Hospitality Technology published its annual survey recently. The survey represents around 19,000 restaurants across all segments of the market. My only gripe is that their usual, weekly articles are too generous; when they survey restaurants you always see some statistic like, “80% of restaurants will invest in online ordering this year.”
No they won’t.
80% of restaurants don’t even know their COGS. The real number of merchants adopting online ordering is way, way less than that 80% figure. Ironically, Hospitality Technology has a section in their annual report that addresses how often statistics for intent and action are so different.
Intent and action are two very different concepts, a fact illustrated by historical data on restaurants’ intended investment areas versus actual spend. CRM was supposed to get a bigger piece of the IT budget in 2016, but that didn’t happen.
They should be sticking this disclaimer in their weekly articles too…
That means we should all take this next graphic with a grain of salt.
Restaurants say the number one reason they don’t deploy or use technology is because it is difficult to measure ROI. (For fun, number three is because their legacy POS systems can’t connect to any useful solutions. Hurray for cloud POS!)
But I actually don’t doubt this 42% figure at all. Here’s why.
If you’ve had the opportunity to examine solutions in-market today, you can’t help but wonder who designed them. They’re kludgey. They’re unconnected. They’re built from two very different perspectives but lead to the same confusing outcome.
The first perspective is the product built by the former merchant who has no idea what’s actually possible, nor what good business practices are. The product is usually really, really lacking in sophistication. A classic example is a forecasting tool that averages the last four Fridays, outputs it to an excel sheet, and lets the operator adjust it based on how they think externalities like weather will impact their business.
I don’t know how windspeed will objectively impact my customer patterns, but you’re going to give me flexibility to do that?
The second perspective is the product built by the engineer who has no idea how merchants run their business. Engineers often get overzealous with their idea of what a customer should do. They expect the customer to rearrange their life to worship the product and take advantage of all their self-proclaimed features.
Look, I get that most merchants have a lot they can learn about running a better business, but making them pore over flashing charts for six hours to appreciate the sophistication in your product to get their answer is stupid.
That’s why 42% of restaurants say they can’t uncover the ROI of using a solution… both of the above approaches lead to products that don’t do what needs to get done.
Good news is on the way.
Because brick and mortar is so far behind the rest of the world, there are have been great improvements in solution delivery. Many other industries have realized the value in prescriptive analytics because it eliminates the need to spend large amounts of time consuming solutions, and it’s forward-looking, meaning corrective actions can be taken ahead of time.
Most importantly as it relates to restaurant concerns, these solutions recommend actions with very clear ROI outcomes. For instance, American Airlines might get an internal alert saying something like,
We’re recognizing decreased demand for flight AA314. We’ve lowered economy prices to $218 and anticipate achieving 91% occupancy. This will produce a fully-weighted EBITDA of $8,031 for flight AA314.
Granted, airlines and hotels are a little more advanced in that machines are automatically taking corrective actions based upon tolerances from data scientists. But if American Airlines didn’t automatically change the economy seat prices, a business manager would have seen this exact same output and would have known that changing economy prices to a recommended $218 would produce a profit of $8,031 for the flight.
Restaurants and retailers should demand this level of thought from their solutions providers because similar solutions are already used in other industries. There are a number of reasons why brick and mortar hasn’t seen such solutions yet, but the biggest is that they’re procuring solutions from old colleagues despite product usefulness.
It sure seems like some serious cognitive dissonance when you stare at that 42% figure.