digital transformation

Digital transformation helps restaurants manage consumer demands and economic challenges

By Luke Rose

Can restaurants use digital transformation as a tool to balance their bottom lines, consumer demands, and economic challenges? The current economic climate, paired with aftershocks from the pandemic, has fuelled a decline in consumer discretionary spending. As a result, many restaurants increased prices as they race to get their heads above the water and keep up with the soaring inflation.

Chili’s reported a 6.6 per cent decrease in traffic in Q3 of 2022 as restaurant visits became less frequent. Applebee’s also recently announced it is anticipating the closure of 10 to 20 locations by the end of 2023, due to increased competition during the economic downturn.

Despite these challenges, the quick service restaurant (QSR) industry has managed to maintain positive revenue by embracing digital transformation. While this is partly due to their inflated prices, their speedy technology adoption has played a crucial role. However, their biggest hurdle will be fostering customer loyalty and finding ways to bring back customers who may have been put off by higher prices. By leveraging a technological edge, they can capitalize on this opportunity.

Think like a tech company

The competition among restaurant brands in the casual dining sector is fiercer than ever as they compete for customers, fueling innovation as they strive to create unique and meaningful guest experiences. In today’s day and age, every business needs to think like a tech company if they wish to succeed. The pandemic showed that companies who already had the technology in place to integrate popular and COVID-friendly features (like online ordering and curbside pickup) experienced a significant increase in sales – a distinct advantage.

Unfortunately, as brick-and-mortar doors closed during that time, many restaurants without that technology missed the boat, losing out on significant revenue.

The casual dining space has continued to adapt to the times and keep up with the latest trends in technology. In fact, with the huge drive for sustainability initiatives, Chipotle has recently announced its new all-electric restaurant design in order to cut its carbon emissions in half by 2030. While QSRs are typically known for speedy food service, they need to pivot quickly, prioritizing technology trends as part of their path to success.

The customer experience

In today’s age of digital saturation and convenience, customers are seeking seamless personal interaction, and this is where casual dining chains are winning. As a result of the pandemic, many customers now want these experiences in their homes, and with third-party food delivery companies making it easy for people to order their food straight to the door, casual dining has to go even further to offer that seamless customer experience.

Many QSRs have embraced the world of apps and widgets to address the decreased number of in-store visits, with 52 per cent of quick-service sales expected to be digitally- driven by 2025. Apps are an effective, low-cost way to maintain regular and consistent customer interaction and drive repeat behaviours through AI-powered technology.

For example, after ordering a specific meal, apps can send customers a notification offering them the option of reordering the same meal at the same time the following day, all with a simple click of a button. Some QSRs have taken this a step further, utilizing AI to create personalized menus for each customer based on their buying habits. This type of technology also encourages upselling by offering an additional side or new menu item when customers order.

With this level of personalization, restaurants can really embrace the experience that customers are seeking while focusing on convenience and loyalty. Today, customer retention is more valuable than customer acquisition, as loyal customers spend 31 per cent more than new customers. Restaurants can capitalize on this technology with a customer-focused approach that actively works to reward loyal customers and build long-term relationships.

Partnerships are key

Although apps are leading the way in 2023 and can really level up the customer experience, it is a trend that has been adopted by the majority of casual dining chains in the past few years. So, to stay ahead of the curve – and the competition – restaurants need to go one step further in their digital transformation.

Cross-branded partnerships provide that opportunity, and we are now seeing restaurants partnering with sports stadiums and airlines partnering with hotels. And it doesn’t have to end there! Restaurants can get creative, even working to offer cross-platform loyalty programs or benefit systems through these partnerships to reach another, larger audience. In this case, although a customer’s meal may be a little more expensive, they could be rewarded by getting early access to a sporting event or free parking at the game. Incorporating features like this will bring a unique aspect to a loyalty program and help to justify the higher prices we are seeing across the board.

What’s next?

With the speed at which digital innovation is accelerating, the restaurant industry needs to ensure it produces personalized experiences for customers if they want to become market leaders and keep sales up during the downturn. Regardless of brand size, a customer’s behavioural and purchasing data can be harnessed to deliver a more meaningful experience to the user with the help of digital transformation.

Luke Rose, Principal Product Manager at Bottle Rocket, explores why Restaurant brands need to embrace the rapid pace of technology advancements if they wish to remain competitive during the economic downturn.