Big Data Becomes a Competitive Advantage in the Restaurant Industry

December 11, 2017
Restaurant chains have a reputation for being laggards when it comes to technology. But this mindset is shifting: today’s industry leaders see technology and Big Data as a way to gain competitive advantage at a time when the restaurant industry faces many challenges. That was a resounding message at this year’s Canadian Restaurant Investment Summit (CRIS) held at the Hilton Toronto Hotel. Here are some key takeaways from the plenary sessions and panel discussions.

Tabletop Devices, Self-Ordering Kiosks and Mobile Apps

While most agree that technology in general is a competitive advantage, opinions are quite varied when it comes to the different types of devices and applications. The jury is still out on whether tabletop devices are improving the customer experience or making it less personal.

John M Hamburger, President of Franchise Times, explained that both Chilli’s and Applebee’s have implemented tabletop devices where customers can order, pay and provide a review of their experience. But during a visit he noticed that the check out system defaults to a 20% tip. So customers are still encouraged to give a high tip even though servers are spending less time with them. He called this the Tipping Tariff and his prediction is that price-sensitive customers who recognize this disadvantage will switch to fast casual (FC) and quick service restaurants (QSRs) where tipping is optional or not required.

Restaurant Tabletop Ordering and POS Device

On the other hand, pizza restaurant chains have seen tremendous value and a high customer adoption rate in using digital/mobile apps for order and delivery. According to the NPD Group, 60% of customers are open to using mobile apps at QSRs and full-service restaurants (FSRs).

Taco Bell tested a self-ordering kiosk and the results exceeded their expectations: the average check size increased upwards of 10%. What they realized is that customers were using more add-on options such as extra guacamole simply because these are more apparent on the self-ordering kiosks. This is a great example of how technology can simultaneously improve the customer experience and increase sales without necessarily attracting new visitors.

Canadian Economy and Capital Market

In a survey of restaurant chain executives, operating costs were indicated as the top challenge facing the industry in 2015, followed by costs of goods and labour costs. The oil and gas downturn, weak Canadian dollar and high household debt all raised concerns for the food-service industry. Besides affecting disposable income, a weak Canadian dollar discourages Americans from traveling to Canada. At the same time margins are shrinking due to increasing commodity, labour, and input costs.

Regardless of these challenges, there are still reasons to be optimistic about the Canadian restaurant industry. For one, investor interest in the industry is high, resulting in a positive lending environment. Michael Glen, VP Equity Research at Laurentian Bank Securities, noted that one of the trends that really stood out in 2014 was an acceleration of same-store sales growth (SSSG). Among QSRs in Canada, A&W had the highest quarterly SSSG, followed by Tim Hortons.

Big Data Driving Restaurant Decisions

At the Big Data panel, Lisa Deletroz (Regional Marketing Director for Wendy’s Restaurants of Canada) and Steve Silverstone (Executive Vice President of Marketing for Boston Pizza) were asked how they are leveraging data to drive business results.

Restaurant decisions are often taken on gut feelings or past experiences. But there’s a cultural shift in the industry to be more data-driven right across the board: choosing new store locations, making better hiring decisions, supporting franchisees, and improving internal fraud investigations just to name a few applications.

This shift is clear to Silverstone when he looks back at just a few years ago when he used to get monthly sales reports. Today his team is working with daily reports.

Deletroz explained that what they look for in the data are trends that indicate areas of the business that need to change.

As discussed during the panel, the danger for any company leveraging big data is ending up with clutter. “The challenge is knowing what is the right amount of information to send your field team that will help them instead of overwhelming them” said Deletroz.

Silverstone added: “For us it’s taking all the information that’s available from all different sources and making it small to get big insights. It’s about defining the questions that we have and using the data available to answer those questions.”

The key is to look at existing data systems and ask: how can I access and make better use of the information I’m already collecting?

For instance, restaurant chains spend millions of dollars installing surveillance cameras but these data systems are essentially dormant because there’s too much video surveillance footage for anyone to manually review.

At Solink, this is the challenge that drives us. We asked ourselves how can we filter through thousands of hours of surveillance video to find the important events and trends. After working closely with restaurant franchise owners, we developed a Restaurant Loss Prevention software that allows owners and operators to detect outliers, trends and suspicious activities across their operations.

In an industry that is characterized by small margins, high operating costs and fierce competition, the market leaders will be the first ones that capitalize on these emerging technological trends.

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