems, or perceived consumer problems that a few tech-savvy entrepreneurs wanted to solve for their own benefit. With the smartphone growing in popularity, apps were a natural platform and relatively simple to create and deploy. The early entrants after reservations, were mostly trying to solve the restaurant discovery problem, to direct smartphone users to local restaurants. A few others got into the restaurant review game and along came loyalty, rewards and photo apps for sharing and then a barrage of social media apps that changed how we engage with restaurants. While that isn't suppose to be a history lesson and I am sure I am leaving out a lot of the technology categories here. But, suffice it to say, the granddaddy is Open Table and the new kids on the block are helping to sell food online and drive traffic to sales-hungry operators. This takeway category, has impacted the restaurant industry in ways that we don't full understand, or fully appreciate. Little things like restaurant design and dark kitchens!

What is

Today, the restaurant industry is an $800 billion monster that represents about 4% of the U.S. GDP. If healthcare is the largest at 6% after the U.S. Government, foodservice is third. It's massive and vital to the U.S. economy. It employs close to 14 million and when adding supporting industries, its well north of 25 million people that call foodservice their profession. Combined, foodservice has a total economic impact greater than $1.5 trillion. BIG. Technology is all about creating efficiencies and boy, does the restaurant industry need that. Costs are high, margins are thin and its so competitive, it's overwhelming. There are just too many restaurants that now, if one restaurant increases sales, another is losing sales. This zero sum game is not good for operators. This makes investing in restaurants even more risky and investing in technology and being creative more important than ever. The restaurant industry is NOT for the amateur and unfortunately, there are no real barriers to entry; never have been.

Restaurant operators are slow to adopt technology, anything new and don't particularly like change. This attitude has to change because frankly, only the smartest, most efficient restaurants will succeed in the future. Operators absolutely must invest in FOH and BOH technologies that will impact their businesses. They should focus on software that (1) increases sales (2) lowers cost (3) better engages their customers; and (4) provides them with insights they can use today, not at the next managers' meeting. But, there are cautions to be considered here. Which vendor is right for me and my operation? What should I pay? How do I measure ROI and how can I become smarter about restaurant technology? Where should I invest first? Do I have a strategy, All good questions.

What may be

Crystal balls. We all want to know the future and we are rarely correct about what the future will bring. But, I do have some ideas; less predictions; more like a collection of ideas about the second wave.

The Second Wave - @michaelatkinson

In the Second Wave for restaurant technology we fully leverage the hard work and hundreds of millions of dollars that has been invested in technology companies over the last decade to build new services and offer more value to the 1 million US restaurants. POS is now e-POS and grocery stores are becoming restaurants, some with brewpubs. Uber now delivers food in a growing number of markets and they will be the dominate last-mile vendor over the next few years. They have the drivers and chains want fewer vendors to manage. And, it's just not economically viable for a restaurant chain to hire thousands of drivers. Restaurants are not logistics companies, or software companies just because they hire some engineers to support their "embedded customer base? Sorry, I'm not buying that one. Operators need to focus on food, beverage, service and their environment, not developing technology or managing logistics.

Second Wave entrepreneurs are smarter than the first wavers. They are aggregating the aggregators and developing new ways to send food orders to operators through third-party integration partnerships. Consumer-facing portals and platforms can drive traffic and increase sales if vendors open their API's. Next generation software vendors like Orderscape are leading the second wave. They created a complex conversational commerce platform using artificial intelligence (AI) and established partnerships to originate food orders by enabling voice and chat conversations on Alexa, Messenger and Google, among others. They manage and route order flow from the likes of Google, Yelp and even banking apps. This new thinking and technology drives new revenues from customers using new technology riding on first wave technology. This is just one example of a second wave technology company and there are man others, including those that focus on reservations and payments.

Over the next few years get ready to invest more, probably 3-5% of totals sales in software and services. Choose wisely (Food Tech Strategics can help) make sure your "stack" of technology can be integrated without relying on a bundle from your POS vendor. Why? Well POS manufacturers are tying to control your technology stack by included modules as part of their offering. Some are included others are ala carte. But, rarely will a module developed by a POS manufacturer be on par with a third-party vendor who focuses 100% on their software product. This may be a good idea for some small operators, however. But, integration is the key here. Your technology systems (Stack) really should be integrated to benefit from all these amazingly useful data that are being generated from each transaction, each site visit, each reservation, and every customer visit. Second wave is here and it's just getting started. To stay informed, consider subscribing to inFOH.com, it's free and all about restaurant technology.

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