Report: Restaurants must diversify revenue, embrace tech

Written by James Shea

The pandemic has been hard on the restaurants, but a new report by Square shows that the restaurant industry is not dying. Rather, it is evolving and must invest in technology.

“Now your digital experience is just as important as your food experience,” said Wally Sadat, owner of The Kebab Shop.

For generations, restaurants were places where people ordered food inside a physical space. For formal dining, that meant sitting down and enjoying a meal. For fast-casual and fast food, people could dine-in or take the food to go. The restaurant only thought about selling food directly.

Now, the kitchen has become a centralized place for multiple forms of commerce, according to the report. The kitchen might produce meal kits and operate several brands out of a ghost kitchen. The kitchen could do both third-party and first-party delivery and serve dine-in customers. The Square report refers to this as the hub and spoke model, and the pandemic has forced restaurants into maximizing the efficiency of a kitchen. Some restaurants are selling groceries and other forms of retail but the bottom line is — restaurants have to diversify their revenue streams.A grphic with the kitchen at the center and various products being produced by the kitchen.

“We’re seeing more of a hub-and-spoke model with the kitchen at the center of it all,” said Bruce Bell, head of seller experience at Square for Restaurants. “Restaurants are embracing new channels for customers to interact with their business, effectively meeting them wherever they are. Each of these channels represents a revenue stream for the restaurant, and they connect to the same kitchen and are all managed by the same centralized POS system.”

For the report, Square partnered with Wakefield Research. A survey was conducted with 500 restaurant owners and managers as well as 1,000 consumers across the U.S.

The report found that restaurants believe takeout and delivery are here to stay and many want to move away from third-party delivery.

  • Restaurants expect 62 percent of their 2021 revenue will come from delivery and takeout
  • 18 percent of restaurant owners and managers expect to be completely dependent on delivery and takeout in 2021
  • 58 percent would rather use their own website or app for food delivery than that of a third-party app.
  • 67 percent of consumers prefer to use a restaurant’s own website or app for food delivery rather than a third-party app
  • 61 percent of those consumers want to order directly to support the restaurant.

That means restaurants must embrace technology, the report concludes. Restaurants have never thought of themselves as technology companies, but the pandemic has required them to embrace innovation. They need to be able to offer first-party delivery and have an operation that functions seamlessly between various products.

“Having a direct ordering channel gives restaurateurs more control over how they engage consumers with marketing and loyalty programs,” Bell said. “And if the restaurant has its own couriers, or leverages Square to provide third-party couriers via On-Demand Delivery, there’s an even bigger opportunity to own the end-to-end customer experience in a really efficient way. Direct delivery has the potential to become vital to restaurants’ operations.”

Contactless ordering is another key area. Customers are going to want to have limited contact with employees and access to digital menus. As well, restaurants are using technology to unify point-of-sale and customer-order operations with things like payroll and scheduling.

“This awful forced experiment has allowed us to bear witness to some of the most incredible pivot stories, whether it’s hosting high-end experiences out of camper vans or building virtual cooking-class subscriptions that can make for the more-than-ideal first date,” said Rajat Deva, product marketing manager at Square for Restaurants. “All of this creativity is so exciting to see and it speaks to the fierce resilience that restaurant owners have. They are determined as hell to get through this.”

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