Union Square Cafe (Photo Credit: Rockwell Group, Emily Andrews)

6 Ways Technology Is Changing Restaurants in 2018 and Beyond

Resy seated 28 million diners in 125 cities in the U.S. in 2017. The smallest restaurant we work with has eight seats and the largest has close to four hundred. The only constant across all of them is change: consumer behavior, cost structure, labor laws, supply chain dynamics, and competition are all moving targets. When some industry experts talk about about it being the end of days for restaurants, these forces are driving their pessimism. Though they are correct that the status quo won’t work, the prognosticators couldn’t be more off-base about the industry’s demise.

The common denominator among the next generation of great restaurants is their embrace of change. These are not your father’s restaurants, as they say. So, what are they doing to evolve? Here are six agents of change, pulled from recent conversations with, and observations of, industry heavyweights:

1. DATA — The future isn’t a data-perfect restaurant, even though some technology people and data-obsessed chefs consider that concept a hospitality industry silver bullet. The theory goes that because the chef knows that I like broccoli on Tuesdays and Bordeaux on Fridays the restaurant will suddenly run exponentially better. The problem with this vision of the future is that, so far, it’s not clear whether the extra margin you get from that information pays for the cost of implementation, which can be high. But, smart restaurants are beginning to focus on splicing data sets to find trends and actionable insights. Take, for example, the Nomad LA, Will Guidara and Daniel Humm’s bright new project in Downtown Los Angeles, which is pulling raw data directly from our data API. They might look at customer feedback, find a correlation between satisfied customers and ideal turn time, then determine the number of covers that nets them the most satisfied customers. That’s real progress.

2. THE THIRD REVENUE CHANNEL — One way to look at the rising costs of operating fine dining restaurants is to say they’ll all go out of business. But, you may have noticed that Danny Meyer has grown the Union Square Hospitality Group from a business that operates fine dining restaurants into one that has diversified revenue channels, from catering to QSR. Historically, restaurants had combined, for example, a la carte and private events business to generate two predicable revenue streams. But Meyer has gone much farther, such as at Union Square Cafe, where its lease is split with a QSR concept, Daily Provisions. In the context of Union Square Cafe, Daily Provisions is a new revenue stream that’s offsetting, and then some, the cost of a Manhattan storefront. Technology is helping many restaurateurs here. At the Rustic Canyon group of restaurants, they have fully embraced delivery via apps like Uber Eats and Postmates. Without these services, the business line wouldn’t exist for them (they are profitable, although delivery apps on a whole can be a double-edged sword.) Resy, via ticketing and events software, is allowing restaurants to leverage large mailing lists into steady, new in-restaurant revenue lines, such as recurring event series (we’re also drastically lowering costs, with features like SMS auto-confirm). In the future, I think we’ll see that all viable restaurant businesses will need at least three significant revenue streams, and technology is going to make it possible for restaurants to have them.

Resy Surveys

3. THE 360º FEEDBACK LOOP —Though it is the unimpeachable best practice when building software to always be conducting measurable user testing, the trusty comments card is as close as most restaurants get today. But, if you think about it, restaurants have many ‘software’ components, such as menu, lighting, music, pace, and price. Restaurants need a better feedback loop, so we are investing purposefully here and will continue to do so. Now context-complete, customizable feedback, including A/B testing, is possible through Resy. As a result, our restaurants will stay open longer, because with the right performance visibility, restaurant ‘software’ can be more fluid, evolve faster, and perform better.

4. THE UNBUNDLING OF DEMAND —It is no longer necessary to buy demand in bulk, an idea I touched on at the end of 2017. Restaurants now have the ability to be precise about where their customers are coming from. Today, we are seeing this on a small scale, such as when global sensation Dominique Crenn partners with American Express to hold back tables for Amex card holders. Crenn has excess demand, so, presumably, she has determined that allocating a portion of her tables for the Amex Platinum concierge boosts profitability. While her restaurants do this manually today, systems like Resy are building connectivity out towards individual demand channels, unbundling them and allowing restaurants to target them a la carte.

5. THE END OF CASH — There are very good reasons that restaurants have started to go cashless: it’s safer and cleaner, to name two good ones. We recently hosted our seventh Resy X dinner, a small-batch series we run to get industry players together with creative types and big thinkers. Each one is themed around a central idea or question and in January the question was, “Will Technology Save Us?,” co-hosted by Adam Landsman at his awesome Williamsburg, Brooklyn all-day-er, Sunday in Brooklyn. Landsman said his restaurant, which is cashless, got robbed recently and the burglars made off with just $200. How do they deal with people who insist on using cash, maybe because they’re trying not to leave a trace? “It’s an opportunity for a waiter to say, ‘This one’s on me,’ ” he says. This isn’t just happening from the ground up, either. Visa recently announced that it will provide financial incentives to restaurants that stop using cash. It may never happen for Peter Luger, where cash is definitely king. But for the rest of the business, I think you’ll see 50% of restaurants declining cash by the end of 2019, made possible by an increasing number of scale cashless payment systems, including ResyPay.

6. THE IMPORTANCE OF REPEAT CUSTOMERS — Some of our competition plays up the importance of first-time diners. That’s because they make most of their money on them. Resy takes a different perspective, which is that the restaurant’s focus should be on getting customers back. The economics are straightforward, but if you want to do a deep dive, go read about LTV, CAC and retention curves. Simply put, the longer a restaurant can retain a customer, the lower the per meal cost of acquiring that customer becomes, more profitable that customer becomes to the restaurant. How is this about technology? It used to be that software only helped a restaurant earn a customer at booking. Now, because new software exists to manage and enhance every milestone along the customer journey, from discovery to feedback to rebooking, the process of turning new customers into regulars is scalable.

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