insight enabled innovation - agilysys...maintaining existing systems building & scaling new...

Insight Enabled InnovationA N N U A L R E S E A R C H I N C LU D E S :• INTRODUCTION PG 3

• BUDGETS & BUSINESS DRIVERS: IT Spending Narrows

as Restaurants Prep Hyper-Focus on Digital & Data PG 4

• TECHNOLOGY STRATEGY: Data Rich Strategies Bolster

Digital Engagement PG 10

• EIQ INSIGHTS: Bucking the Store Obituary Trend PG 16

• TECHNOLOGY INVESTMENTS: Executing on Guest

Expectations Drives Innovation PG 18

• FIFTEENTH ANNUAL •• 2 0 1 8 • T W E N T I E T H A N N U A L •

Insight Enabled InnovationRESTAURANTS PUT HYPER-FOCUS ON DATA AND DIGITAL

RestaruantStudy2018.indd 1 2/26/18 10:24 AM

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INTRODUCTION 2 0 1 8 R E S T A U R A N T T E C H N O L O G Y S T U D Y

Insight Enabled Innovation Restaurants put hyper-focus on data and digital initiatives to empower guests and drive business

The future may be digital, but data will be the key to help companies survive and thrive in an analytics hungry world. Restaurants have become increasingly digital and data-driven over the course of the last several years. Brands are focusing more than ever on improving engagement and realizing that bolstering analytics capabilities will be an integral part of developing strategies that positively impact service and operations.

This emerged as a central theme in the findings from the 2018 Restaurant Technology Study. After a period of feeling constricted by maintaining legacy systems, brands are gear-ing up for a surge in IT spending and big data — or more accurately big answers — will be core to technology investments.

As restaurants position data as a corporate asset, analytics will be viewed on par with major investments such as human capital and other equipment necessary to run the daily business and position it for success. To be effective and leverage analytics to drive business, restaurants will need to manage data with similar procedures as they would with other assets.

Ways restaurants will go about doing this are taking shape in how they are structuring overall IT investments. From budgets to strategy to investment, restaurants are placing im-portance on data, analytics and forecasting. As restaurants set out to build an insight-rich infrastructure, they will need to identify goals and work towards having a holistic view of data to generate value for the company. 3 Keys to Keeping Data a High-Value Corporate Asset

1. Inventory Your Data: Know what data is available and maintain that in order to utilize it appropriately 2. Build a Data Distribution Chain of Command: Acting upon data will be the differentiator. Passive reporting and analysis is only part of the battle. Enable a data distribution chain that ensures data is getting into the hands of the appropriate people to take action.3. Nurture the Data EcoSystem: Have integrated systems in place that will ensure data remains uncorrupted and accurate. Maintaining the quality of data will ensure the value of the asset.

About the 2018 StudyNow in its 20th year, the Restaurant Technology Study is published by Hospitality Technol-ogy magazine and is evaluated with support from EIQ Research. The 2018 report offers a representative sample of the overall marketplace with a diversity of dining segments and revenue factors represented. This year’s survey was sent via email to opt-in subscribers of Hospitality Technology magazine in late 2017. The largest pool of respondents include both fast casual and QSRs (89%). Family casual makes up 10% of respondents and 1% was from fine dining. Overall respondents represent IT decision makers for 26,591 units. Most respondents are from regional operations (53%), while about a quarter (26%) are national brands and 21% are global. Slightly more than half (53%) are non-franchised restaurant operators, 29% are franchisors of a single brand, 15% are franchisors of multiple brands and 4% are franchisee restaurant operators. Annual revenues are broken down as follows: 49% of respondents bring in less than $50 million annually; 16% fall between $50 million to $99 million; 24% made $100 million to $499 million; and 11% claim to make more than $500 million.

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IT Spending Narrows as Restaurants Prep Hyper-Focus on Digital & DataTech budgets poised to rise after historically heavy effort on maintaining systems

2 0 1 8 R E S T A U R A N T T E C H N O L O G Y S T U D Y

BUDGETS & BUSINESS DRIVERS

Following the money in restaurant technology in 2017 paints a picture of an industry on the verge of a spend-ing shift. IT budgets fell short from projections, coming in at only 2% of revenue, down from 2.6% in 2016. De-spite predictions of increased technology investments, 2017 revealed itself as a year marked by less spending on technology. Restaurants, already starting to make the shift to a digital and data-driven paradigm, spent a cycle hunkering down, maintaining legacy systems, an indicator that a tide of investment is swelling.

Looking ahead to 2018, operators are earmark-ing dollars for IT and more specifically investments in mobile and digital customer management. Jockeying for attention will be back-office systems that will in-creasingly be looked to as data centers, with analytics impacting every area of operations from guest expe-riences to marketing, operations and even employee engagement and productivity.

This chapter provides a comprehensive look at the scope of restaurant technology budgets, from the good (increased budgets for 2018) to the not-so-good (lower than expected IT dollars in 2017) and a vari-ety of areas in between. Beyond tracking restaurant investments, we benchmark budgets and business drivers against two specific groups: leaders in digital engagement and data.

