Arguably the biggest theme at this year’s National Restaurant Association Show, besides perhaps plant-based food, is robots. Go anywhere on the vast exhibition floors at the event and you will come across some automated device that performs a task previously performed for humans, such as burger flippers or food runners or even order takers.
Technology is always pervasive at the show, though it’s growing more important than ever given the industry’s current state. The largest chains are pouring billions into integrating technology into their restaurants, so much so that it’s becoming table stakes.
“In order to future proof your business for the next five years,” Mahesh Chandramouli, digital transformation and IoT leader with Deloitte Digital, said at the show on Sunday, “you have to look at A.I.” Artificial intelligence is one of the technologies that is taking off, particularly at fast-food chains. But he might as well have been talking about almost anything, from robotics to data analytics.
The big problem, however, is that many of these technologies are out of reach for independent operators.
The pandemic has accentuated the gap between large chains and independent restaurants. The 500 largest restaurant chains have more than recovered sales lost during the pandemic, according to Restaurant Business sister company Technomic—though the biggest beneficiaries remain the very largest chains that have the most access to the types of technology we’re talking about.
Plenty of independent operators have done fine, too. But many of them remain deep in debt more than two years into the pandemic. They were dealt an unsurprising blow last week when Congress couldn’t come to an agreement on a replenishment of the Restaurant Revitalization Fund.
While total industry sales are up far past 2019 levels, according to federal data, profitability is a growing challenge. Consider this: Menu prices for restaurants and bars are up 7.2% over the past 12 months. But their two primary costs, food and labor, are up twice that much. Food is up more than 16%--and the National Restaurant Association expects that to get worse—while labor costs are up 13%. And, as we were reminded by Golden Corral CEO Lance Trenary, the association’s chairman, other costs such as equipment and construction are soaring, too.
All these costs hurt indies more than they do chains.
Profitability challenges could be in place for some time, and that will continue pushing the industry toward more efficient means of doing business. On balance, that is a good thing, because restaurants do need to find ways to do business with less labor. But many of these technologies remain expensive.
That is a function of technology. In its early days, technology is expensive and only the richest of us can afford it. Eventually, it gets cheaper and more people can afford it. The same is true for restaurants.
The artificial intelligence is a good example of this. “Every month, every year, costs are coming down,” said Atif Kureishy, founder and CEO of the restaurant automation company Vistry. “The A.I. space is really advancing quickly.”
Some of the smartest people in the industry have recognized the potential that technology can be a key element dividing winners and losers and they have taken steps to put themselves in position to do just that. Inspire Brands, for instance, was formed in large part to generate more scale so it can add more technology to its various chains.
None of this means independent operators can’t take steps to push their businesses forward. Indeed, some of the earliest adopters of food-running robots have been independent restaurants that couldn’t find enough staff. And many innovative independent restaurants have infused their businesses with technology from the get-go, which has given them a leg up even on large-scale chains that are adding it after the fact.
Yet it’s difficult for existing operators, because of up-front costs, debt concerns and weak profitability. But operators should take steps to determine whether these technologies can fit their businesses, especially if they are limited-service concepts, and measure the potential return on investment. A new robot or A.I. ordering function could well save on labor and make their businesses more profitable. Or it may reduce waste or improve overall efficiency.
“Measure ROI against the problem you’re trying o solve for,” said Susan Sly, CEO and founder or RadiusAI. Many technologies can quickly pay for themselves through reduced labor hours, for instance, or reduced waste.
“The small independent doesn’t have to figure it out,” Scott Brubaker, director of enterprise AI, QSR, retail and CPG, for Nvidia, said at the show. “They just have to ask.”
Technology isn’t necessarily an end-all, be-all. And many new technologies increase complexity and frustrate employees, something Starbucks has learned in recent months—not to mention a number of other brands adding new technology into their businesses. And many of them may not be quite as necessary as some think. This is especially true for full-service restaurants where customers still prefer to order from a person and enjoy their meal.
Yet if they do not take steps to figure this technology out, independents risk falling behind as the industry pushes forward.