The pandemic swept restaurants into the digital age

Many operators had to come online to survive, marking the dawn of a new, omnichannel era for the industry.
Illustration: Tara Jacoby

This story is part of RB's look at the impact of the pandemic on the restaurant industry.

Progress tends to happen gradually, over the course of years or decades. Rome, as the old saying goes, wasn’t built in a day.  

That wisdom has been tested over the past 12 months, during which life as we know it was turned upside down by the coronavirus pandemic.

With dining rooms closed and consumers hunkered down at home, restaurants, notoriously slow to adopt new technology, had no other choice but to dive in head-first, or risk extinction.The result was years’ worth of technological progress in a matter of months—and in some cases, days. As the U.S. marks one year since the crisis began, with vaccinations ramping up and restrictions easing, restaurants are reemerging as a transformed industry.

Matt Eisenacher remembers vividly the moment everything changed for First Watch. The breakfast chain’s SVP of brand strategy and innovation was sitting in a conference room with the rest of the leadership team on March 16, 2020, when someone shared the news that Ohio had ordered all restaurants in the state to close their dining rooms.

Until that point, 300-unit First Watch had been tremendously successful operating in a way that even then was decidedly old-fashioned. Orders placed inside the restaurant were hand-written, entered manually into the POS and passed along a pulley to the cook, who shouted the dish to the rest of the kitchen. To-go orders were taken only over the phone and traveled along the same analog path.

“That was our technology,” Eisenacher said—and it worked. The chain had long-term plans to add third-party delivery and a mobile app, but it wasn’t in any hurry. With 38 years under its belt and a long track record of growth, why fix what ain’t broken?

“Headed into March 2020, we had every incentive not to rock the boat,” he said.

The pandemic had other plans. After hearing the news out of Ohio, Eisenacher and his colleagues looked at one another as the realization dawned on them: “We’re doubling down on all of this stuff we had talked about in theory,” he said.

The team immediately moved to install chit printers in all of its kitchens. And it accelerated its relationship with Olo to set up online ordering. It built web ordering and a mobile app and turned on Google ordering to reach customers via multiple channels. Third-party delivery, waitlist software and credit-card processing were integrated along the way. In just four days, First Watch went from orders scribbled on a pad to a fully integrated tech stack.

“We literally turned the entire business on its head,” Eisenacher said.

In the meantime, its restaurants had resorted to taking orders over the phone as sales fell to as low as a couple hundred dollars a day.

They flipped the switch on the new system on a Monday, and the impact was instant. “The first moment, there were 250 orders in the system,” Eisenacher said, a number that grew exponentially each day.

Inside its restaurants, staff watched with excitement as orders began streaming out of the new printers as if by magic.

“They were over the moon,” he said.

It was a pattern that would play out across much of the industry in the following weeks and months as restaurants mobilized to reach customers sheltering in place the only way they could—digitally.

“Restaurants, especially independents, that did not have their own contactless ordering methods had to immediately flip the switch and sign on with a provider,” said Melissa Wilson, principal with Restaurant Business sister company Technomic.

That sea change was accompanied by innovations like curbside pickup and contactless ordering, aided by the once-maligned QR code. People that had never ordered delivery began trying it, driving companies like DoorDash to new heights and giving rise to an entirely new restaurant category: delivery-only virtual brands. Aside from most fast-food and pizza chains, virtually no restaurant was exempt from the sweeping changes. Chicago icon Alinea, known for intimate dining experiences with triple-digit pricetags, began offering beef short-rib Wellington to go for $34.95—and sold out within hours.

To get a sense of how many restaurants came online for the first time, consider that customers spent $435 billion on online food orders in 2020, and a majority of that spending (61%) was at restaurants that had offered only sit-down dining prior to the pandemic, according to a recent report from PYMNTS and Paytronix.

Meanwhile, as of September, 27% of restaurants had added third-party delivery, according to a survey of 3,500 operators by the National Restaurant Association.

For the technophobic restaurant industry, the pandemic was a “once-in-a-century kind of event,” said Fred LeFranc, founding partner of restaurant advisory company Results Thru Strategy.

“They have no choice” when it comes to adopting technology now, he said. “We’ve reached a tipping point.”

That tipping point, however, spelled the end for thousands of restaurants that were forced to close for good.

Fire, a staple of Cleveland’s fine-dining scene since 2001, was among the casualties. Douglas Katz had never planned to bring his flagship restaurant online, and when the catering business associated with it was taken out by the pandemic, he closed Fire for good in August.

“That food was meant for China, great wine, all that kind of stuff,” he said. “The whole experience was from a different era.”