Analyzing Innovation: What Data & Digital Leaders Do DifferentlyIn previous years’ reports, tracking the behavior of a self-proclaimed group of technology innovators — companies that believe they lead competitors in techno-logical innovation — has proven helpful to paint a picture of what technology leaders do differently. This year, a competitive analysis rated operators against their rivals in terms of digital customer engagement and data prow-ess, as two areas restaurants prioritize as top strategic goals for technology.

Monitoring these subsets of leaders to identify top challenges, areas for investment and how IT spending is allocated, is a valuable predictor of where restau-rants must focus in the year ahead to remain com-petitive in an increasingly challenging environment.

Survey takers were asked to compare companies as better than, at par with, or lagging behind competi-tors in three areas: technological advancement, use of data/analytics and digital customer engagement. Comparing confidence levels to 2017, restaurants put themselves farther ahead. The greatest leap in assur-ance was seen in technological advancement, with 35% of restaurants claiming to be better than com-petitors compared to 23% in 2017.

With restaurants across segments hyper-focused


C H A P T E R O N E

Restaurants are least confident in how their customer engagement strategies stack up in an increasingly competitive and digital-first world.

Use of Data/Analytics:

Digital Customer Engagement:

Technological Advancement:

36% 23%

40%

24% 35%

42%

35% 26%

39%

43% 17%

39%

39%18%

43%

43% 12%

45%

2018

2017

2018

2017

2018

2017

COMPETITIVE ANALYSIS: MATRIX OF INNOVATION

Better than competitors On par with competitors Lagging behind competitors

Better than competitors On par with competitors Lagging behind competitors 2017

2018


Maintaining Existing Systems

Building & Scaling New Systems

R&D and Innovation



on digital customer engagement, analytics will play a vital role in providing the insight necessary to em-power meaningful experiences. About a quarter (26%) of restaurants feel confident in their use of data and analytics, and 39% consider themselves on par, but 35% say they have improvements to make.

As restaurants’ confidence in overall technological advancement grows, we see restaurants becoming less sure of claiming a leadership stake in digital cus-tomer engagement. As competition heats up in this area, the stakes have been raised, and 39% feel that they lag competitors. Only 18% feel they are better than the competition.

Breaking Down Tech Budget BenchmarksRestaurant technology budgets took a hit in 2017. Despite anticipated growth, overall IT spending as a percentage of revenue dipped to 2%. Restaurants ex-ercised great caution with budgets in 2017 as a larger percentage of operators fell into the modest spend-ing range of less than 1% of overall revenue going to IT. Modest spenders rose from 17% to 29% and fewer operators identified as heavy spenders with only 7% in 2017 compared to 18% in 2016. The midrange of in-vestors remained steady with 65%.

The good news is that restaurants seem to be gearing up for a phase of investment — and IT is poised to benefit. About half of operators (47%) claim they will increase technology budgets and only 7% plan to decrease spending. When examining how leaders in data, digital and overall technology plan to invest, we see even greater planned growth, with 56% of data leaders and 54% of technology innova-tors looking to increase budgets.


Leaders in digital customer engagement outpace technology innovators in research & development.

IT BUDGETS AS A PERCENTAGE OF ANNUAL REVENUE

2017 TECH BUDGET DISTRIBUTION

29% invest less than

.99% of revenue on IT

15% invest between 2% and

2.99% of revenue on IT

12% invest between 3%

and 3.99% of revenue on IT

3% invest between 4% and 4.99% of revenue on IT

38% invest between

1 and 1.99% of revenue on IT

6% invest greater than 6% of revenue on IT

2% invest between 5% and 5.99% of revenue on IT

CHARTING CHANGES IN IT SPENDING: LOOKING AHEAD TO 2018

24%

66% 69%

32%

18%

Data Leaders Digital Leaders

10%

47%Increase

46%No change

7%Decrease

56% of data leaders will increase IT budgets

63% of data dawdlers and 56%of digital engagement stragglerswill increase tech spending

TODAY’S LAGGARDS, TOMORROW’S LEADERSRestaurants that feel they are falling behind are preparing to increase IT spending.

63%

56% of data leaders will increase IT budgets

29%

65%

7%

AVERAGE RESTAURANT

IT BUDGET

2% OF REVENUE

MIDRANGE

MODEST

HEAVY


A D V E R T I S E M E N T

A Nimble POS Empowers Staff & Management to Offer Guests a Better Dining Experience

Allowing the guest to order where, when and how they want is key to improving digital customer engagement. What can restaurants do to create a nimble infrastructure at the POS to empower guests in this way? HINOJOSA: A nimble infrastructure for restaurants

entails a POS platform that enables the guest to create their own experience. Mobile-optimized, web technology is key. A web-enabled menu will go a long way to increase guest engagement. For example, it could allow them to, upon arrival, place an order for their favorite glass of wine and have it in their hand shortly after being seated. Plus, staff can use the POS to offer a more personalized experience with guest data: food preferences, allergies, etc. Restaurants should allow the guest to make the experience their own and not require a proprietary app to be downloaded before gaining guest engagement.

