Tech Check is a regular column on restaurant technology by Senior Editor Joe Guszkowski. It's also a newsletter.
It’s FSTEC week, one of the best weeks of the year if you run a restaurant or a tech company or write about them like I do.
Last year’s event marked a transition from the tech boom of the pandemic to a more pragmatic chapter of tech adoption. Things like virtual brands and NFTs fell to the wayside as operators shopped for products with a more obvious and immediate ROI.
The issues restaurants face today are much the same as last year’s, only amplified. Persistent inflation is taking its toll. Consumers’ spending power appears to be waning as they burn through the last of their pandemic savings; face the return of student loan payments; and open restaurant menus to find $16 burgers (before tax, tip, and, increasingly, service fees).
Practically every restaurant is losing traffic as a result. And that has had dire consequences for some. As summer came to a close, we saw a wave of store closures and bankruptcies as operations that had been treading water for years finally succumbed to rising costs and slowing demand.
But don’t let that get you down! If you’re lucky, you are on your way to FSTEC, a place where it’s OK to dream a little. There’s a chance you’ll find the next piece of software or form a new relationship that will change your business for the better.
As for myself, I’ll mostly be asking questions. Here are four that came to mind as I got ready to head to Dallas this week.
Is the delivery boom over?
The last round of quarterly restaurant earnings calls included quite a few chains that saw their delivery sales dropping. Most suggested consumers are tired of paying a premium for something they can do themselves. And they didn’t seem all that upset about it. After all, delivery is costly for restaurants, and they’re happy to see customers shifting toward more profitable channels like dine-in and pickup.
And yet there are still a few large brands that appear to be devoted to delivery. Wingstop has made it a core part of its identity; Starbucks is aggressively pursuing it; Panera is running ads promoting it. Even Denny’s is hoping to soak up some of the demand left over from competitors that are pulling back.
It all sort of suggests that we may have reached cruising altitude with delivery until someone finds a way to make it more affordable.
Are tech companies OK?
As difficult as the past couple of years have been for restaurants, they’ve been just as hard for the many tech startups born early in the pandemic, when demand was high and money was cheap. Since then, many have had to tighten their budgets as their investors ask for cash flow rather than expansion.
That’s led to layoffs, restructuring and strategic shifts at a number of these companies and has put a premium on slow, responsible growth.
This setback doesn’t mean restaurants don’t need or want technology anymore—they do. It’s just that someone has to pay for it, and outside capital is no longer enough. That has forced companies to make desperate decisions, like Toast’s ill-advised 99-cent order processing fee, which it said was needed to pay for tech upgrades.
Toast quickly axed the fee after a restaurant uproar. But it was a sign that something has to give. I’ll be curious to hear how vendors are navigating this.
Where’s the loyalty?
Loyalty programs could be one tech-based solution for restaurants’ traffic woes. Instead of trying to attract more and more guests, maybe operators can use rewards to get a core group of customers to visit more often.
But these programs require a delicate balance. At a time when restaurants’ margins are shrinking, they can’t afford to give away a lot of free food to people who would be visiting anyway.
That has led to a shift in how loyalty programs are designed. Restaurants are increasingly moving away from the traditional points-based model and are adding features like tiers, badges and special offers that look to either add value to the experience or nudge customers to visit without actually giving them a discount.
Of course, Domino’s went against the grain this week when it unveiled a new loyalty program that is actually more generous than before—and took a shot at other brands in the process. This could get interesting.
What will AI do next?
Just about every week, I find out about something new that artificial intelligence can do. Most recently, I learned that Domino’s is using it to start making pizzas before a customer has even finished ordering.
What sort of AI surprises might be in store at FSTEC this year? Will robots finally be able to identify when someone is hungry and recommend just the dish they’re craving? Probably not, but I’ve been shocked before.
Notably, this is the first FSTEC to be held in a post-ChatGPT world. While things like voicebots were a clear trend last year, I’m expecting AI to show off some new tricks at this week’s event.
FSTEC is owned and operated by Restaurant Business’ parent company Winsight. This year, it runs from Sept. 13-15 at the Hilton Anatole in Dallas. More than 850 operators are expected to attend.
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