Will 2024 be a comeback year for restaurants?
Despite challenges including inventory costs, commission fees and staff turnover, many restaurant owners are expressing optimism about moving forward, according to TouchBistro’s 2024 State of Restaurants Report. Ninety-four percent of operators are planning some form of expansion and more than half of the 600 U.S full service restaurants surveyed plan to introduce catering services.
Additionally, the report found that AI is already part of mainstream restaurant operations as 89 percent of operators surveyed are already using it in their restaurants in some way. The top three ways operators are using AI are through digital assistants (35 percent), chatbots (34 percent) and predictive analytics/reporting (31 percentt).
To delve more into the results, Modern Restaurant Management (MRM) magazine reached out to Matt Zibell, VP Technology at TouchBistro.
What results did you find surprising and why?
I think I was most surprised by the fact that 72 percent of FSR operators said they had a dedicated website – I thought this would be higher. I think most of us know that now, more than ever, the dining experience starts long before the customer even walks through the door. Even our Diner Trends Report found that a whopping 84 percent of restaurant goers always or often look up a restaurant menu ahead of time, and 79 percent always or often look at a restaurant’s website. So, to me, finding out that over a quarter of restaurants don’t have a website was a bit surprising.
Many operators are starting to realize that this omni-channel approach is increasingly essential to guest engagement in order to ensure they’re top of mind from the moment customers discover your restaurant (which often begins online) until well after their meal ends.
I think one thing we’re seeing more and more is that restaurants have to take a 360-degree approach to guest engagement. The website is one part of it, but it’s also about maintaining an active social media presence, offering a loyalty program, and investing in ongoing marketing campaigns. I think many operators are starting to realize that this omni-channel approach is increasingly essential to guest engagement in order to ensure they’re top of mind from the moment customers discover your restaurant (which often begins online) until well after their meal ends.
What can restaurant operators do to better handle inventory and labor challenges?
Inventory: Generally, when food costs go up, operators will raise their menu prices by a small amount. But what we’ve found is that operators have been leaning on menu price hikes to cover their expenses for more than two years now, and they’ve finally reached the limits of what consumers are willing to pay. A whopping 90 percent of operators reported seeing some change in customer behavior from menu price increases, including customers ordering fewer dishes (30 percent), ordering less alcohol (28 percent), tipping less (34 percent), and generally spending less overall (33 percent).
It’s becoming more clear that, given the current state of the economy, operators have to shift their focus from increasing revenue to cutting expenses. It’s now essential for operators to focus on reducing their expenditure on food in the first place, which is something that’s actually quite straightforward if you have the right inventory management system. These tools can help operators identify certain underperforming menu items (something that 35 percent of operators are now doing), identify and swap expensive ingredients for less expensive substitutes (something that 28 percent are doing), and manage suppliers (which 41 percent of operators are doing).
Labor: From a labor standpoint, 2023 was a relatively good year for operators. Just 82 percent of operators said they were short one or more staff members, which is far better than the 97 percent who said the same just last year. But while it is easier for restaurants to find new staff, the flip side is that turnover remained unchanged at 28 percent (and as high as 34 percent for multi-units).
Even with operators offering higher wages, it’s pretty clear that many restaurant workers are still not fully satisfied – just think about the recent wave of unionization across the sector. The best course of action for operators here is to make the jobs of their staff easier and more satisfying, which can be done in a lot of different ways. One easy option is to switch to intuitive, user-friendly restaurant tech (we saw that ease of use was the top factor for 40 percent of operators when choosing a new POS). Similarly, automating repetitive, time-consuming tasks can make day-to-day operations much easier for staff (this is something that the majority of operators are already starting to do, with 65 percent automating inventory, 72 percent automating online ordering, 66 percent automating sending orders to the kitchen via KDS, and 67 percent have automated email marketing).
What can restaurateurs take away from the responses of their fellow operators?