How can restaurants leverage technology to avoid data paralysis and take appropriate action based on available intelligence? HINOJOSA: To limit the potential for data paralysis, restaurant operators can approach their business analysis with two distinct, parallel paths, and focus on just a couple key metrics for each: Guest and Business Analytics.

Guests Analytics focuses on initiatives that drive guest retention, new recruitment, better marketing offers, enhanced service, and as a result, a more personalized experience for the individual guest. Business Analytics should drive more efficient and profitable operations. For example, data that reveals theft activity should be easy to pull from the POS. These analytics give you a good idea of where to focus loss prevention efforts.

Systems integration is a top challenge for restaurants. What are some key things operators should look for in technology partners to ensure that solutions work together in a seamless, highly effective way? HINOJOSA: The primary characteristic of a good technology partner is the willingness to have an open mind about evolving industry needs and trends. The partner must: 1) Be forward-thinking: Paying attention to what’s taking place in the market and having the resources to respond in a way that anticipates, and even solves potential trends or challenges; and 2) Have open integrations: Their platform should support other technology leaders in their respective disciplines. Providing architecture that supports open integrations using modern technology is a must.

Just as customer demographics have changed, so has the workforce. In what ways should technology be leveraged to empower a smarter workforce and management?HINOJOSA: Provide staff with technology that is easy-to-use and allows them to be empowered as well as educated about their guests. This often equates to something that functions similarly to what they’re used to with personal devices. Staff empowerment is important. Ideally, they can access important allergen information right from the menu on a tablet, for example; or suggest cocktails or wine parings when the guest selects a particular appetizer or entrée. For managers, they must stay on top their KPIs in real-time, that’s where push notifications help them run their businesses better. For example, whenever a given server hasn’t produced an order with appetizers or other upsells, managers can receive a notification and resolve the situation in real-time, making a positive difference to the day’s revenue.

MIKE HINOJOSASR. DIRECTOR OF PRODUCT MANAGEMENT, AGILYSYS, INC.

E X E C U T I V E Q & A

W W W. A G I LY S I S . C O M

15.RestStudyht0318_Agilysis.indd 27 2/26/18 10:18 AM

Front-of-House Software

Corporate/Enterprise Software

Back-of-House Software

CRM/Loyalty, Digital & Mobility

22%

15%

30%32%



More importantly however, laggards in these areas are going to be bullish about increasing tech spending, likely in a bid to play catchup. Of those that identified as data laggards, 63% plan to increase technology budgets and 56% of digital engagement laggards are going to loosen the IT purse strings.

IT Budget Tracker: Focus on Systems MaintenanceIf there was a question as to why restaurants might not have felt particularly innovative in 2017, the an-swer could be the fact that 66% of IT budgets — already diminished from the year prior — went to maintaining existing systems. Systems maintenance has histori-cally taken the largest chunk of technology budgets — 58% in 2016, 60% in 2015. Couple this with the fact that being held back by legacy systems was named as restaurants’ top challenge (more on this in chapter two) and with tightened tech budgets, there’s an over-all sense that operators were in “heads down” mode likely preceding a swing upward in tech investments.

Technology innovators, unsurprisingly, put more into R&D than the average (14%), but laggards funnel even more into maintaining systems (74%) and the same is true for digital engagement laggards (73%).

Restaurants that classified themselves as lead-

ers in data and analytics are slightly more fluid with funds for developing technology. Data leaders, slightly more focused on systems maintenance than the average, still manage to put 22% of IT budgets into building and scaling new systems, but put less than the average 8% into R&D.

The real investment in innovation is seen with the self-professed digital customer engagement leaders. This group puts the largest amount into building new systems (32%) and research and development (18%).

Revenue to R&D: Allocating Funds to TechWith only 2% of overall revenue going to tech bud-gets in 2017, restaurants couldn’t afford to look at al-location lightly. Systems maintenance was a pressing concern and similarly a portion of tech dollars needs to go to the basics as it were – keeping the lights on. In 2017, front-of-house software pulled ahead of corpo-rate software, which had held the top spot for the last two years. While CRM software (inclusive of digital and mobility components) still gets the least, it is tell-ing that front-of-house got a larger share of budget dollars as restaurants focus on improving the guest experience.

Breaking down allocations by competitive anal-ysis of data and digital leaders, we see that digital leaders aren’t leading by mistake — they invested more in CRM and loyalty software giving it equal im-portance with front-of-house software.

Data leaders prioritized corporate/enterprise soft-ware. As insights from systems across the enterprise are more important, having robust systems to funnel data from is a priority. Data leaders also put more budget into back-of-house software (26%).

