Impact of technology on the Restaurant Industry
Impact of Technology on the Restaurant Industry
Introduction
Food and drink preparation, presentation, and serving to consumers, a crucial part of the food service industry, can be widely referred to as the food and drink services sector. It includes many industries, such as quick-service and casual dining establishments, full-service establishments, cafes and coffee shops, bars, clubs, and nightclubs, as well as catering services and canteens. Also, each of these distinct industries is vulnerable to various trends; the development of the online market and digitalization are two examples that apply to all of them. Technology, enhancing both customer service and kitchen display systems, has been the leading factor in the transition of the restaurant industry in the past few years, as 95% of operators admit that technology improves overall efficiency.
Restaurant Industry Size
Global Restaurant Market
The global market size of the restaurant industry was valued at $2323.29 billion in 2021. The industry has expanded significantly in 2022 and reached a value of $2540.05 billion. The restaurant industry is expected to grow at an annual rate of 10.76% each year till 2029. With the expected compound annual growth rate in double digits, the industry is expanding significantly and will reach a value of $5194.60 billion by 2029, catering to evolving customer expectations.
RESTAURANT TECHNOLOGY
The restaurant industry analysis is incomplete without factoring in the latest advancements in restaurant tech. According to an online survey conducted by OnePoll, 57% of restaurant owners said that technology has been crucial to their survival over the past two years. The most popular technological tools used in restaurants worldwide are discussed below:
Data Analytics Software in Restaurants
The data analytics software helps restaurants analyze structured or unstructured data, enabling them to make more informed decisions. The data analytics software finds out the trends and patterns from the data. With the help of these findings, restaurant owners can analyze the trend and buying behavior of the customers, which can help the restaurant owners to target the customers according to their tastes. Moreover, dashboards can efficiently perform restaurant industry analysis and predict future sales.
Artificial Intelligence in Restaurants
Artificial intelligence in the restaurant industry has revolutionized the experience for customers. It helps the customers in the tracking of their orders via live tracking. Moreover, it helps to reduce extensive labor costs and time taking procedures. In addition, when artificial intelligence is incorporated into the self-tablet kiosks, it can recognize the voice of the customer. With the help of voice recognition, it assesses the customer’s age and recommends offers as per their age and preference, enhancing customer care and customer loyalty. Moreover, AI can help restaurant owners to forecast inventory and demand. As a result, it helps the restaurant stock inventory for the demand, is integral to effective Customer Relationship Management and assists the restaurant in pricing its products.
Automated Inventory Management in Restaurants
Inventory Management System in the restaurant industry works as a tool or dashboard representing the data regarding the input and output of the ingredients. When the ingredients hit a certain low, it warns to reorder the inventory, and when the inventory piles up, it also signals low sales. Automated inventory management softwares has completely revolutionized the restaurant industry as it solves all inventory-related problems. It has been found that 70% of food items go to waste before reaching the customer’s plate. Thus, with the help of inventory management, restaurants nowadays can minimize food waste and other costs.
Cloud-based Restaurant POS System
A cloud-based restaurant point-of-sale system is a web-based point-of-sale system that allows you to process payment online. It has eliminated the need for expensive and complicated services. It has boosted the sales of the restaurants and created convenience for the restaurants and the customers. The following graph shows the expected increase in market size for Cloud-based POS systems in the U.S. It clearly reflects that businesses are becoming more comfortable with shifting their data and sharing it on the cloud as it becomes more convenient to coordinate activities.
Source: Giminsights
Delivery Apps
In this modern era of technology and innovation, delivery applications have become a part of daily life. Many restaurants offer delivery services. For those restaurants that do not offer online delivery, delivery applications fill the gap in the market. The delivery applications have made the ordering process very smooth and easy, due to which many sales are conducted via the delivery model. It is estimated that in the U.S., at least 60% of customers order online food once a week and around 31% of customers order online food twice a week. Of these customers, 34% order for at least $50, which shows the potential in the delivery model and how much revenue the restaurant can earn from it.
Source: Forbes
It is evident from the above chart that people frequently order through online apps these days. Moreover, they are comfortable spending similar money on online orders as dine-in.
Self-Ordering Tablets-Kiosks in Restaurants
One of the latest innovations in the restaurant industry is the self-ordering tablet kiosks. It helps the customers browse the menu, deals, and options.
