The Restaurant of the Future Is Open. Will Diners Bite?

The restaurant industry’s digital transformation is one of the pandemic’s success stories. Eateries whose very existence was imperiled by mandatory closures adapted overnight with dramatic digital makeovers to sustain themselves through the worst of the crisis. Now many are celebrating a stunning comeback, with recent data showing consumer interest and new business openings in restaurants up 3% and 10%, respectively, in 2023 — and interest in fine-dining experiences, in particular, surpassing pre-pandemic levels. These figures are especially impressive considering that other categories of discretionary spending — such as shopping, beauty and travel — were slightly down year over year.

Since the pandemic’s disruption, moreover, the digital shift itself has evolved from a stopgap measure for survival into a proven recipe for restaurant efficiency and customer convenience. Faced with continued staffing shortages and persistent inflation driving up costs, restaurants are inventing themselves anew with ever-increasing levels of technological sophistication, including automation and robotics. These innovations promise to produce a winning cocktail of both cost-containment and personalization — but will consumers buy what’s on the menu of the future?

• Restaurantgoers Return With an Appetite for Value
  
• Technology Fuels Restaurant Reimagining
  
• Now Serving: Automation
  
• Personalization Will Head the Menu of the Future
  

Restaurantgoers Return With an Appetite for Value

More than half of consumers are dining in restaurants as much or more often than before the pandemic’s onset, but they have acquired a new taste for savings. As inflation continues to pump up prices, delivering on this expectation may be a tall order.

As restaurant dining returns to pre-pandemic levels, consumers are craving value.

The latest figures on consumer dining offer ample cause to celebrate. In the face of worries that restaurant dining might never recover from the pandemic, a recent Deloitte survey shows that more than half of consumers — 55% — reported having dined in restaurants in early 2023 as much or more often than before the pandemic’s onset. Even more strikingly, more than two-thirds of consumers ordered food for takeout or delivery as much or more often during that time than before the upheaval.

These findings represent a welcome victory for the industry, which was among those hardest hit by the pandemic. Still, the results do not signal a wholesale return to business as usual. Inflation has left its mark, with consumers specifying one new caveat: 37% of dine-in guests and 40% of takeout customers want less-expensive dining options, as well as promotions and discounts, wherever they go. With food and labor costs continuing to soar, delivering on this expectation may be a tall order for most restaurants to fill.

Inflation and labor challenges still threaten restaurants’ bottom lines.

Consumers are not alone in their cost sensitivity. According to a new survey from TD Bank, inflation is restaurants’ leading concern as well. Labor quality and availability are also keen pain points, with 69% of restaurant owners saying employment challenges have worsened in the current macroeconomic environment. Such factors are compressing profit margins, and the National Restaurant Association predicts that increases in menu prices will continue to be the primary driver of sales growth in 2023, as in the previous two years.

With consumers hungry for bargains, however, cost-cutting will be imperative for restaurants to stay ahead of the competition. Restaurants already made one digital shift to survive the pandemic, but the survey finds many operators now looking to technology to streamline costs and operations. Encouraged by the cost-saving potential, 41% of restaurant franchise operators say they plan to invest in total in-store reimagining, remodeling or digital and delivery systems.

Technology Fuels Restaurant Reimagining

Restaurants are banking on technology to help overcome financial barriers to growth, but as they reinvent themselves to adapt to rapidly shifting market signals, getting the balance just right for consumers will be no mean feat.

Restaurant operators are looking to implement new technologies in the following areas to power their growth:

Restaurants are seeking to expand growth through technology.

With operational challenges approaching an all-time high, restaurants are banking on technology as a key ingredient for overcoming barriers to growth. A study conducted from May to July 2023 reveals that 96% of restaurant decision-makers are planning to expand operations over the next 12 to 18 months, with technology serving as the lynchpin for these plans.

More than half to two-thirds of restaurant operators are looking to implement or update back-of-house restaurant technologies, such as business intelligence, inventory management and labor scheduling solutions. Some of these include digital menus that offer retailers control over their inventory, allowing them to adjust pricing, mark items as out of stock or add new products all from a single platform — thus empowering them to respond nimbly to local market conditions and changes. One estimate predicts that these operational improvements could boost sales by an average of 22%.

Bold new store concepts are driving explosive growth in the QSR arena.

Quick-service restaurant (QSR) Taco Bell is perhaps the reigning example of success powered by digital innovation. Leveraging an arsenal of digital touch points and strategic operational initiatives, the Mexican-inspired fast-food chain set out to grow sales by streamlining operations while also enhancing the customer experience. Its Go Mobile concept store, established in 2021, trades indoor dining space for grab-and-go shelves and features a dedicated parking area for mobile orders and pickup. The results speak for themselves: The chain logged a growth rate of almost 35% year over year in its digital channel, opening 63 new stores globally and seeing a 4% jump in same-store sales in Q2 2023 alone. Burger chain Wendy’s recently announced its introduction of a similar digital-first concept store, Wendy’s Global Next Gen.

Increasing digital sales assure that technology-enabled innovation will stay at the forefront of restaurants’ growth strategies — and some eateries are taking reimagining up a notch into fully automated dining operations. Restaurant customers, however, appear torn between the desire for convenience and cost savings on one hand and a longing to return to a former sense of normalcy on the other. As restaurants adapt to rapidly shifting and sometimes fickle market signals, it is becoming clear that getting the balance just right for consumers will not be easy.