Digital innovators have made investments in CRM, but half will look to increase spending here, to keep the pressure on competitors. Data innovators will also make their play to close the gap in digital initiatives with 72% increasing spending on CRM, mobility and loyalty. Having made the investment in systems to bolster analytics in 2017, these insight leaders will hack away at budgets in 2018 to focus on the digital side. Beware the innovators in data and digital — they will rule the world. HT


Front-of-House Software Corporate/Enterprise Software

Back-of-House Software CRM/Loyalty, Digital & Mobility

43%

9%

39%

10%

45%

9%

58%

3%6%5% 6% 5%

PROJECTED IT SOFTWARE BUDGET CHANGE FOR 2018

Plan to Increase Plan to Decrease Expected 2018 Growth

BREAKDOWN OF SOFTWARE BUDGET ALLOCATIONS

2017

33%

26%

31%

26%


Digital and data laggards put more budget into the front-of-house than the average.

Digital Laggards: 35% Data Laggards: 37%


4%4%

Data Rich Strategies Bolster Digital Engagement Customer-centric focus requires strong analytics coupled with appropriate technology


TECHNOLOGY STRATEGY

What comes first: the digital or the data? No, it’s not a chicken or egg riddle, but the two areas are once again jockeying for top position among strategic goals for technology. Data naysayers are a diminishing breed as businesses recognize that effective analytics will lead to insights that drive engagement.

To be truly future-ready, restaurants must adapt to a data-driven — or even data first — mentality in or-der to better understand guests, integrate digital ser-vice and drive personalized engagement. Those that do not will falter as their more tech nimble competitors enjoy the increased revenue and loyalty that comes from creating targeted and personalized experiences.

The second piece of the restaurant of the future remains digital engagement. It would be a mistake to say this is merely a generational issue. While the size of the Millennial and Centennial generations is a valid consideration, as digital giants like Amazon and Google infiltrate every corner of service, consumers across age groups expect that ordering food should be a seamless and easy experience.

No restaurant segment or brand is immune to needing to focus on enhancing the customer “expe-rience of the future.” McDonald’s CFO, Kevin Ozan highlighted this as a strategic financial focus during a Q4 2017 earnings call, revealing that the QSR plans to spend approximately two-thirds of its capital in 2018 on further accelerating this guest experience.

“We have realized that we are going to need to continue to invest in technology and digital in order to keep up with where the world is going and our custom-ers’ expectations,” he noted.

Efficiency has taken a back seat to driving digi-tal engagement over the last two years. Restaurants continue to place top priority to improving in this area with 53% of operators naming it a top strategic goal for technology. In 2017 improving digital customer engagement dominated the list of priorities with a sizeable lead. This year, the gap between objectives diminished a bit indicating that while still a top focus, restaurants have been putting attention in the area and are ready to examine a broader landscape of tech

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C H A P T E R T W O

TACTICAL TECHNOLOGY OBJECTIVES FOR 2018

Objectives on the rise: Delivery and increasing employee

productivity saw the largest leaps

in priority from 2017.


40%

33%

20%

17%

14%

9%

9%

53%37%

69%

41% 63%46%

30% 37%

26% 39%

Improving digital customer engagement/loyalty

Improving customer analytics

Increase employee productivity

Enhance payment/data security

Support new business models/revenue generating ops

Enable seamless orders/commerce across channels

Reduce cost of managing technology

Partner with third party delivery services

Keep up with franchise expectation

Keep up with competition

Migrate solutions to cloud

Enhance bandwidth


42%

28%


TECHNOLOGY STRATEGY

goals once again. Focusing on improving use of cus-tomer insights, will be chief among these.

While last year was the first time in 10 years that improving efficiency wasn’t the top technology goal, it saw a resurgence in 2018 with 40% of operators identi-fying it as their number one focus, up from 27% in 2017. Delivery similarly saw a sizeable jump as partnering with third party delivery services went from 9% to 17%.

Delivery will become more prevalent as more res-taurants look for appropriate avenues to enable the ser-vice. Hardly a one-size-fits-all solution, when it comes to delivery, restaurants must consider impact on opera-tions, plus what makes the most sense for the brand.

Examining what leaders in digital and data are doing differently, alignment to top challenges emerge. Data leaders are naturally more focused on improving customer analytics (63%), however, they also are more focused on technology that supports new business models and revenue-generating operations (37%). This makes sense when considering that data leaders are more likely than the average to be frustrated by measuring for ROI (44%).

Digital leaders prioritize enabling seamless orders across all channels (39%) and feel more frustrated at

not being able to deliver technology projects faster and not having skilled IT staff in house (42%).

Chipotle will focus on improving the guest experi-ence in 2018 with innovation in digital technology, in particular mobile and online ordering, as the com-pany’s digital sales have continued to be the fastest growing part of its business. The brand’s digital sales mix was 8.6% of sales on average. The growth led by mobile ordering is up 50% over last year.

The wave of restaurants struggling to measure for ROI ebbed in 2018, with operators feeling more held back by legacy systems. Difficulty assessing ROI still makes the top five challenges, but was eclipsed by lack of IT budget (33%) and effort required for systems integration (33%). This indicates that restaurants have started to solve for ROI, or at the very least, have been able to position tech that is perhaps not directly tied to a revenue stream as a worthwhile investment.

