For restaurant owners, the pandemic disruptions weren’t out of the rearview mirror before an economic downturn and inflation struck. In an industry where profit margins are often thin, challenges related to hiring and retaining staff, budgeting for rising operational costs, and trying to entice new customers – and keep them coming back – added to their woes.
As of November 2023, the average cost of food in the U.S. rose 2.9 percent across the previous 12 months. Over the same time period the average cost of food purchased away from home (i.e., in a restaurant) increased 5.3 percent. Food inflation affects restaurants in various ways, from changing the budget’s line item to juggling making a profit while retaining customers, who may go elsewhere if restaurant prices are set too high.
Purchasing food is not the only financial challenge. Operational costs also increase during inflationary times. The costs of utilities, interest rates, insurance premiums, and transportation/shipping have risen. According to Kamran Izadpanah, CTO of Tillster, “The macroeconomic environment will continue to shape restaurant and tech priorities. Factors like inflation, cost of goods, labor fluctuations, and shifting consumer demands and expectations are putting pressure on operators and affecting virtually every segment of the space.”
Deploying the right technology solutions can meet and solve these challenges. Ram Jayaraman, SVP of software engineering at Tillster, says, “The restaurant industry is becoming an increasingly competitive space, and technology will be a key component for operators to maximize profitability, increase average check, and increase market share in 2024. There is a need for modern and easy-to-use technology and different ordering channels that entice customers to keep coming back. In 2023, we saw brands innovate in several areas such as AI voice ordering, drive-thru pick up, mobile and app-based ordering, and loyalty programs, which will only accelerate in 2024.” Such innovations help restaurants become more efficient and deal with labor shortages.
Increase Operational Efficiency
Izadpanah expects brands will be “highly focused on creating operational efficiencies in both the dining room and kitchen to be able to keep up with the demands driving the sophistication of the industry.”
Jayaraman holds that investments in technology will be crucial to improving operational efficiency in the restaurant industry. Especially with states expected to raise the minimum wage. He says, “Operators can increase digital ordering channels or implement solutions for improving operational efficiencies like speed of service, accuracy, reduced food waste, and improved drive-through efficiency.”
Izadpanah predicts labor challenges will be offset with strategic ordering channels and practices. “We’ve seen brands like Shake Shack and Burger King leaning heavily into kiosks, and other brands exploring scheduling sales by channel (e.g., limiting to a certain sales revenue by channel) to overcome labor challenges and keep up with orders,” he notes. He adds, “Kiosks and more strategic ordering operations will be a help to operators looking to maximize their staff on hand and offset the costs of hiring more than needed.” Jayaraman agrees, “Technological investments allow for existing staff members to focus on other in-store operations such as cooking, serving and providing exceptional customer service,” he says.
Where are Restaurants Focusing their IT Investments in 2024?
Industry thought leaders see promise for restaurants that adopt drive-through kiosks, AI, customer relationship management (CRM) tools, and more to control costs and enhance customer satisfaction. A few strategic areas stand out.
“The drive-through will be a key area for operators this year and we can expect to see increased AI voice ordering technologies and multi-lane drive-through technologies to improve efficiency,” Jayaraman says.
CX and CRM
Jayaraman also believes customer experience (CX) is a crucial element. “Improving CRM to get a 360-degree view of the customer will be another priority for restaurants this year as consumers increasingly crave personalization. Restaurants will be focused on increasing and improving customer analytics to help unlock actionable data gathered across a variety of ordering platforms,” he says.
Izadpanah agrees focusing on quality customer data is important. “Data is everything,” he states, “and in 2024, we’ll see brands getting more intentional about data quality. In order to set the stage for a data-driven future in the restaurant landscape, for example, a future where AI unlocks true value, AI models need to be fed with accurate and quality data. With this in mind, I’m seeing brands invest in centralizing and unifying customer data.”
Izadpanah stresses the importance of another facet of customer experience. “One of the most prominent trends emerging is consumers’ expectation of interconnectivity in their dining experiences,” he says, especially among younger diners. “A customer wants to be able to order a pizza on their laptop, track the status on their way to the restaurant and use their mobile wallets to pay inside the store.” Izadpanah predicts, “We can expect to see brands invest in solutions, partnerships and integrations that allow for a seamless level of interconnectivity between devices throughout the ordering cycle in the year ahead.”
“Looking at dine-in priorities for 2024,” Jayaraman says, “restaurants will be looking to streamline all areas of the restaurant experience. Kiosk use will increase to reduce manual labor along with digital kitchen display systems and augmented food assembly improvement technologies aimed at increasing in-store operational efficiencies.”
Proactive Restaurants Will Deploy Tech
Harnessing technology to improve operational efficiency, buffer against staffing shortages, and enhance customer experiences will pay off for restaurants who want to be proactive in preparing for whatever the future holds. ISVs can help them manage their challenges by recommending and implementing solutions to boost revenue as well as customer loyalty. The ISV that does that will create strong ties with restaurants.