Furthermore, it helps the costumes with the ordering process, and they do not have to wait in a queue to speak to the staff. Overall, it significantly improves the restaurant experience for the customers. The automation and the convenience provided by the tablet kiosks satisfy the customer’s needs, making the customers visit the restaurant repeatedly.
Recent research by Tillster showed that 65% of customers would visit a restaurant more often if offered self-service kiosks. Moreover, 30% of the customers said that they would prefer to order via self-kiosks if there were the same waiting queues on the self-kiosks vs. cashier.
Source: FactMR
The graph above shows that the current market size of interactive market kiosks is around 30 billion USD, estimated to grow to 45 billion USD in the next five years. Further, the global growth rate is around 5.3% for this market.
QR Codes in Restaurants
A QR Code is a matrix barcode containing information about anything like location, website, price, data, etc. The information is extracted from the QR code using a scanner or camera that supports the QR code feature.
Implementing QR codes in the restaurant industry has been a significant innovation. With the help of QR codes, people visiting the restaurant can scan the restaurant’s menu within a few seconds. Moreover, it also removes the language barrier as the scanned menu from the QR code can be translated into any other language. The QR is significantly improving the customer experience in restaurants. It is also reported that 52% of the restaurants in the U.S. have started the QR system in their restaurants. According to 49% of restaurant operators, a mobile payment option is a must-have technology for diners.
Geolocation Apps for Restaurants
With the help of geolocation technology, it is possible to get the real-time location of any place or device. From this technology, customers can get the restaurant’s location on their mobile phones and efficiently track the route to the restaurant. The increase in the usage of smartphone delivery apps from 2018-2023 is shown in the graph below:
Source: InsiderIntelligence
Online Table Reservation System
The online table reservation system has significantly enhanced the restaurant dining experience. Customers can reserve the table from their homes and do not have to wait at the counter for the table. This has made the restaurant experience hassle-free for the customers, which tends to increase the ratio of people going to dine out.
Restaurants on Social Media
Social is one of the largest sources of connecting people globally. It has around 4.55 billion active users worldwide. According to a survey conducted in 2021, around 87.6% U.S. population uses social media at least once a month.
As a result of the wide use of social media worldwide also has a significant impact on the restaurant industry. As people go out to dine in, they appreciate the food quality or the place’s ambiance of social media. Likewise, if they don’t like the taste, they post it on social media with negative remarks, negatively impacting the restaurant’s sales and reputation.
IMPACT OF TECHNOLOGY ON RESTAURANTS
As mentioned above, innovative technology has helped revolutionize restaurants from when they know about a new restaurant opening to ordering and then payment. Following are some of the impacts of technology usage that have made the lives of customers and restaurant owners easier:
Convenience for Restaurant Operators
The ultimate goal of technology is to increase user convenience. Hence, restaurant technology is also doing this for its users. The use of technology reduces the chances of error as well and makes dining out an enjoyable experience for the customer. Additionally, the digitization of operations has increased the efficiency of restaurant operations and reduced the waiting times for busy customers. For instance, people can now go on restaurant websites or mobile applications to pre-book tables at a restaurant. The restaurants also provide digital payment options to make it convenient for the diners; most of the time, they can earn royalty points while paying digitally. Technology also helps overcome restaurant labor shortage problems through accurate staffing and scheduling apps.
Restaurant Contactless experience
According to surveys, customers have become more prone to a contactless experience over the past few years. The digitization of the restaurant industry, including the widespread use of self-order kiosks and digital payment options, has helped establish this objective. It has been predicted that the value of contactless payments will reach food delivery app and place their order without going through the trouble of calling a restaurant and repeating their order several times.
Source: JuniperResearch
Opportunities for expansion in the Restaurant Market
The use of technology has created immense opportunities for expansion for restaurant owners. Their expansion opportunities have increased exponentially, from using delivery apps to increase sales to attracting new customers on social media platforms. The value of the online delivery market across the world is $130.2 billion, estimated to grow to $223.7 billion by 2027. Compared with the other market, it is verified that American restaurant has more potential to grow because they have more opportunities in the market.
Innovative Restaurants Based on Trends
Technology enables restaurants to attract customers by providing an innovative experience based on emerging trends and amplifying their sales. The internet has made it possible to get fresh ideas from around the world. Many restaurants now use data analytics techniques to analyze sales and social media data to recognize the most preferred trends in the market. They can use this data to tweak their business models and attract a diverse audience.