Seeing legacy systems maintenance bubbling up as the number one concern, is an indicator that restau-rants will be launching into a period of spending. With that also might come an uptick in restaurants feeling constrained by systems integration (33%), already a top three challenge. Restaurants and their technology


IT EXECS IDENTIFY TOP GLITCHES FACING TECHNOLOGY TEAMS

Held back by legacy systems (hardware, software)

Lack of sufficient IT budget

Effort required for systems integration

Difficult to measure ROI for technology

Lack of skilled IT resources in-house

Resistance to change in the organization

Delivering technology projects faster

Resistance from franchisees

Scaling innovation chain-wide

Guests expect greater tech than we can keep pace w/

Building a culture of innovation

Company philosophy doesn’t embrace tech innovation

Poor IT-business alignment

TODAY’S LAGGARDS,

TOMORROW’S LEADERS

Data Laggards’ Top Challenges

1. Maintaining legacy systems 38%

2. Insufficient budgets 38%

3. Resistance to change in the organization 38%

Digital Laggards’ Top Challenges

1. Maintaining legacy systems 44%

2. Insufficient budgets 44%

3. Effort required for systems integration 41%

45%

33%

33%

30%

28%

28%

27%

22%

15%

13%

10%

8%

5%

50%

44%

33%

17%

58%

42%

17%

17%

17%




TECHNOLOGY STRATEGY

partners will need to solve for this as we move into a period of greater investment and technology rollouts.

Larger restaurants (revenues greater than $50 mil-lion) are slightly less challenged by legacy systems than the average, with one out of four naming it a top challenge. However, there is greater pressure on these organizations to deliver on technology projects faster as 40% name it a top challenge.

Not surprisingly, restaurants that feel they are leading in data initiatives have already executed big data projects. Two out of five (41%) data leaders have already initiated a plan.

Looking at the bigger pool of respondents, 23% admit they don’t have any set plans surrounding the use of big data. This is an uneasy stance for brands as having a strategy to gain actionable insights will be vital to stay competitive. In chapter three of this report, we will look at where investments will be made and big data is among the top three initiatives on restaurants’ innovation agenda.

More important than “big data” is perhaps, “get-ting big answers.” Data is worthless if it doesn’t an-swer a question or help solve a problem. The specific areas restaurants are prioritizing for deeper insights, reveals where they need the greatest help. In 2018, res-taurants rank workforce management as a top area where better insight is needed. As labor costs continue to rise, data and insights will help restaurants not only manage and monitor scheduling but provide insight into what employees are doing well, where their tal-ents are best suited and even how store performance is linked to staff on duty at a given time or daypart.

Digital innovators will focus data mining and analysis on menu performance, pricing optimization, and guest check optimization. Data leaders are put-ting more emphasis on customer insights and social analytics. Having a holistic view of who guests are will be a major differentiator for brands. Bridging the gap between personal and social data to a customer pro-file will be the key to meaningful, personalized experi-ences that will inspire loyalty and frequency. HT


TOP 10 AREAS FOR DEEPER INSIGHTS IN 2018

29%

Staffing/labor management

Promotions effectiveness

Menu performance

Pricing optimization

Guest-check analysis

Customer insights (profiling/analysis)

Sales and service predictions/optimization

Social media analytics

Personalized promotions

Site selection

40%

46%

42%

24%

36%

33%

36%

21%

21%

21%

18%

30%

41%

29%

35%

29%

20%

Data Digital

TODAY’S LAGGARDS,

TOMORROW’S LEADERS

13% of data laggards have a two-year plan to

hire chief digital officers, data scientists and chief

insights officers while 9% plan to have chief expe-

rience officers on the payroll.

Digital laggards’ two-year plan includes 16%

bringing on chief digital officers and 12% filling

data scientist and chief insights officer roles.

STATUS OF EFFORTS WITH BIG DATA

Executing Project

Exploring via Pilots

Learning more

Not Considering

17%

6%

53%

23%

41%

12%

60%

20%

10%

80% of digital innovators are in some

stage of learning or piloting of big data projects in a bid to position themselves as both leaders in data and digital.




EIQ INSIGHT

The future of stores depends on retailers’ ability to understand both current and fu-ture customer expectations in stores. This not only requires deep learning of what cus-

tomers want to buy, but also how they would like to be treated by retailers during every stage of the buy-ing journey.

According to recent EIQ Research, for a majority of retail stores and restaurants, customer dissonance is-sues are endemic and run deeper than what appears on the surface. Currently, one in two retailers and res-taurants struggle with unique customer identification, behavioral insights and lack of predictability of cus-tomer traffic

Until recently, technology available to retailers to help identify and predict customer behavior was woe-fully under-equipped and came up short on several counts. This includes, but is not limited to: inaccurate or unreliable data, questionable store-level insights and lack of prescriptions or recommendations that could enable a timelier response to customer needs from store staff. Providing deeper, more accurate and time-lier customer intelligence and engagement models to store teams can go a long way in knowing and engag-ing with customers in the appropriate and desired way.

Smart Tech Empowers Customers & WorkforceThe introduction of cashierless checkout, overhead traffic counting cameras, advanced RFID and in-frared technologies, artificial intelligence, lift-up-a- product-and-learn, connected shelves and autono-mous digital wallet payments has meant that retailers finally have a few reliable options for delivering on customer-first store environments.

