We all know the story. The tortoise wins the race and beats the hare: “slow & steady wins the race.”’ The tortoise symbolizes endurance. The hare burns bright then flickers out.The restaurant industry, although much faster-paced than the tortoise image might imply, has historically been focused on endurance. With its daily demands, big pushes are not sustainable, repeatable, or scalable. But during the pandemic, it would be fair to say that restaurants had to be a hare—not just adjusting on the fly to changing regulations but investing quickly in technology to keep in the race.
While the restaurant industry displayed incredible resilience, creativity, and innovation to survive the pandemic years, the result of speedy decisions is that many restaurants now have Frankenstein-ed tech stacks with pieces that work individually for a specific feature or function, but not in a seamless, symbiotic fashion. Like the hare, these restaurants with complicated tech stacks risk collapse.
Why did this happen? Rapid innovation is often messy. The pandemic created incredible need, which was filled by many companies offering sometimes not-fully-baked solutions. Restaurants, rushing to save their businesses, made hasty procurement decisions. With venture capital fuel backing the technology companies came venture capital growth expectations. While many individual technology companies did a stellar job considering the situation, as a group, technology companies oversold their capabilities and expected results. This overselling led restaurants to purchase more technology than perhaps they needed, and some degree of distrust in technology companies.
Worse, because the technology companies tended to offer features instead of solutions (a common occurrence early in an innovation cycle), restaurants were faced with a bewildering array of overlapping, sometimes unnecessary, possibly counterproductive, and conflicting ideas. In our first book, we highlight one restaurateur who told us he receives 20 emails a day from enterprising SDRs (Sales Development Reps from tech companies) who didn’t know his business or his needs. It would not be possible to run a restaurant if the owner spent his or her time learning about each of these interesting companies.
Restaurant executives who realize this encumbrance are now becoming slower and steadier in their race to deploy technology, recognizing that more thoughtful cost/benefit analysis is required. Today, restaurants are applying greater scrutiny in understanding how technology drives top- and bottom-line contributions.
At the inaugural NextGen Restaurant Summit/QSR Evolution Conference in September, Nandu Gandhi, CTO of Focus Brands, said restaurants assess technology spend compared to the expenditure required to open new locations. That makes sense. Any CFO should compare the returns from technology to those derived from growing through additional units.
The challenge is restaurant executives know the playbook for opening new units. New units are a proven and replicable investment, especially for chains or restaurant groups who repeat a winning concept and business model. However, with technology, there is often less certainty and clarity on its contribution to the bottom line. This has to change.
Most restaurant executives we speak to consider technology investment through numerous lenses depending on the type of technology. Some capitalize large investments, while others expense technology. Some put it all at restaurant level and others at HQ. Some see it through the lens of incremental people in the IT department, others as a SaaS fee. Some consider total technology spend of all kinds as a percentage of sales.
Regardless of its place on the P&L, all see technology as a necessary cost to maintain the operation of a restaurant. In this way, technology investments have been more like remodels than like new units. The restaurant has to be updated, but that update may or may not generate incremental sales. The industry does know that NOT updating restaurants will lead to declining sales … it’s just upkeep. For the last few years, NOT investing in technology would lead to declining sales. But can it also grow them?
Restaurant executives clearly understand what is required to open a new unit—land, building costs, FF&E, hiring and training, new opening marketing. And they know what it takes to make money from that investment. It is the model that they have utilized through their careers.
But how clear are restaurant chains on the technology they need to utilize today to succeed tomorrow? How clear is the picture of what technology is required for a restaurant group, and more pertinently, what is not needed yet? To what reliable level of confidence do those same restaurant executives have in spending on technology to squeeze out incremental profitability without overtly complicating an already complex operating model? Isn’t spending capital on growing an additional unit easier when the returns model is so finely tuned?
The larger chains may test and pilot, but these approaches are lengthy. The degree of success often relies on the chain’s operational team while maintaining “business as usual.” There is a limit on what can be placed upon teams at any one time.
To return to our metaphor, what if your restaurant were a tortoise? How can your restaurant be slow & steady to ultimately go the fastest? How can you be speedier with your decisions and focus, while maintaining appropriate scrutiny?
In this column, we will consider how technology shapes the future of the digital restaurant business model. We will highlight the pitfalls and risks involved while untangling the decisions that lead to hesitancy. Our latest book, Delivering the Digital Restaurant—The Path to Digital Maturity, was written with this goal in mind. We set out to help restaurants of all sizes understand where they are on the digital maturity path and where to consider their focus most appropriately for evolving to greater success. We hope you can join us for the journey and let us know your opinions along the way.
Editor’s note: This is the first column in a new series from Meredith Sandland and Carl Orsbourn called “The Path to Digital Maturity.” Sandland and Orsbourn are co-authors of “Delivering the Digital Restaurant: Your Roadmap to the Future of Food” and “Delivering the Digital Restaurant: The Path to Digital Maturity.” After each spent 20-plus years in corporate strategy and retail food, Meredith and Carl each concluded that food in America was changing. They left their corporate jobs in search of innovation that would transform the restaurant industry. Ghost kitchens, virtual brands, digital marketing, the gig economy and lean operations are at the heart of the future they envision. Carl is a co-founder at JUICER, a restaurant dynamic pricing company. Meredith is the CEO of Empower Delivery, software that powers delivery-centric kitchens. Subscribe to their newsletter at www.thedigital.restaurant and tune into their podcast at http://www.thedigitalrestaurant.buzzsprout.com/