Restaurant Marketing Campaigns
Undoubtedly, technology has revolutionized marketing campaigns worldwide. The digitization of marketing has enabled restaurants to reach a broader audience and gain popularity for their unique ideas. Restaurant owners increasingly hire social media influencers to generate hype for their restaurants. According to a survey conducted in the U.S., 48% of respondents followed social media accounts from a restaurant, and 21% chose restaurants based on posts. They can also use data analytics for proper market segmentation and to track the effectiveness of each marketing campaign. Different social media platforms also allow them to reach a diverse audience group.
Immediate customer feedback for restaurant services
One of the significant shifts in customer behavior has been their inclination toward leaving reviews after visiting a restaurant. Previously, people were reluctant to share honest feedback in person. However, technology has allowed customers to leave anonymous reviews on restaurant websites or apps. This change has empowered the customers to become more open about their experience and has helped restaurants prevent losing customers by tending to immediate and sincere feedback.
Lower Restaurant Operating Costs
A survey was conducted in the U.S. in 2019 in which 52% of restaurant owners said high operating and food costs were top challenges for them. The main objective of any business is to increase profits by lowering its costs. Technology can be employed in all operational areas of restaurants to increase efficiency and minimize waste. It can also be used in restaurants to track the costs incurred accurately, control inventory, manage recipe costing, and promote high-margin menu items.
Logistics Planning in Restaurants
Restaurants can now easily plan their logistics using automatic inventory management systems. These help them reduce waste and storage costs. Each year food items worth $100 billion go to waste in the hospitality industry. However, automated inventory management systems can reduce these numbers significantly.
Human Resource Management in Restaurants
Recently, technology has become an essential component of human resource management across industries. The restaurant labor shortage is a significant issue these days. Restaurants also use digitized scheduling and staffing systems to streamline their workforce. This technology is crucial for restaurants as most of the help they hire is part-time and helps restaurants reduce their cost-per-hire. The average turnover in restaurants is around 75%. Hence it is challenging for managers to assign duties manually.
Health & Safety in Restaurants
Various technological tools can be used to guarantee safe and healthy food at restaurants. These tools are used to assess the fitness of grocery items for use. Hence, only those items purchased will not go to waste. This is done to protect diners from illness. The restaurant business took a significant hit during the pandemic in 2019. The owners realized they would go out of business without digitizing their operations. Technology was central in making the dine-out experience contactless for the customers so restaurants could stay in business. The market size of interactive kiosks reached In 2020 26.63 billion U.S. dollars after COVID-19 in 2020.
RESTAURANT TECHNOLOGY: U.S. VS. CHINA COMPARISON
United States: Restaurants Market Size
During the last two decades, individuals have increasingly opted for restaurant food rather than homemade. The market size of the U.S. restaurant industry amounts to $876 Billion in 2021. The size of the restaurant industry in the U.S. has been expanding every year in history, with few exceptions.
U.S. Fast Food Market
Due to technological advancement, the U.S. fast food market is projected to grow at a cumulative annual growth rate of 5.8% for the period (2022-2030). The market size of the U.S. fast food market is valued at $267.1 Billion in 2022, which is projected to reach $410.1 Billion by 2030.
Source: Statista
China: Restaurants Market Size
China’s food and service industry market size was valued at $947.50 billion in 2021. Due to the increased use of technology in the restaurant industry, China’s cumulative annual growth rate is expected to be 7.4% for the time period (2023-2027).
China Fast Food Market
Due to technological advancement, the Chinese fast food market experienced significant growth. The Chinese fast food market amounted to $12.9 billion in 1999. As technological advancement started in the country, there was a boom in sales experienced during the next ten years. The sales of the fast food market increased to $84.8 billion in 2013.
As time progressed, technology continuously evolved. Moreover, it is projected that technological advancement will take place further in the industry. The industry’s sales will increase further in the coming years. The fast food segment in the Chinese market is expected to amount to $147.2 billion in 2023 and will increase to $190.09 billion in 2030.
Source: NCBI
Online Delivery (China)
The introduction of online restaurant delivery has significantly changed the restaurant industry. It has increased the sales and profits for the restaurant side by side, causing ease for the customers. Before the online delivery option started, the restaurants were missing an excellent potential for sales. But now, online food delivery has opened a new sales channel.
The total amount of online food delivery orders amounted to $66.4 billion in 2022 in China. The market for online food delivery is expected to reach $129.6 billion in 2028. The expected cumulative annual growth rate is 11.5% for the years (2023-2028).