It is evident that the digital spectrum and access to personal devices has dramatically changed an aver-age customer’s in-store purchase behavior and prefer-ences over the last decade. In the past year or so, the so called “retail apocalypse” amplified this trend even fur-ther perhaps, in over-inflated ways, but there is no de-nying the fact that the writing has been on the wall in terms of low-relevancy in the minds and hearts of cus-tomers within several retail segments since 2010. This is an often cited reason for under-performing stores and other stresses experienced in these segments.

Over the course of the last few months, a few seg-ments bucked this trend effectively. For instance, in 2017 a positive same-store sales growth was reported within grocery, discount, convenience stores, do-it your-self (DIY), automotive and restaurants. Such a perfor-mance is less to do with extraordinary store planning or digital integration and more to do with discretionary customer spend and demographic shifts. Some of this growth also has to do with the fact that digital is not yet a preferred means of shopping among a large majority of customers within grocery, convenience, discount and to a lesser extent in restaurants and DIY.

In order to future proof store business, operators will need to determine the right store model (pricing, inven-tory, marketing, labor, technology, et al) using a con-tinuous flow of demand learning, based on deep cus-tomer science, neural, demand pattern recognition and prescriptive intelligence. This type of deep intelligence via machine learning is needed to win new custom-ers, retain existing ones and bring back customers who have been dissatisfied or denied timely service and are due experiential satisfaction at the store-level.

Just as Amazon Go is experiencing today, these customer intelligence and engagement tools will need some time for prime-time perfection. However, stores can finally rely on more accurate customer identifica-tion, journey knowledge and engagement models that can drive positive customer activity without the fear of major data accuracy issues and other process-related shortcomings. When associates and managers don’t trust the technology or the process, they figure out a way to go around it.

Increasing customer satisfaction, enhancing brand loyalty and higher customer conversion emerged as the top three business outcomes that retailers expect from in-store customer engagement strategies. High cus-tomer satisfaction and net promoter scores are the key to securing loyalty and generating superior long-term financial/operational performance. HT

Bucking the Store Obituary TrendWhat restaurants should learn from retail: Retaining and gaining new customers will demand consistent, relevant and timely insights

By Sahir Anand, Managing VP Research & Strategy, EnsembleIQ

For more insights on retail and consumer

goods technology trends, please reach out to

Sahir Anand, Managing VP Research &

Strategy at [email protected]

or @sahiranand.



10%

6%

29%

29%

35%


TECHNOLOGY INVESTMENTS

The average IT budget in 2017, at 2% of total revenue was roughly $4 million. This is less than what restaurants spent on technology in 2015 and 2016, and according to this year’s

survey, the largest percentage of that IT budget went to systems maintenance. Not exactly a strong formula for innovation. The good news is that IT budgets are poised to pop once again. With a year of maintaining legacy systems under their belts, restaurant operators have been evaluating IT investments to help achieve the strategic goals outlined in chapter two. As IT bud-gets creep back upward, operators are eyeing specific software upgrades — mobility, customization and an-alytics are among chief priorities.

This chapter takes a detailed look at technology investments and software upgrades to compare and contrast the findings in chapter two. While not always the case, in 2018 it appears that operators are look-ing to synchronize tactical objectives with actual tech initiatives.

Guest Perspective Influences InnovationCompetitors — not necessarily from within the restau-rant industry — are increasingly setting diners’ expec-tations. Beyond the scope of digital giants like Amazon and Uber, service paradigms for foodservice are influ-enced by the likes of convenience stores, groceries and services like Blue Apron.

As options for convenient food increase and come from a myriad of new competitors, restaurants will have to address how to increase convenience factors and find a common ground with customers accus-tomed to pervasive digital touchpoints.

“Restaurant, C-store and grocery are at a conflu-ence and this meeting would help create a conscien-tious and thoughtful real-world point of view on how we can and will shape the future,” says James Park, CEO, Garbanzo Mediterranean Fresh.

Operators overwhelmingly identify mobile pay-ment and enabling delivery services as the top two items on their innovation agenda for 2018, tying for

Executing on Guest Expectations Mobile payment and delivery top restaurant investment areas as laser focus remains on digital engagement


C H A P T E R T H R E E

Mobile Payments

Delivery Services

Big Data

Interactive Kiosks

Tableside Ordering Devices

Beacons (Location-based sensors)

Guest WiFi in Restaurants

Artificial Intelligence (Voice ordering etc.)

Internet of Things (IoT)

Wearable Devices

Biometrics/Facial Recognition

Automation (robotics)

INNOVATION AGENDA FOR 2018 Data Leaders Digital Leaders

52%

59%

35%

52%

28%

27%

23%

19%

19%

11%

9%

5%

5%

3%

40%

Top Tier

Middle Tier

Bottom Tier

Delivery services poised for growth in 2018.

FOLLOW THE MONEY:

65% of companies with

revenue greater than $50 million put mobile payments and delivery

at the top of the innovation agenda.

