How technology is disrupting the restaurant industry

Tom Custer
Like many industries, the restaurant sector faces the challenge of keeping up with the dynamic changes of consumers’ lifestyles, trends, and demographics. Brands must be focused and purposeful in their actions, to drive for an ecosystem of change, both internally and externally.

Restaurant brands, like many other retail brands, are facing disruption from ongoing technology transformation. There are key trends that have emerged at the forefront of this industry. This rise of technology has also pushed the barriers to entry lower than ever for new, emerging brands, making it more important than ever that restaurant brands of all shapes and sizes are fast movers and position themselves for future growth by being authentic, fearless, and human, to strengthen their brand experiences and achieve in-market success.

 Redefining the path

Rapid advances in technology—and the access to information and the seemingly instantaneous adoption rates among consumers that come with it—is a leading force that is constantly redefining customer needs and expectations. The prevalence of connected mobile devices continues to rapidly evolve and be adopted in new ways by all types of consumers. It has redefined the path to purchase for all retail, with special implications for restaurants. Today, there are 64 different paths, rather than just one from 10 years ago, according to a KPMG report.

Technology has certainly led the transformation of an industry, especially within the quick-service and fast-casual dining sectors. This trend shows no signs of slowing down, as more and more consumers use their mobile devices to explore, order, carry out, pay, and share their food experiences. It’s critical for brands to develop and strengthen their mobile experiences by developing consumer-inspired and brand-relevant apps and digitally enhanced offerings, including integration with their Point-of-Sale (POS) system and loyalty programs. In 2018, Dominos introduced 150,000 of its Hotspots in the US, to enable delivery to parks, pools, and other nontraditional ordering locations, streamlining with the help of digital devices the formerly confusing process of meeting a delivery person without an address. Restaurants also used to think about specific time frames for meal occasions, but those lines are blurring. It’s now about “my time,” meaning lifestyles are more varied than they used to be, and consumers want to eat when they want to eat versus at specific times of the day.

The in-store advantage

In an era where consumers crave not only convenience but experiences, the restaurant sector is ripe with opportunities to deliver upon­—and exceed­—expectations. In a seemingly counterintuitive move, given the growing prevalence of digital, Starbucks discontinued their online store in late 2017, making their merchandise available only in-store. Starbucks has long been an experience leader that has always stressed the importance of theater and romance in-store for consumers, so this move away from e-commerce reinforces the brand’s experience principles.

The “create your own” trend that has been sweeping the industry also enables an in-store experience that cannot be delivered through digital alternatives. This movement appeals to consumers’ senses, while enabling the level of control and customization they seek. This also provides the transparency and access to alternatives for diverse dietary needs that set certain restaurants apart from the rest. YUM China has a very localized menu in its KFC locations. To maintain its high market share, the company continues to refine itself for a younger audience in the Chinese market, including adding new menu items that align with emerging dietary trends, renovating many of its stores to showcase a contemporary industrial-chic look, and opening an experimental outlet called KPRO by KFC, which is targeted at young, tech-savvy consumers who seek new tastes and an immersive dining experience.9

A focus on health

From fine dining down to Quick Service Restaurants (QSR), healthy alternatives that meet the needs of those on exclusionary diets are emerging. According to a Nielsen survey of healthy eating trends around the world, consumers are seeking fresh, natural, and minimally processed foods. Younger consumers­—millennials and Gen Z­—are willing to pay more for healthy foods. Additionally, health attributes are the most important in emerging markets, where people are also willing to pay a premium for food touting healthy benefits: 43% of global respondents stated that natural ingredients and foods free of GMOs are a very important consideration. Additionally, 36% of global survey respondents stated that they have a food allergy or intolerance.

