As we move into a controlled re-opening, restaurant operators are rethinking their business strategy to weather what promises to be a challenging economic climate. Some establishments are opening their doors for the first time in perhaps months, others are reviewing their current take-out and curbside business and charting a path forward.
Mandates and requirements will evolve day-by-day and there are no clear markers yet on how consumers will behave. There will be multiple stages of recovery for the food and beverage industry, starting with a rebound from complete shutdown or highly restricted operations, to a rebuild and finally a reimagining of the industry. Restaurant operators will need to remain agile and continuously explore new business models and service concepts.
Over the last several weeks, we have engaged in discussions with several customers considering various diversification strategies. For example, full-service restaurants opting to partner with a ghost kitchen to supplement their take-out business; increasing revenue channels by offering their facility and staff as a ghost kitchen for other brands; as well as creating new offers like meal kits and corporate partnerships for work from home essentials, to name a few. As we progress from rebound to rebuild, restaurateurs will need to be able to pivot quickly away from concepts that are not delivering fast returns and experiment with new offers. They will need to be able to free up cash and create balance-sheet flexibility as seen with the most resilient companies after the 2008 downturn.
Rethinking Table Service
As stay-at-home orders lift, we are seeing the hard truth about running at reduced capacity. Increasing the number of covers a restaurant can turn while balancing the staff required, will be more data science and technology than art, for the foreseeable future.
Reduced capacity may also mean expanded roles for front of house team members – servers, hostesses and bus staff. These employees may become runners, delivery drivers, or answer phones to take orders as demand increases. Behind the scenes, it will be critical to understand how to measure the productivity of employees in the kitchen. The industry has been slow to adopt analytics that track key statistics like ‘meal production by hour’, but this will be vital in keeping restaurants efficient and profitable.
Striking a balance between safety, customer satisfaction and margin performance will be more challenging. Owners of table service restaurants will need to maximize their footprint, utilizing in- and outdoor space to balance covers with social distancing guidelines. This will require careful orchestration as potentially fewer servers hustle across a larger area. Considerations like menu, payment and delivery services, kitchen flow and inventory all need close assessment on a near daily basis. We also expect to see an increase in book and order ahead models where patrons have a finite window to arrive, receive their meal and exit.
Digging into Delivery
A more data-driven approach in how businesses engage and leverage 3rd party delivery service providers will be essential to long-term success. We will likely see brands pull back where possible given the importance of owning customer journey data, brand integrity and bottom-line performance. Brands that do continue leveraging 3rd party delivery services will need to regularly assess partnerships and dynamically manage which channels are right for an individual order based on business criteria. For example, if the delivery is to a loyal customer, a brand new customer, or within a certain proximity to the restaurant, the brand should retain the transaction from end to end.
Increased Endpoints, Agility, and Data Security
Contactless payments will become the new normal worldwide. Contactless payments are already widely accepted in EMEA and Asia, but the U.S. will need to accelerate its adoption of EMV. We are also likely to see contactless ordering models evolve as they have in China where patrons simply scan a QR code, select from the menu and pay via mobile wallet.
As the industry starts to rebound and reimagine the restaurant experience, we are likely to see a plethora of new technology providers and platforms borne out of specific regional conditions that have global application and relevance. Brands need to ensure they have the agility and an open API architecture in place so they can quickly embrace new technology that can move their business forward.
All these new technology endpoints and and an ever-increasing online transaction volume will make the industry an attractive target for hackers. Understanding point-of-sale (POS) security protocols and personally identifiable information (PII) protection will need to be at the forefront for IT leaders.
Anticipating and Flexing with Supply Chain Limitations
A critical piece of business resiliency will be the ability to anticipate and operationally manage supply chain fluctuations. Restaurants need to operate with efficient flexible menus, model potential ingredient swaps when there is a change in the supply chain or customer demand and dynamically make those changes across consumer touchpoints.
For example, when a national meat provider recently faced a potential need to idle its largest pork plant. Restauranteurs with a heavy reliance on that ingredient and supplier would be smart to model out what the impact of cost of sales (COS) would be to replace pork with an alternative such as chicken.
Reducing Inventory Costs and Waste
A more streamlined flow of customers and staff also necessitates rethinking a restaurants menu and analyzing where the most popular and profitable offerings are. It will be especially important to understand which menu items can be adjusted to optimize costs while still delighting customers. Utilize this information to place more accurate orders with suppliers and identify what can be removed from an order to allow for a reduction of waste.
The National Resource Defense Council estimates US restaurants generate between 22 to 33 billion pounds of food waste each year, with between 4 and 10 percent of food purchased by restaurants wasted before reaching the consumer. Restaurants who can effectively reduce this number with effective supply chain and inventory management have an opportunity for sales recuperation.
The Road Ahead
Now more than ever, data will be essential for business planning and decision-making. The volume and variety of data will increase, from in-house operations to macro trends, consumer behavior, supply chain, and economic conditions. This is not novel for large enterprises, but this data-driven approach will hold for small to mid-size enterprises (SME’s) and independents. Adding to the complexity is the notion that historical data will be largely useless to daily decision-making. In essence, our industry has hit the reset button and will need to carefully monitor data day-to-day to set a “new normal” baseline.
Looking to the future, a tightly integrated technology platform that enables this kind of data-driven intelligence into internal operations and enables the business to quickly implement and measure menu changes, delivery options, and staffing will be critical.
The restaurant industry is incredibly creative and resilient. There is no doubt we will see a plethora of new models and ideas emerge as brands navigate uncharted waters. But amongst the art that is food, data science will need to play an increasingly important role in keeping businesses moving forward profitably and serving their communities for years to come.
Simon de Montfort Walker is senior vice president and general manager of the Oracle Food and Beverage Global Business Unit. Tapped for his deep experience in hospitality technology, de Montfort Walker leads the business unit’s efforts to deliver innovative hardware and cloud solutions, enabling restaurants of all sizes to personalize the guest experience, streamline operations, and grow their businesses. de Montfort Walker has built a track record of success in software sales, strategy, and execution for both public and private companies. Throughout his career, He has held leadership roles in a number of technology firms as well as led the operational turnaround efforts for technology companies in travel, banking, insurance, and hospitality.