FOLLOW THE MONEY:

65% of companies with

revenue greater than $50 million put mobile payments and delivery

at the top of the innovation agenda.

60%

Digital leaders place roughly two times the priority on beacons, AI and wearables than the average.

Data Leaders place double the priority on Internet of Things compared to the average.

20%

18%


20%20%




other channels (34% doubling from 15% in 2017). Analytics and forecasting moved up the ranks with

almost half of operators (47%) having the functionality in the POS and 45% saying it is a must- or good-to-have. The distinction of having software that is provid-ing restaurants with actionable insights is an impor-tant one. Looking at what digital leaders do differently, 70% already have the functionality and another 20% consider it vital.

Digital leaders put more emphasis on the point of sale to house solutions. When evaluating a list of 12 functionalities, seven hit 100% of operators either al-ready having the feature or deeming it a must-have or good-to-have. The majority of digital leaders already have menu management/customization (80%), om-ni-channel management (70%), analytics (70%) and CRM/loyalty program management (60%). Digital

MUST-HAVE POS SOFTWARE FUNCTIONALITY

Menu Management/Customization

Inventory/Ingredient management

Analytics & Forecasting

Kitchen management

Labor/Workforce management

Manage orders from other channels (mobile, online, kiosk)

CRM/Loyalty program management

Third party delivery support

Loss prevention

Mobile Payment Support

Social Media Integration

Team member mobility

Currently Have Must Have Good to Have

53%

48%

47%

45%

41%

34%

33%

33%

33%

23%

22%

13% 25%

13% 23%

20% 25%

9% 34%

20% 28%

16% 33%

27% 28%

19% 23%

22% 38%

22% 36%

14% 50%

14% 45%

TODAY’S LAGGARDS, TOMORROW’S LEADERSLaggards look to gain ground with the smart

use of social media integration and mobile

payments.

73% of digital laggards believe social media

integration it is a must-have or good-to-have and

69% say mobile payment is a top POS functionality.

Data laggards also identify mobile payments

(74%) and social media integration (87%) as a

must- or good-to-have.

the position with 52%. Delivery is a standout because it made a sizeable leap up the agenda from 36% in 2017. A middle tier of investments falls significantly lower with the next two priorities — big data and interactive kiosks — getting 28% and 27% respectively.

Restaurants have been sluggish to rollout mobile payments, but digital leaders will put muscle into it in 2018, with 60% prioritizing the technology. Rounding out the top three is delivery services (50%) and beacons (40%). Location-based technology will have more ap-plications as restaurants initiate delivery services and facilitate pick-up orders. From tracking and monitoring drivers to geo-fencing areas to alert when customers are in proximity for a pickup, location-based technolo-gy will be an important facilitator of frictionless service.

Operators are prioritizing software that they hope will yield digital and insight-rich wins. To identify how they hope to accomplish this, we asked operators to classify point of sale software functionality by whether they currently have it and what they consider a must-have or a good-to-have.

Overall, CRM/loyalty program management is a top functionality for POS software with 27% of respon-dents naming it a must-have. The top three must-haves are rounded out with loss prevention and mobile pay-ment support both with 22%. Restaurants have closed the gap on functionalities they considered must-haves, but didn’t have a year ago. Areas that saw promising upticks include: third party delivery support (doubling from 16% in 2017 to 33%) and managing orders from





leaders also are two times more likely than the average to have mobile payment support (40%).

Data leaders on the other hand place analytics at the top of POS functionalities, as 71% already possess it as a feature in the POS. Top must-haves for data leaders include CRM/loyalty program management (24%) and team member mobility (24%).

Looking at the top five areas for software changes in 2018, restaurants overall are prioritizing the digital customer experience. Areas with the most amount of movement, including first-time additions, upgrades or supplier changes include: digital ordering (64%), CRM/loyalty (61%), mobile payments (58%), delivery (58%) and analytics (56%).

Data and digital leaders will also focus on these top five areas, but digital innovators plan to make a big push for mobile payment with 60% planning to add the technology for the first time. Digital leaders, as they have already made significant strides in digital engage-ment options, are ready to turn their focus to mobile payment, laying back a bit on other initiatives.

Need to be Nimble Sets Course to the CloudWith 45% of restaurants feeling held back by legacy systems and the largest portion of IT budgets going to systems maintenance, above property tactics provide a salve. While only 9% of operators identified moving to the cloud as a strategic objective for technology, when asked to identify status of cloud migration against a list

of nine systems, more than half are in some active stage for more than half of the operators surveyed.

As operators become hyper-focused on having a single source of data, moving systems above property provide a way for restaurants to synchronize data and reporting to provide insights in real-time to appropriate parties whenever and wherever they may be. The view for eventually moving all systems to the cloud, essentially results in turning the restaurant itself into a computer.

When segmenting cloud migration by data leaders, we see that data leaders are making moving analytics to the cloud a top priority as 65% are either considering or currently running data in the cloud.

Mobile-First to Data-First Mentality From big data to predictive intelligence and machine learning, the differentiator is going to be which brands turn insight into action and provide meaningful experi-ences for guests.

