State of the Stone-Age Restaurant Industry
In 2011, the Financial Times wrote that “capturing the new value in the digital space over the next several years will depend on the ability of companies…to develop strategies that bring them closer” to customers.1 Five years later, the customer-service-heavy industry, restaurants, ranks last out of 15 sectors in industry digitization.2 Restaurants’ variable nature, high degree of “hands-on” interaction with customers, and generally lower usage of technology all contribute to the industry’s technological lag. The big challenge with digitization of restaurants is that “tools have to work in the context of restaurant work: rarely in front of a computer, multilingual, and time strapped.”3 Restaurants’ current solutions for supply, labor, and cost management are fragmented and rudimentary at best. Existing technology programs are not optimized for restaurant owners, staff, or customers, as they focus on only one area, do not integrate easily with other systems, and do not leverage cloud connectivity.
Born out of this industry’s vacuum, Toast attacks this issue and uses innovative technology to deliver a complete solution for the restaurant industry’s needs: operations, orders, customers, and employees.4 Toast’s founders realized that restaurants live and die by their point-of-sale (POS) system, most versions of which were built back in the 80s and 90s, “not cloud-based, not-mobile, and not enabled for customers who are used to tablets.”5 The company took advantage of this opening in the industry and created a multifunctional POS software platform complimented by hardware accessories, with easy installation and updates, real-time statistics, and off-site access for a more modern way of selling. Toast’s enterprise-grade infrastructure is easy to use and integrates into the restaurant’s P&L for greater visibility into the business and increased data collection and analysis. Target customers are full (table) service, quick service, bars / nightclubs, online ordering, and franchise restaurants, all of which can customize the software based on specific needs.
Key differentiators that are all part of Toast’s operating software platform include:
- Business Intelligence: The Toast Customer Relationship Management (CRM) software is integrated directly into the POS system, allowing restaurants to collect and integrate data from many sources so that they can more easily gain insight to perform customer segmentation and marketing. Detailed customer preferences like menu choices and payment methods are available on demand, greatly increasing the ease and speed of information flow. Not only does cloud-based technology like Toast’s help restaurants rely less on inefficient manual processes when monitoring various aspects of the business, but it also can help restauranteurs control price variance, conserve time, and considerably reduce category spend.6 Additionally, menu costing becomes much simpler and efficient with full transparency, and the software’s streamlined purchasing process can greatly contribute to reducing costs and bringing consistency.
- Inventory: The 2016 State of Small Business Report found that 48% of all small business do not track their inventory or use a manual process and furthermore that 25% of restaurants just use pen and paper for inventory management.7 Complimenting the intelligence reporting described above, Toast offers automatic and downloadable food cost, inventory variance, and menu engineering reports. Nationwide, millions of pounds of food are thrown away each day, and “4-10% of food purchased by a restaurant or foodservice operation is discarded before ever reaching a guest.”8 Because part of Toast’s customer promise is easy-to-use software, the inventory management tools are integrated alongside the POS reports, allowing restaurateurs to make decisions about menu and labor instantly.
- Performance Management: One of the key reasons many restaurants fail is because of poor planning and inattention to possible cost saving opportunities.6 At Toast, labor management software automatically tracks employees’ pay and productivity, with real-time reporting making it easier to take advantage of opportunities to reduce labor cost. The ability to instantly view this information also ensures that necessary activities are not overlooked during close-of-day tasks and decreases the time and complications of these actions.
As technology advances, companies operating within the restaurant industry will have greater success in digitizing their businesses. Toast’s competition in its currently-fragmented landscape may increase substantially or demand for its services could decrease. As a result, to remain viable, the company could expand its offerings and work next with larger food service providers like schools or stadium complexes. Additionally, given that several insurance and fitness companies are developing ways to gather data on health-related behavior,9 Toast could partner with interested consumers to automatically send nutritional information based on menu items consumed or imbibed. The recognition that technology – “whether it takes the form of new POS systems for mobile wallets, on-demand delivery services, or bold social media strategies”10 – is critical for great restaurant experiences is the reason why Toast will be successful in changing the digitization dynamics of the industry if it remains innovative and expanding.
- Standridge, David and Christopher Pencavel. “In the digital economy, the consumer remains king.” Financial Times, November 23, 2011. https://www.ft.com/content/d6124740-160f-11e1-a691-00144feabdc0.
- Friedrich, Roman, Florian Gröne, Alex Koster, and Matthew Le Merle. “Measuring industry digitization: Leaders and laggards in the digital economy.” Booz & Company (December 2011). http://www.strategyand.pwc.com/reports/measuring-industry-digitization-leaders-laggards, accessed November 2016.
- Feldman, Eli. “Why the Restaurant Industry is the Most Important Industry in Today’s America.” Medium, January 18, 2015. https://medium.com/@EliFeldman/why-the-restaurant-industry-is-the-most-important-industry-in-todays-america-6a819f8f0ac9#.tkz8b8lp4, accessed November 2016.
- Toast, Inc. https://pos.toasttab.com/, accessed November 2016.
- The Fenway. “Toast Pops Up in The Fenway: Hatch’s First Tenant Moves In.” http://thefenway.com/art-culture-business-events-real-estate-working/toast-pops-fenway-hatch%E2%80%99s-first-tenant-moves, accessed November 2016.
- “Digitization: The Role of Technology in Creating Restaurant Efficiency.” Modern Restaurant Management, October 24, 2016. http://www.modernrestaurantmanagement.com/%E2%80%A8digitization-the-role-of-technology-in-creating-restaurant-efficiency/, accessed November 2016.
- Wasp Barcode Technologies. “State of Small Business Report.” http://www.waspbarcode.com/small-business-report, accessed November 2016.
- National Restaurant Association. “Measuring food waste can bolster your bottom line.” http://www.restaurant.org/Manage-My-Restaurant/Operations/Back-of-House/Measuring-food-waste-can-bolster-your-bottom-line, accessed November 2016.
- Burkitt, Frank. “A Strategist’s Guide to the Internet of Things.” Strategy+Business: Winter 2014, Issue 77. http://www.strategy-business.com/article/00294?gko=a9303.
- Scott, Renae. “Digitize or Die: The Near Future of Quick Service.” QSR Magazine: July 2015. https://www.qsrmagazine.com/outside-insights/digitize-or-die-near-future-quick-service.