The True ROI of IoT in Food Service
4 Min Read By Tom Woodbury
“A penny saved is a penny earned.” No truer words were spoken by Benjamin Franklin and is a mantra that resonates deeply for businesses in the food service industry—many of whom are in recovery mode in the midst of the COVID-19 pandemic. With operational costs sky high and profit margins razor thin (ranging on average from three to nine percent), restaurant operators are continually looking to keep costs down without degrading quality or service. It comes as no surprise that many are reluctant to spend or invest during these challenging times. But what if by investing in technological innovation restaurants achieved both bottom- and top-line revenue growth? It’s possible by looking at the true ROI.
Recovery Mode Post-Pandemic Lockdowns
The COVID-19 pandemic has made life even more challenging for restaurateurs. Lockdowns and restrictions cut into hours of operation and profits. In 2020, 90,000 restaurants and bars in the United States closed according to the National Restaurant Association. And the organization estimated that the industry as a whole lost $300 billion.
Further, consumers have shown interest in returning to restaurants, but it’s still a slow march. At the same time, restaurants are grappling with ongoing staffing issues. This puts even more pressure on restaurateurs to carefully calibrate costs and protect profit margins without sacrificing service.
IoT to the Rescue
Restaurateurs have options to mitigate these challenges. One desirable option is to leverage Internet of Things (IoT) solutions. They can deliver energy and maintenance efficiencies, automate mundane tasks to free up employee time, and increase operational efficiencies. And each of these areas can reduce operational expenses that translate into tangible cost savings.
Low-power IoT solutions, in particular, offer added benefits because they draw much less power than higher-price cellular or Wi-Fi-enabled solutions to transmit data, which means devices last longer without the need for replacement batteries, resulting in a lower total cost of ownership. Plus, the solutions deliver deep indoor coverage, which is paramount for food services operators who typically need coverage for walk-in coolers and freezers made of dense materials and in areas where signal strength is weaker. Finally, low-power IoT solutions require fewer access points, making deployment easier.
The ROI is There…You Have to know Where to Look
As restaurant owners look to cut costs, energy consumption is an obvious area to exploit. Restaurants draw a tremendous amount of electrical power for lighting, refrigeration, air conditioning, and – of course – gas for cooking meals. A typical office building uses $2 of energy per square foot, compared to restaurants’ $12 per square foot. That’s five to seven times more energy used by food service than in a commercial space.
IoT-based automated energy management systems enable owners to reduce utility costs. This is key when a 20 percent reduction in energy costs translates into an additional one percent profit. One option is to deploy a monitoring platform that optimizes the use of cooling systems and Air Handling Units (AHU), which circulate and ventilate the air inside buildings. These systems integrate data from the electrical grid to modulate energy consumption when rates are highest.
An upward adjustment of a mere two degrees on hot days can significantly reduce energy consumption. Because of automation and IoT connectivity, these systems require no human intervention to make the adjustments and lifts the burden of energy management from staff to focus on the customer experience.
Speaking of Temperature Monitoring…
IoT systems can track temperatures through sensors on fryers, for example, to maintain optimum levels for cooking efficiency and food safety. The systems can lower temperatures when detecting those fryers are not in use and quickly raise them when needed.
Temperatures in refrigeration units also must be monitored carefully to prevent food spoilage and maintain quality. Usually, checking temperatures periodically and keeping a manual log for safety and regulation compliance is an employee task. The checks are frequent and time-consuming, pulling staff away from responsibilities with a bigger impact on sales and customer experience.
A more reliable and efficient approach is to equip refrigerators with IoT-connected sensors that monitor temperatures 24/7 and streamline the logging process. If temperatures fluctuate away from optimal levels, the monitoring system alerts a manager to take quick corrective action.
By automating this process, it minimizes error, improves food safety procedures, and prevents inventory spoilage. When you consider that the average three-year ROI on food waste reductions programs is 600 percent p, the impact on ROI becomes even greater. Aside from minimizing food costs, time savings is another area affecting ROI. One MachineQ customer noted that by automating routine tasks like temperature monitoring of refrigerators and freezers, it saved the company up to 12 percent of an employee’s time. What does this time savings mean? Fewer employees are needed because restaurant operators can repurpose an employee’s saved time to focus on customer service. As a result, this savings impacts top- and bottom-line revenue.
Water Damage Prevention
IoT solutions can also help restaurants prevent water damage caused by leaking pipes and faucets, clogged drains, and malfunctioning cooling units. Any of these issues can severely damage buildings and equipment and even temporarily shut down a restaurant. Each year, insurers pay out $2.5 billion for water damage claims.
Thanks to IoT monitoring applications, sensors can monitor water, humidity, and temperature to detect leak anomalies that indicate problems such as leaking pipes. When something goes wrong, the sensors use wireless connections to issue alerts and can automatically trigger a valve shutoff to minimize damage.
Data from these sensors is collected continually to help with water use management and reduce waste. Technology is beneficial in preventing damage that can cause shutdowns and reducing water use when possible.
Knowing Where the ROI lives?
Profit margins will always be narrow in food service, but IoT solutions help boost competitiveness by modernizing operations and furnishing an ROI that’s difficult to see when it looks—on the surface—like an investment. Plus, when restaurateurs take the approach of investing in one or two solutions that have the most immediate ROI then look to build on that foundation, it further drives efficiencies and profits, enhances the customer experience, and offers a lower total cost of ownership (TCO).