Online Delivery (United States)
The total amount of online food delivery orders amounted to $26.1 billion in 2022 in the United States. The market for online food delivery is expected to reach $46.5 billion in 2028. The expected cumulative annual growth rate is 10% for the years (2023-2028).
Payment Method (China)
Online payment and contactless payment options have significantly improved the shopping experience of customers, which leads to increased expenditure by customers. These advanced payment options have also revolutionized the restaurant industry. In a survey conducted in 2018, 93.2% of the respondents said that they paid their restaurant bills via online payment options like Alipay and WeChat payment. While 43.2% of the respondents said they paid the bill by debit/credit card. Only 42.7% of the respondents said that they paid via cash.
Payment Method (United States)
Online payments in the United States have also flourished during the last few years. People tend to prefer the cashless payment method over traditional cash payment. In the survey conducted by TSYS, 44% of the respondents agreed that they prefer using debit cards in restaurants. While 33% of respondents said that they prefer using credit cards. Only 12% of the respondents said that they use cash in restaurants.
RESTAURANT TECHNOLOGY: EUROPE VS. ASIA COMPARISON
Restaurant Industry Size
According to an estimate, the European restaurant industry is estimated to grow by 144.3 billion USD during 2020-2026, with an expected compound annual growth rate of 3.4%.
The growth rate of the restaurant industry in Asia Pacific is expected to be 31.2% from 2020-2027. The growth rate of the restaurant sector in Southeast Asia is estimated to be 18.7% annually during the same period, with projected revenue of 23.38 billion USD in 2027.
European Restaurant Technology
The investment in food tech grew by 137% between 2017 and 2020 globally; 69% of this increase was in Europe alone. European food tech startups raised €2.7B in 2020 alone. One of the prominent markets for food tech in Europe during 2020 was cloud kitchens, as 67% of the total €460M invested in food services went towards cloud kitchens. Cloud kitchens combine the real estate sector and kitchen as a service – these locations are renovated and equipped to be rented out to restaurant operators. A cloud kitchen in the United Kingdom, Karma Kitchens, raised €291M in investment in 2020. Now European restaurants are looking for technological solutions that can help them completely digitize their supply chains.
Asian Restaurant Technology
The three largest food delivery markets in Southeast Asia are Singapore, Thailand, and Indonesia; their market values (MV) are shown in the chart below:
Source: TechCollectiveSea
This region’s annual compound growth rate of online grocery sales and food delivery is around 11%. In 2021, an artificial intelligence startup raised 5 million USD to assist with digitizing restaurant operations in Southeast Asia. Also, a Malaysian inventory management platform raised 4 million USD to connect restaurants directly to suppliers. Therefore, it can be said that the focus of the Asian food tech industry is shifting toward restaurant operations as well.
Comparison of Food Delivery Apps
Food delivery apps are the most prominent technology solutions that have helped revolutionize and expand the restaurant industry worldwide. China has the world’s largest food delivery market, with a value of 200.5 billion USD in 2022 and an expected annual compound growth rate of 14.5% from 2023-2028.
Source: ExpertMarketResearch
The spread of coronavirus hit the restaurant sector hard, and European restaurants rapidly adopted food delivery apps after COVID-19. A survey was conducted in Europe by McKinsey in which 35%-55% of the respondents said they intended to use delivery apps in the future. The delivery apps also made possible the expansion of delivery-only kitchens during this time which helped the owners in cost-cutting. Thus, Europeans have become more comfortable with click-and-collect ordering during the past few years. All this was made possible due to the advancements in restaurant technology.
MOST POPULAR RESTAURANT TECHNOLOGY
| Europe | Asia |
| Ghost Restaurants | AI-powered restaurant management |
| Self-service Kiosks | Robot restaurants |
| Voice Ordering | Digital Kitchens |
| Mobile Order & Payment | Self-service terminals |
| Back-of-house digitization | Vending machines |
| Online Menus | Pre-order Apps |
Source: McKinsey
Conclusion
The Oak Business Consultant concludes that technological advancements have entirely revolutionized the restaurant industry. The technological advancements have proved to be beneficial for the customers as well as for the restaurants. It has significantly improved the customers’ dining, delivery, and payment experience. Moreover, for restaurants, technology has enhanced revenue and profits. Due to the ease in the ordering process and improved dining experience, the restaurant industry is projected to grow at a cumulative annual growth rate of 10.76% till 2029.
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