I hope they come away from reading the report with a sense of optimism. While profit margins were down in 2023, there were lots of signs that the industry is heading in the right direction. Both rent and labor costs were far less of a concern for operators than they have been in past years, and the staffing shortage has eased considerably. Not to mention, operators are still seeing positive gains from things like online ordering and loyalty tech.
I think our report reveals that 2023 was a year characterized by a lot of regrouping and reorienting of business priorities. Many took the opportunity to reevaluate their businesses’ needs in 2023, carefully considering everything from where automation and AI can improve day-to-day operations to creating more innovative menus. And with that more solid foundation, I hope operators will feel optimistic about 2024.
Why do you feel so many restaurateurs are planning for expansion and investing in their businesses? Are they starting to breathe and feel more confident and recalibrating after pivoting and being in survival mode due to the pandemic?
I think that’s definitely part of it. The past few years forced operators to make a lot of big changes all at once and now they’ve finally found a groove with those new processes, like online ordering (which 95 percent of FSRs say they currently offer), cloud POS systems (which 76 percent of FSRs are now using), and reservations tech (which 62 percent of FSRs are using). They’re over the learning curve and are now looking at how restaurant tech can help them make gains in efficiency that will allow them to grow and expand much faster and with ease.
But I also think today’s restaurant tech is simply better equipped to help them with that expansion. Today’s restaurant tech is well suited for growth because it ensures consistency and allows for the gathering of information from multiple stores. Having all your essential tools accessible from one centralized platform not only makes things easier from an operational perspective, it also allows you to expand quickly and cohesively without complicating your restaurant’s tech stack.
How do you anticipate restaurants will be investing in their tech stack this year?
I think automation will be the biggest trend of 2024. In most cases, we found that operators had either already automated essential processes, or they wanted to do so. For instance, 59 percent of operators have already automated staff scheduling, but a further 34 percent of them want to automate this process. Similarly, 65 percent have automated inventory, but a further 31 percent want to. And, 67 percent have automated email marketing, while a further 30 percent want to.
On a related note, I also expect more operators will invest in AI voice services to answer phones and handle frequently asked questions such as hours and policies. While most operators aren’t yet comfortable having AI handle phone orders or reservations, automatically answering basic questions should significantly reduce employee hours spent on the phone, freeing them up to focus on other tasks. It’s this kind of experimentation with AI that I see continuing well into 2024.
In what ways are operators using automation and AI now and how do you expect to see that evolve?
The majority of restaurants are already using automation to make day-to-day operations more efficient, and this will only continue in the year ahead.
Initially, I was a bit surprised that 89 percent of operators were already using some form of AI in their business. I think when many of us think of AI, we think of those really buzz-worthy stories, like Domino’s creating a voice assistant that allows customers to order a pizza simply by speaking it into Domino’s app, or IHOP using AI to generate order recommendations for customers.
When we actually dug deeper into the data and asked restaurateurs how they’re using AI, we found that it’s not really these flashy, customer-facing applications. A lot of it is about using AI quietly in the background to make operations more efficient.
But when we actually dug deeper into the data and asked restaurateurs how they’re using AI, we found that it’s not really these flashy, customer-facing applications. A lot of it is about using AI quietly in the background to make operations more efficient. For instance, 31 percent are using AI-generated analytics and reporting to better understand their numbers. And 41 percent of multi-unit operators are using optical character recognition (OCR) technology, which is used to speed up manual processes like taking inventory and submitting invoices.
It’s the same with automation more generally. Even though customers don’t notice it, it’s already happening in the background of so many restaurants. For instance, a whopping 70 percent have already automated payroll, 67 percent have automated invoicing, and 65 percent have automated accounting/bookkeeping. These are all tedious, routine back office processes that would usually have someone stuck in an office for hours on end, it gives staff back valuable time. In turn, that time can be spent on more meaningful work, such as customer service and creating real connections with diners. The true benefit of this kind of technology for the restaurant industry is that it allows people to focus their time and energy on growing their business, rather than being burdened by paperwork.