SOFTWARE CHANGES PLANNED FOR 2018Add 1st Time Upgrades Change Supplier

Digital Ordering (Online/Mobile)

CRM/Loyalty

Mobile Payments

Delivery

Analytics

POS

Consumer Mobile App

Restaurant Back-Office

Inventory Management

Workforce/Labor Management

Kitchen Management

Associate Mobile App

Digital Content Management

Kiosk

Guest WiFi

Personalization Engine

25% 28% 11%

17% 33% 11%

27% 20% 11%

17% 31% 10%

11% 34% 11%

5% 34% 11%

23% 20% 6%

5% 38% 5%

9% 28% 5%

13% 19% 9%

10% 19% 8%

16% 13% 6%

10% 14% 10%

17% 8% 5%

2% 23% 2%

5% 6% 2%

FIRST TIME SOFTWARE ADDITIONS LEADERBOARD

DATA INNOVATORS DIGITAL INNOVATORS

Mobile payment 30% Mobile payment 60%

Associate mobile app 30%

Delivery 29%

20%

Digital ordering, POS,

kitchen management,

consumer/associate

mobile app, and kiosk





“AI is going to be more important than human-ity’s mastery of fire or electricity,” Google CEO, Sundai Pichai, says. The writing seems to be on the wall — or perhaps the shower door, if one thinks like Marriott. If hotels experimenting with touch sensitive technology to record guests’ thoughts in the shower isnt’ a sign of the rapid pace of change, I’m not sure what else is.

The notion of restaurants wading into the territory of being technology companies that serve food, is no longer necessarily a bad thing. Caliburger, a quick-service restaurant with 37 global locations, is a division of CaliGroup, a technology company that has been behind the launch of the restaurant’s robot, “Flippy.” The company also has teamed with NEC Corporation to deploy facial recognition technology to engage and win new loyalty members through a kiosk.

With 58% of digital leaders naming measuring ROI as a top challenge, innovators still often struggle to align revenue with newer, “untested” technology. The scope of technologies considered “emerging” is rapidly narrowing as the lines between digital and analog be-come more blurred. At the recent National Retail Fed-eration’s Big Show in January 2018, a common refrain from technology experts was bringing an online experi-ence to the physical store.

Today’s digital natives are accustomed to technol-ogy making things easier and more personalized, they will demand the same from brands with which they

do business. When comparing restaurants’ innovation agendas to technology they feel has potential there is a disconnect.

Restaurants see the greatest potential in Internet of Things (connected devices), with 68% of overall respon-dents and 80% of digital leaders putting it at the top of the list, but only 9% plan to rollout technology in 2018. Similarly, 48% of operators see potential in location-based technology compared to 19% planning to make investments in beacons.

What is considered emerging today will rapidly be table stakes and with competition from Silicon Valley coming at a rapid pace — restaurants must identify the opportunities where it makes sense for their brands to deploy more forward-looking technology in order to be leaders. To not do so puts them not just at risk for fall-ing behind, but even worse, becoming irrelevant.

For example, location-based technologies offer great potential as restaurants leverage the technology for both marketing and tactics to streamline service. Google found that nearly two-thirds of smartphone users are more likely to purchase from companies whose mobile sites or apps customize info to their loca-tion. As futurist and author Brian Solis notes, “location for marketers is critical in the next-generation of micro- moments. Location matters more and more even though expressed less and less. Consumers expect more relevant content in these local micro-moments.” HT

CHARTING CLOUD MIGRATIONS BY SYSTEMSIn the cloud Actively exploring Considering

Point of Sale

Corporate Enterprise Software

Restaurant Back-Office software

CRM/loyalty

Digital Ordering (online/mobile)

Analytics

Kitchen Management

Kiosk

Workforce/Labor Management

25% 17%

28% 6%

28% 13%

30% 13%

41% 6%

25% 9%

9% 11%

6% 6%

25% 17%

TOP 5 NEXT-GENERATION TECHNOLOGIES WITH IMPACT

Internet of Things (Connected, Smart Devices)

Location-based Technology

Artificial Intelligence (Voice-enabled devices)

Automation/Robotics

Wearables


64%77%80%

48%

38%

33%

21%

59%70%

41%40%

24%

IT SNAPSHOT:

DIGITAL FOOD SAFETY

Making the Supply Chain Smart & Safe

85% of operators say IoT has greatest potential to facilitate

food safety, followed by location-based technology

and AI (31%).

More Than Just Bitcoin 8% of operators think it is likely blockchain will help

facilitate food safety measures.

11%

6%

11%

6%

10%

17%

5%

3%

16%


S I LV E R S P O N S O R S

T I T L E S P O N S O R

G O L D S P O N S O R S

HOSPITALITY TECHNOLOGY THANKS THE SPONSORS OF THE 2018 RESTAURANT TECHNOLOGY STUDY. THEIR SUPPORT HELPS TO MAKE THIS LANDMARK

RESEARCH POSSIBLE. RESEARCH POSSIBLE. RESEARCH POSSIBLE.


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