JUNE 2021
In collaboration between TechTable and Culterra Capital, we are pleased to share an updated 2021 Restaurant Tech Ecosystem map, sponsored by Back of House, a community of restaurateurs to find and share top-reviewed tech solutions. Download the map here.
It is an understatement to say that the restaurant industry went through a massive shift since publishing our 2019 Restaurant Tech Ecosystem map. The pandemic’s economic toll on the industry has been grave, though notably, the toll was not evenly distributed. A higher level of digital maturity was a clear success indicator for most restaurants that survived the crisis (as detailed by McKinsey here).
Thus in a year that was challenging for all, we did find one bright spot from the pandemic: many of our past predictions around tech adoption were significantly accelerated - shrinking from years to months.
In fact, in the past 18 months technology solutions across the restaurant and hospitality industry evolved at such a fast pace that keeping up with changes proved challenging, even for those of us who work in the space. This rapid pace of adoption in the industry caused even the technophobes in hospitality to rapidly embrace tech solutions.
The most notable growth areas were of course within Ordering/Delivery and On-Premise Ordering/Payments Tech -- including kiosk, mobile ordering and payments, and cashierless checkout. In addition to the acrobatic feats from restaurant operators, we also saw tech companies reinventing themselves to stay in business during the pandemic.
With that in mind, we are pleased to share our 2021 Restaurant Tech Ecosystem, which serves as a current heat map of the broader ecosystem (and is clearly not exhaustive).
In order to help operators, entrepreneurs and investors continue to understand and digest this quickly evolving landscape, we also highlight some of the essential shifts and sector themes below, plus a few predictions for the year to come.
Help Wanted
Finding and securing hospitality staff has never been so challenging. As thousands of hospitality workers were left unemployed by the pandemic, or stymied by the risks of the frontlines, many have moved on to find work in other fields, leaving a huge gap in talent.
As a result, the urgency to leverage robotics, automation, computer vision, and voice technologies will continue to increase as the hospitality industry aims to do more with less staff. And while discussions around robots within hospitality have always been cautious -- because we don’t want to put people out of work -- we believe we will continue to see more opportunities in the near-term for human-assisting robots (versus replacement by robots).
For example, as restaurant operators seek to offset workforce challenges,there are numerous opportunities for specific task automation of repetitive, dangerous or mundane tasks like dishwashing, precision preparation/cooking, food waste management, bar/food inventory, and quality control.
Another area ripe for automation via AI-driven voice tech includes drive-thrus and digital ordering. When people think of a traditional drive-thru, they likely picture a garbled voice and screaming the order into a speaker, hoping their order is correct. But we are seeing many of the larger chains replacing human voices with automated voice assistants to speed up service, order accuracy and upsell rates. We’ve seen estimates that drive-thru automation can reduce customer wait time by 10-25%, which is compelling given that the former CEO of McDonalds previously declared that for every six seconds saved at a drive-thru is equal to an increase of 1% in sales.
Ghost Kitchens: It’s Complicated
While many restaurant operators were broadly familiar with the concept of ghost kitchens and virtual brands before the pandemic, they are now prevalent in most discussions on the burgeoning post-pandemic restaurant industry.
Whether part of an existing kitchen or a separate commissary kitchen, the simple purpose of a ghost kitchen is to fulfill online orders for delivery or pick up. Ghost kitchens have the potential to solve real challenges for their restaurant customers, and there are tremendous variations on the economics, setup, and ideal use cases.
So then what’s so complicated about ghost kitchens?
The rapid growth in consumer demand for restaurant delivery and the high usage of third-party ordering/delivery apps pushed restaurant operators to explore different avenues to expand their access points and footprint beyond their existing restaurants.
However success (a.k.a. profitability) within the confines of a ghost kitchen business model is primarily driven by volume of daily orders, average order value, and percentage of direct channel sales vs. third party sales. This is why ghost kitchens are primarily well-suited for larger brands, as most local restaurants simply do not meet the average requirements to warrant a ghost kitchen endeavor. (If you are curious to crunch the numbers, check out this excellent ghost kitchen calculator created by Kitchen Fund).
Further, the lines are beginning to blur between delivery and ghost kitchen platforms. We are entering a world where these platforms are increasingly supporting their own virtual brands and/or next-gen food courts, oftentimes by using the ordering/menu data captured from current restaurants using their platform. Thus local operators will be battling for market share against larger chains which are using ghost kitchens to extend their reach and volume, as well as additional competition from ghost kitchen platforms themselves.
Enter the The Mobile-Only Experience
Stateside, we’ve increasingly been adopting mobile-first ordering and marketing strategies, but the mobile-only approach (often seen in Asia) wasn’t widely embraced before the pandemic. Now, whether via QR codes, apps or mobile web, there has been a huge shift towards mobile-optimized menus, ordering and payments which eliminate or reduce most employee/customer contact. This can help to improve the guest experience via increased speed and less errors, and for fine dining this also saves time/costs in printing and sourcing supplies for paper menus.
Successful operators will prioritize their tech strategy to capture as much digital data as possible in order to personalize offers, segment customers and influence behavior, and a mobile-first/mobile-only approach creates a compelling opportunity to increase both first-party and third-party data capture.
As it can be dizzying for operators to decide how to best leverage their digital data, we predict high growth for the tech partners which are helping operators utilize customer data to better uphold their brand, funnel customers into more profitable channels, and make better decisions about merchandising, pricing, and promotions.
Aggregators will Continue to Disrupt the Customer Journey
While many of the technologies we discuss here are more operational, we also want to address the customer search and discovery experience. While this was an important topic in pre-COVID times, it is all the more so now, when disruptions and uncertainties are pushing customers to regularly search for what nearby food options are actually open, and whether they offer delivery, curbside, or takeout options.
We have also reached a point where Google/Google Maps have become the defacto top of the funnel for a majority of restaurant consumers. Thus it is increasingly critical for restaurant operators to proactively manage their full digital footprint, and provide up-to-date information that customers can trust -- especially across all third party platforms.
For example, even though Google profiles include a link to a restaurant’s own website, that little link is eclipsed by the amount of ad-driven real estate that the third party aggregators/marketplaces get within each profile.
Growth Categories to Watch in 2022
Voice / Bot Technology
Robotics / Automation
Shared / Ghost Kitchens
Food Safety / Quality (a new category for the 2021 map)
Ordering and Payments will continue to evolve
Marketing Analytics / CRM, and Order / Delivery (both B2B and consumer-facing marketplaces) will continue to consolidate.
As always, we welcome your thoughts and reactions, and look forward to continuing to follow this sector together in the coming years.
Brita Rosenheim is a Partner at Culterra Capital, and Venture Partner at Better Food Ventures, with 20+ years of investment, M&A, and strategy experience within the food and tech verticals. Her analysis on the Food Tech sectors are regularly used by participants in the space to understand the quickly evolving landscape. This article originally posted on The Spoon.