Now Serving: Automation

Automation and robotics in restaurants are here, promising enormous cost-containment and profitability potential — but are consumers ready for the future shock of robot-run restaurants?

Automation is powering restaurants’ growth — but consumers have concerns.

With labor costs a major barrier to growth, restaurants are looking more and more not simply to reduce but also to eliminate the need for extensive human labor. Major QSR chains, including Chipotle, Domino’s, Starbucks, Sweetgreen and White Castle, are employing technologies such as robotic grills, faster blenders and drone delivery to automate operations, cut labor costs and beef up revenues. QSRs anticipate that 51% of tasks will be automated by 2025, while full-service restaurants expect to automate 27% of tasks.

This automated future is unfolding at a rapid pace in Europe — and rising to new heights. Dutch startup Eatch recently launched a fully automated robotic kitchen with the capacity to crank out 5,000 meals per day — and the potential to go as high as 15,000 daily. Robots carry out the entire meal-production process, from cooking to plating to pot cleaning. Eatch has been operating out of Amsterdam for four months, providing meals to catering behemoth ISS, but discussions with U.S. grocery chains and contract caterers are underway. Restaurants will need to look before they leap into the deep end of automation, however, as consumers’ perspective on the trend is quite different.

By definition, automation depersonalizes dining.

Even as consumers have shifted their dining behaviors toward digital and are watching their wallets, many are beginning to push back on higher levels of automation. Yelp research shows diners’ increasing demand for last-minute nights out as well as fine-dining experiences, despite Deloitte confirming a desire for cheaper eats no matter where they go. In addition, bad service has become a chronic complaint, with an overwhelming 82% of consumers, fed up with poorly staffed venues, saying restaurants need to do a better job of managing labor challenges.

However, PYMNTS Intelligence research from June finds that while consumers are curious about robotic or automated food preparation, the overwhelming majority — 65% — are not at all or only slightly interested in partaking of the trend. More than 8 in 10 consumers believe that food prepared by robo-chefs would be of lower quality and less personalized than food prepared with a human touch. Similarly, 74% were concerned that automation would mean human workers losing their livelihoods. Consumers are also skeptical of automation’s ability to reduce costs, observing that technology will not come free of charge.

Technology and personalization are not either/or.

Of the minority of consumers who are interested in virtual kitchens, more than 30% base that interest on the potential to personalize their dishes — perhaps out of hesitancy to ask a human server or chef to accommodate their tastes. It is in this ability to customize orders that more automation could find its niche as consumers remain leery of its use in restaurants.

Profitability is not simply a matter of cutting costs. With 92% of consumers in a recent survey saying they expect some sort of personalization from restaurants, leveraging technology that delivers not only efficiency but also tailored experiences is a win-win for restaurants. Restaurant technology platform Olo, for example, recently told PYMNTS that it is realizing its vision of a future in which restaurants feature fully personalized dining experiences. These experiences include drive-thrus that recognize diners and modify menus based on their ordering histories, as well as dine-in restaurants that remember guests’ cuisine and table preferences, allowing them to skip the wait for the check with the help of saved payment credentials. The company also offers a payment solution that boasts the ability to reduce fraud and boost payment authorizations while offering customers one-click checkout using only their phone numbers.

Technology platforms such as these and others can help restaurants achieve better performance metrics while increasing customer engagement and loyalty.

Personalization Will Head the Menu of the Future

To meet the consumer demand for better value and service amid economic uncertainty, restaurants should avail themselves of all the technology that creates efficiency without dehumanizing the dining experience. Certainly, innovations and tools that streamline payments, inventory and labor scheduling are boons for restaurants both to reduce wasteful operations and to plump profit margins. Analytical tools that permit the tailoring of targeted promotions and offerings through the capture of rich data are also especially important to implement. Restaurants should tread carefully, however, when it comes to automating human work that contributes to the subjective qualities and ambience of dining experiences, especially in full-service operations.

The following restaurant technology innovations are essentials:

• Restaurant management or point-of-sale (POS) software: Offers a central repository for managing all operations, including inventory and labor.
• Employee scheduling software: Automates weekly schedules and allows employees to submit time-off slips via a mobile app while also providing messaging from managers about open shifts.
• An integrated accounting program: Reconciles real-time data from POS systems, payroll and bank accounts and allows managers to set up recurring reports to track business metrics easily.
• Customer loyalty software: Not only rewards customers but also tracks guest information to help restaurants stay connected, segment audiences and share targeted promotions.

In a rapidly changing world, dining offers more than physical sustenance: It is ultimately an expression of human connection and love. The smart use of technology will ensure that restaurants continue to deliver “comfort food” to their customers — in every sense of the term.

In the next decade, we believe that restaurant brands will drive fast-paced growth by owning the experience in new ways. Brands that create true omnichannel experiences for their guests and staff using digital tech that drives efficiency AND enables brands to deliver truly personalized guest experiences at every interaction with the guest will win in the market. Advances in digital and automation technology can help liberate restaurant staff from manual tasks, which not only makes their jobs easier and more enjoyable but also gives them more quality time to interact with guests. Those same advances in tech also enable brands to drive more personalization into all points of service by uncovering critical insights on guest behavior and using those insights to surprise and delight their guests and drive a better overall experience.”