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<p>Customers value digital menus and online order capability over other technologies used in restaurants.</p>

2016 outlook: Restaurant technology takes a back seat

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Haven’t installed state-of-the-art technology at your restaurant yet? No problem. It’s last on the list of customer priorities for 2016. What they want the most: lower prices, a stronger focus on food safety and an improved lineup of healthy menu items, no matter the segment.

That’s how respondents ranked 15 key issues in “Tall Orders: Higher Wages and Menu Changes”, the 2016 North American Restaurant and Foodservice Outlook released last week by global business advisory firm AlixPartners. 

The report combines survey data with a qualitative component provided by the organization’s in-house consulting experts. The focus is on chain restaurants, but most of the findings are pertinent to full-service operations, too.

“Issues such as ensuring food safety throughout broader supply chains, offsetting rising labor rates, and determining which technology investments are prudent and which are likely to become obsolete overnight present formidable challenges for the industry,” says Adam Werner, managing director at AlixPartners and co-head of the firm’s restaurant, foodservice and hospitality practice. “The most successful operators will be those who tie near-term actions to a sound, analytical long-term strategy, and who along the way practice strategic restraint, carefully picking their spots and always looking for ways to do more with less.”

Here are some key findings from this study.

Lower prices. Customers always want to get more for less, and AlixPartners found a renewed emphasis on value this year. Fifty-six percent of survey respondents plan to seek out more discounts during 2016 than they did during 2015. Operators shouldn’t expect a lot of new business if they do offer more deals. Almost 60 percent of consumers would like to see discounts coming from operations they already frequent; only 16 percent said a price cut would convince them to try a new restaurant.

Discount promotions are more frequently used in quick-service restaurants than in their full-service counterparts. But if you use this tactic, go big. Thirty-one percent of respondents said one large discount is better than multiple smaller ones in encouraging trial.

Food safety. One-quarter of survey respondents said food safety should be one of the foodservice industry’s top three areas of concern. The stakes are definitely high for operators if something goes bad. Ninety percent of respondents take note of food safety incidents at restaurants. Twenty-eight percent said they would never eat again at a restaurant that experienced a food safety outbreak, no matter the geographic location of the unit or units where the actual problem occurred.

There’s no quick fix on the horizon. “Rapid shifts in the supply chain—especially in cases in which some form of local-ingredient focus requires special variations in the supply base—will also likely give rise to new constraints and will broaden areas of exposure on long-standing food safety policies and practices,” the report notes. “Those shifts could force many operators to rethink—and reinvest in—their standards or procedures. Leaders in the more-health-conscious brand areas are being tested by challenges presented by more-localized sourcing. As chains convert their supply bases to respond to consumer demand for greater and greater amounts of fresh, local ingredients, the industry is likely to see other such challenges.”

Technology. The study points out that while technology is indeed popular with customers, restaurant operators may wish to think more strategically about how and when it should be implemented.

“What we’re hearing from the consumer plus seeing in the field calls into question whether all of today’s investments in consumer technology, including digital loyalty programs, are well-placed bets,” says AlixPartners managing director Eric Dzwonczyk.  “Some technologies are already superfluous, given the fast pace of smartphone innovations; some are getting obsoleted almost as soon as they’re installed; and for many technologies, there is just simply a finite market. It would behoove companies not to get too far out in front of their skis in this area.”

One cautionary statistic: just 10 percent of survey respondents felt restaurant chains should provide more consumer-facing technology in 2016. It’s less important to them than “improve kids’ menus.”

Of the available technology options, digital menus and online ordering capability are the top priorities for customers. More than half said they are more important that mobile functionality and tablets.

Digital loyalty programs ranked as a third high priority for restaurant chains. But only 14 percent of respondents said loyalty programs are very or extremely influential in their choice of restaurant. While 58 percent of respondents said they had joined a restaurant loyalty program, 90 percent said they do not use more than three programs very often.

AlixPartners sees a conundrum here.

“Those insights potentially call into question the size of the market for loyalty and consumer technology: is everyone vying for the same narrow consumer base?” the study asks. “Or is limited participation in loyalty programs more a question of having the right technology to make it appealing and convenient? The loyalty program appears to be a wait-and-see topic while many operators assess the potential for increased adoption rates when more-robust offerings get introduced—especially any that can compare to Starbucks’ integrated loyalty and payment platform.”

Factor in the “‘severest labor crisis” the industry has ever faced” and 2016 is going to be a challenging year for restaurant operators. “Strategic restraint” will be required. “Success will likely be realized by companies that achieve more with less and that don’t try to address every trend and initiative all at once,” AlixPartners predicts.

Contact Bob Krummert: [email protected]

TAGS: Operations
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