2023 Restaurant Tech EcoSystem: Feeding the Bottom Line
Together in between TechTable again Vita Vera VenturesWe are pleased to share an updated map of the 2023 Restaurant Tech Ecosystem.
We all saw that the pandemic brought a wave of experimentation in the restaurant technology space, but we also know that technology-driven change is not always straightforward.
At the beginning of 2022, we made bold predictions about the place of restaurant technology in 2023, as we expected a lot of acquisitions earlier (acquisitions driven primarily by technical talent vs the value of strategic technology). This was due to a tight tech job market (at the time) and increasingly challenging financing and interest rate conditions.
However, with the recent wave of macro tech layoffs, the tech labor market is no longer strong, and we believe that many restaurant tech companies may be forced to close rather than find a soft spot through acquisitions. We have already seen a strong reset in financial efficiency requirements and start-up rates in the sector. This massive shift may create the potential for upside opportunities, but most early-stage assets across the sector are overfunded and underfunded single-point solutions.
This is ironic as the demand for technology-driven solutions has never been stronger, but companies without the right growth metrics may struggle to survive. The inflationary environment also forces difficult decisions on users, which may further reduce their willingness to engage with new solutions.
With that in mind, we’re happy to share our 2023 Restaurant Tech Ecosystem, which serves as a current heat map of the broader ecosystem within the US (and obviously not perfect).
Click here to enlarge/download map image. Click here for a downloadable PDF.
A Journey from Point Solutions to Complete Tech Stacks
While single-point solutions for things like online ordering, loyalty programs, and delivery were popular during the pandemic, we’ve reached a point now with the most multi-point solutions on the market.
Technology stacks that require multiple logins now create a cognitive burden for employees, rather than the intended promise of efficiency and ease of use. As a result, operators are beginning to look for integrated systems and smaller technology stacks that can do more. (See the comments in the previous section about folding possibilities!)
Restaurant technology consultant David Drinan succinctly points out the most important thing that is close to most users: “The restaurant industry is waiting for technological innovation that will bring high margin, increased revenue.”
On the operational side, managers still struggle with certain areas such as planning and inventory management. These tasks can be time-consuming, especially for independent restaurant owners with limited resources. As a result, we’ve seen a growing phase of solutions that can automate these tasks and provide real-time data to help operators make informed decisions.
Help *I’m still looking for it*
Labor shortages in the restaurant industry have been a major challenge for operators in recent years, and labor development remains a priority for all operators. The pandemic has caused many workers to leave the tourism industry permanently, leaving restaurants short-staffed.
According to the National Restaurant Association, nearly two-thirds of US restaurant workers say they are understaffed to support current demand. Instead of replacing this lost population, many operators are turning to technology to multitask and reduce the need for human labor.
From digital menus and ordering kiosks to automated kitchen equipment, there are many ways technology can help restaurants run more efficiently with fewer employees. By automating basic tasks like taking orders and processing payments, operators can free up their staff to focus on more complex tasks that require human expertise, such as customer service and food preparation.
Another trend the restaurant industry is facing is the changing expectations of younger workers when it comes to the employer/employee relationship. With more emphasis on work-life balance, career development, and job satisfaction, young workers want more than just a paycheck.
To meet these expectations, operators are looking for workforce management solutions that can help improve engagement, development, and rewards for their employees. This includes tools for tracking and managing schedules, as well as new solutions for tipping and other compensation methods. By investing in these solutions, operators can not only attract and retain top talent but also improve the efficiency and productivity of their workforce.
Finally, it should be noted that basic planning and labor management tools can have a significant impact on profitability by reducing labor costs and improving operational efficiency. By automating scheduling and timekeeping, for example, restaurants can reduce the likelihood of overstaffing or understaffing, which can be costly in terms of wasted work or lost sales opportunities.
Ultimately, the ability to use technology to improve employees is essential for restaurants to remain competitive in a challenging workplace. While kiosks and text ordering have shown promise in the QSR space, there are many other opportunities for technology to make a positive impact on the industry as a whole.
Ghost Kitchens: It’s even more complicated
In our 2021 restaurant tech preview, we had a lot to say about this growing sub-category, including the challenges of success (aka profitability) within the ghost kitchen business model.
Now, as the concept of virtual and ghost kitchens continues to evolve more and more, it is important for operators to understand the complexities involved and navigate these challenges to create ghost kitchen operations.
One major obstacle has been the tension between virtual brands and existing businesses, where adding virtual brands can lead to direct competition with their existing businesses. Finding the right professional and working partner to balance the two is essential.
Additionally, ensuring food safety and maintaining quality standards across multiple brands can be challenging. Many mainstream brands do not have distinct value or clear taste standards, leading to pressing food quality issues and displacement from large third-party delivery platforms.
Last Mile Magic
Making the economics work for restaurant delivery is a growing priority in the industry. This includes better collaboration between POS/Kitchen systems and delivery providers, better routing and batching systems, localized kitchens, and of course delivery logistics.
We’re tracking more than 20 companies in the neglected last mile category, but it’s still early days with many (all?) solutions working in limited environments and customer testing. So we have left this piece in the infographic for 2023, but do not forget to keep your eyes on the sky, as we have seen the recent growth of companies that bring drones to the yard that seem to be faster and better in the environment (if they can pass the noise and concerns about control).
GenAI is on the menu
Tech entrepreneurs have long dreamed of personalized meal recommendations, but few have succeeded in truly personalizing preferences beyond dietary concerns, allergies, or ingredient likes/dislikes.
However, we have now reached a unique time where new technologies like ChatGPT will be able to create meaningful and personalized interactions with visitors. This has always been the basis of the early varieties of AI-driven restaurant technology, but the ability to use raw data to engage and connect with guests in a more personal and conversational way is truly game-changing.
Using data from past orders and interactions alone, ChatGPT can help create personalized experiences for guests, from recommending menu items to offering personalized promotions. ChatGPT can be an important part of a restaurant’s marketing team by creating content, which has the ability to translate into different languages easily. This can give operators a significant competitive advantage as consumers seek a personalized experience. We’ve started to see ChatGPT’s capabilities with free templates offered to restaurant operators already.
In addition, conversational AI like ChatGPT can be a valuable tool for restaurant operators who want to understand their performance metrics. By integrating ChatGPT into their technology stack, operators can ask natural language questions and receive real-time answers, empowering them to make informed decisions about their operations.
Emerging Restaurant Technology Concepts to Watch
- Discuss/AI across marketing and operations
- Technology-enabled employee support and training (for example, personalized benefits, touch options, or language options)
- AI programming to free managers
- Values are strong
- Reusable containers + technology-driven circular economy for foodservice
Looking forward – As always, we welcome your thoughts and feedback, and look forward to continuing to pursue this field together for years to come. Contact us: Brita@vitavc.com and hello@techtablesummit.com.