This trend is being mirrored in shifts occurring within the restaurant industry, as companies alter their menus to meet these consumer demands and create the dining experiences that reflect their offering, to appeal to people’s desire for transparency and storytelling. As a result, there are strong growth trends for those companies that cater to food sensitivities in the UK, Germany, and the US, as large brands take on transformation. For instance, KFC has a very clear brand positioning: “Always Original.” The brand also offers an example of mobilizing­—not just talking about—transformation, such as the announcement that, by the end of 2018, all chicken purchased by KFC in the US will be raised without antibiotics. This move marks the first time a major national QSR brand extended its antibiotics commitment from boneless chicken to chicken on the bone, setting new standards for the industry.

Responsible dining

Today’s consumers place an increased onus on the companies they support to be driven by social responsibility. Consumers are more informed than ever, and in addition to their expectation of transparency, they also have an expectation of accountability for the brands they support. In the US, 64% of consumers believe that a company’s corporate social responsibility policies affect their purchase decisions. Additionally, in Britain, 86% of diners believe that restaurants should focus on creating menus that help them make sustainable food choices. Ethical employment is becoming a predominant topic in this industry as well. Treating staff fairly is cited as one of the UK-based Sustainable Restaurant Association’s 10 focus areas, and consumers seek brands with transparency and an ethical focus.3

McDonald’s introduced its Scale for Good platform, which highlights its responsibility and ability to make a positive impact as one of the largest restaurant companies in the world. With a focus on a few global priorities that the company believes will make the greatest difference and drive industry-wide change, some of these focus areas are in close alignment with the concerns of many conscious consumers, such as climate change, food sustainability, and recycling. Waste reduction is a key action consumers are expecting companies to undertake; in addition to the push to find plastic alternatives and increase recycling efforts, restaurant brands need to be creative with how they handle surplus food. Danish app Too Good To Go and US app Food for All help restaurants sell surplus food and reduce waste around the globe.

The Instagram effect on restaurant design

Consumers crave more than just food: They are seeking a connection with the brand and its story, especially as it relates to the history, quality, and source of the menu offering. This desire for unique stories reflects the continued increased interest in ethnic cuisine across markets. Restaurants are redefining their experiences through retail design and the inclusion of storytelling elements to communicate these links. Restaurants need to offer a unique in-store statement to bring guests in as well as to make their experiences more share-worthy, which has grown into one of the most important marketing vehicles for brands.

Consumers like to share their food experiences with friends and others via social media. Experiencing food is no longer defined by the act of eating it. All elements of the customer experience are now part of the meal. With third-party delivery solutions emerging globally, restaurants need to differentiate themselves by doing something unique within their retail space to entice consumers to select their experience, not only their offering, above their competitors’, as well as their delivery partners. This is changing the game in all aspects of the in-restaurant experience, from the colors and graphics on walls to the relationship a consumer can have with back-of-house operations. Unique experiential elements that deliver a seamless experience are key, and that’s not just in the dining room. This is why we are seeing more open design concepts, with transparency into the kitchen, unique storytelling through graphics and messaging, and other narrative efforts that create shareable moments that appeal to a wide range of customers.

Beyond millennials

The millennial generation is aging, and as their incomes are increasing, so is their love of restaurants. With the trend of eating out more, this consumer segment spends more per capita than any other generation on food outside of the home. However, it is not just about millennials anymore. As generation Z has challenged brands to rethink the customer experience, this generation has impacted the consumer mind-set across all demographic groups. Globally, consumers are eating outside of the home more than ever before. In the US, dining out surpassed dining at home in late 2016, and the gap continues to grow.7 All consumers, whether they are among the emerging digitally adept Gen Z or older generations, are accustomed to being constantly connected and having their increasingly demanding expectations concerning quality, sustainability, and convenience met where they are. To relate to this changing breed of restaurant patrons and the different motivations that govern their dining choices, restaurant brands need to offer the human experiences they are seeking through meeting their expectations with authenticity, clarity, and purpose.

Acknowledge that business as usual simply won’t cut it anymore. Consumers today are empowered to control their own engagement and experiences, and in this category in particular, they have many options available to consider and engage. Innovation and change are integral to success for brands across all retail today. So, learn from the brands that are truly mobilizing transformation in their business, to strengthen and continue to delight and develop relationships with consumers.

Executive Director, New Business Development
Get in touch