But even as Katz was marking the end of an era by closing Fire, he was beginning a new one with his other concepts. Shortly after the pandemic struck, his high-end Mediterranean restaurant Zhug began offering takeout and delivery through Toast for the first time. And in June, he transformed the dormant catering commissary—a refurbished 1940s diner—into space for a delivery-only ghost kitchen concept called Chimi. He launched a second ghost kitchen, Amba, out of the same location in October.

“It worked out because I owned the building, I had a kitchen that wasn’t being used, in an area where I wouldn’t have thought to open a restaurant,” he said. “It was a perfect fit for a ghost kitchen.”

Ghost kitchens are yet another tech-enabled format that gained a foothold amid the shifting conditions of 2020. By May, more than half of restaurants were using one for some or all of their delivery orders, Technomic found, up from 15% before the pandemic.

While the kitchens have worked well for Katz, he sees them as a “stop along the road” that allowed him to keep business flowing and staff employed during the pandemic. His plan is to turn Chimi and Amba into brick-and-mortar restaurants and continue using the catering commissary as a kind of incubator for new concepts.

Nonetheless, the new approach represents a departure from where he got his start two decades ago at Fire.

Back then, “the expectation was based on what people were used to. Now, I think there’s more thinking out of the box,” he said. “In the new age, less interaction with the server, less interaction in general, is going to be more common.

“I’m not saying there isn’t a place for some high-end, old-style restaurants, but I do think that [the pandemic] created a huge change in the direction of the industry,” he said. “People aren’t set on what a restaurant experience should be or was before.”

To witness that dynamic, look no further than concepts like Brooklyn Dumpling Shop, a new-age automat that touts a “zero human interaction” experience, or Piestro, a fully automated pizza machine.

“[Brooklyn Dumpling Shop] is the right concept at the right time—high volume, small footprint, tech-forward, fully co-packed menu built for speed, accuracy and incredible taste,” said Dan Rowe, CEO of Fransmart, in November. The franchise developer has a deal with the brand to expand it to 1,000 North American locations.

For many restaurants, though, the challenge of the new digital age will bewalking the fine line between the omnichannel convenience customers have come to expect and the hands-on hospitality that defines the industry.

Starbucks, which has long branded itself as a “third place” for guests to gather and unwind over coffee, views that experience as one that will be increasingly mediated by technology. It attempted to reconcile that change in a letter to customers and staff in May.

“We think of the third place as a mindset—a feeling of comfort that uplifts customers everywhere, and in every way, they experience Starbucks,” CEO Kevin Johnson wrote. “The third-place experience created by Starbucks partners in our stores is extended and enhanced by the digital relationships we have with our customers.”

Johnson went on to predict that the chain’s mobile app, which had 20 million users at the time, would become the dominant form of payment.

New York-based Joe Coffeeis working to strike a similar balance as it integrates digital channels with its community-centric mission, said VP of Operations Ron Shuler. Joestarted offering mobile and online ordering through Ritual in May as it reopened its 20 stores.

“Our premise for operating has always been about this community feel, this experiential piece you get from visiting,” Shuler said. The chain wants to communicate to customers that “You can still have that experience, just in a different way.”

But not all restaurants are sold on a more digital-centric model.

Dollop Coffee, a chain of 15 cafes in Chicago, transitioned all of its locations to online and mobile ordering only during the pandemic, most for the first time, to enable a completely contactless experience for customers and staff.

While most customers took to the new system, which required them to either download an app or scan a QR code, owner Dan Weiss is taking a wait-and-see approach with the new channel at his shops, which are designed for guests to linger.

If you’re sitting down in a coffee shop, I don’t see the necessary advantage of mobile ordering,” he said.

“Traffic will dictate what we do next.

While he wouldn’t be surprised to see a 50-50 split between online and in-store orders post-pandemic, he hopes his cafes can continue to act as community hubs.

“I’m not interested in building a bunch of convenience store coffee shops,” Weiss said. “That doesn’t appeal to me.”

One year after ditching paper and pens, First Watch is fully embracing digital. But it is not abandoning the hospitality piece that has been its foundation for nearly four decades. That approach is reflected in a new prototype restaurant in Winter Park, Fla., which makes room for both the on- and off-premise experience. An indoor/outdoor bar for dine-in guests, for instance, highlights the chain’s new alcohol program. Meanwhile, the kitchen will have an entire second makeline dedicated to to-go orders.

“We’re really bullish on both sales channels,” Eisenacher said.  

Whether they like it or not, technology is now “the price of entry” for restaurants, Lefranc said.

“Any kind of modernization, automation and digitization is what all restaurants should be looking at.”

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