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Daily news and analysis about the food tech revolution

Future of restaurants

2023 Restaurant Tech EcoSystem: Nourishing the Bottom Line

In collaboration between TechTable and Vita Vera Ventures, we are pleased to share an updated 2023 Restaurant Tech Ecosystem map.

We all saw that the pandemic brought a wave of experimentation in the restaurant tech space, but we also know that tech-driven change is not always linear. 

In early 2022, we made bold predictions about the restaurant tech environment in 2023, as we anticipated numerous acquihires ahead (acquisitions primarily driven by tech talent vs strategic tech value). This was due to the tight tech labor market (at the time) and the increasingly challenging funding and interest rate conditions. 

However, with the recent wave of macro tech layoffs, the tech labor market is no longer tight, and we believe more restaurant tech companies may be forced to shut down rather than finding a soft landing through acquisition. We’ve already seen a strong reset on requirements for capital efficiency and valuations of startups in the sector. This macro shift may create potential for rollup opportunities, but many early-stage assets across the sector are overfunded single-point solutions and still subscale.

This is ironic as the need for tech-driven solutions has never been stronger, but companies without the right growth metrics will likely struggle to survive. The inflationary environment is also forcing harder decisions for operators, which may further dampen their willingness to engage with new solutions.

With that in mind, we are pleased to share our 2023 Restaurant Tech Ecosystem, which serves as a current heat map of the broader ecosystem within the US (and is clearly not exhaustive). 

Click here to enlarge/download image of map. Click here for downloadable PDF.

The Journey from Point Solutions to Comprehensive Tech Stacks

While single-point solutions for things like online ordering, loyalty programs, and delivery were popular during the pandemic, we have reached a moment now with perhaps too many point solutions in the market. 

Tech stacks that require too many logins are now in fact creating a cognitive burden for employees, rather than the intended promise of efficiency and ease of use. As a result, operators are beginning to seek integrated systems and smaller tech stacks that can do more. (See commentary in the previous section about rollup opportunities!) 

Restaurant tech advisor David Drinan succinctly identifies the near-term priority for most operators: “The restaurant industry is thirsty for technology innovation that will deliver high margin, incremental revenue.”

On the operational side, managers are still struggling with certain areas such as scheduling and inventory management. These tasks can be time-consuming, especially for independent restaurant owners who have limited resources. As a result, we have seen a growth category of solutions that can automate these functions and provide real-time data to help operators make informed decisions.

Help *Still* Wanted   

The labor shortage in the restaurant industry has been a major challenge for operators in recent years, and labor optimization is still at the top of every operator’s mind. The pandemic caused many workers to permanently leave the hospitality industry, leaving restaurants short-staffed. 

According to the National Restaurant Association, almost two-thirds of US restaurant operators say they do not have enough employees to support existing demand. Instead of replacing this lost workforce, many operators are turning to tech to automate more functions and reduce the need for human labor. 

From digital menus and ordering kiosks to automated kitchen equipment, there are many ways that technology can help restaurants operate more efficiently with fewer employees. By automating basic tasks such as taking orders and processing payments, operators can free up their staff to focus on more complex tasks that require human expertise, such as customer service and food preparation.

Another trend the restaurant industry is grappling with is the changing expectations of younger workers when it comes to the employer/employee relationship. With more emphasis on work-life balance, career development, and job satisfaction, younger workers are looking for more than just a paycheck. 

To meet these expectations, operators are looking for workforce management solutions that can help to improve engagement, development, and rewards for their employees. This includes tools for tracking and managing schedules, as well as innovative solutions for tip outs and other compensation mechanisms. By investing in these solutions, operators can not only attract and retain top talent but also improve the overall efficiency and productivity of their workforce.

Finally, it is worth noting that basic scheduling and labor management tools can have a significant impact on profitability by reducing labor costs and improving operational efficiency. By automating scheduling and timekeeping, for example, restaurants can reduce the likelihood of overstaffing or understaffing, which can be costly in terms of wasted labor or lost sales opportunities. 

In the end, the ability to leverage technology to optimize labor is critical for restaurants to remain competitive in a challenging operating environment. While kiosks and text ordering have shown promise in the QSR space, there are many other opportunities for technology to make a positive impact on the industry as a whole.

Ghost Kitchens: It’s Even More Complicated

In our 2021 restaurant tech retrospective, we had a lot to say about this growing subsector, including the challenges for success (a.k.a. profitability) within the confines of a ghost kitchen business model.  

Now, as the concept of virtual and ghost kitchens continues to evolve even further, it’s important for operators to understand the complexities involved and navigate these challenges to build successful ghost kitchen operations.

One major obstacle has been the potential for tension between virtual brands and existing businesses, where adding virtual brands can lead to direct competition with their own existing businesses. Finding the right tech and operational partner to balance between these two is key.

Additionally, ensuring food safety and maintaining quality standards across multiple brands can be a challenge. Many of the generic virtual brands have lacked distinct value or clear taste standards, leading to underwhelming food quality issues and removal from the major third-party delivery platforms.

Last Mile Magic

Making the economics work for restaurant delivery is a growing priority for the industry. This includes better interoperability between POS/Kitchen systems and delivery providers, better routing and batching systems, localized kitchens, and of course even the mode of transportation for delivery.

We are tracking over 20 companies in the North American unattended last mile category, but it is still early days with most (all?) of the solutions operating in limited geographies and customer trials. So we have left this slice off the infographic for 2023, but don’t forget to keep your eyes on the sky, as we’ve seen recent growth of backyard drone delivery companies which are proving to be faster and better for the environment (if they can outweigh the noise and regulatory concerns).

GenAI on the Menu

Tech entrepreneurs have long dreamed of personalized food recommendations, but few have succeeded in creating true personalization beyond dietary concerns, allergens, or ingredient likes/dislikes. 

However, we have now reached a unique moment where new technologies like ChatGPT will be able to create meaningful and personalized interactions with guests. This has always been the premise of a variety of AI-driven restaurant tech startups, but the ability to leverage the underlying data to engage and interact with guests in a truly personal and conversational manner is game-changing. 

By using data from previous orders and interactions alone, ChatGPT can help to create a more tailored experience for guests, from recommending menu items to offering personalized promotions. ChatGPT can become a critical part of a restaurant’s marketing team by creating content, with the ability to easily translate to different languages as well. This could give operators a crucial competitive advantage as consumers demand more personalized experiences. We have only begun to see the capabilities of ChatGPT with free templates being offered to restaurant operators already.

Moreover, conversational AI like ChatGPT can also be a valuable tool for restaurant operators seeking to understand their own operating metrics. By integrating ChatGPT into their tech stack, operators can ask natural language questions and receive real-time responses, empowering them to make informed decisions about their operations.

Emerging Restaurant Tech Concepts to Watch

  • Chat/AI across marketing and operations
  • Tech-enabled employee support and training (for example, personalized perks, tip-out options, or language choices) 
  • AI for scheduling to free up managers
  • Dynamic pricing
  • Reusable containers + tech-driven circular economy for foodservice 

Looking ahead –  As always, we welcome your thoughts and reactions, and look forward to continuing to follow this sector together in the coming years. Reach out to us: Brita@vitavc.com and hello@techtablesummit.com. 

Eatsa’s New System Aims to Restore Order to the Restaurant Front of House

Mobile ordering is something of a catch-22 right now for restaurants. It’s practically imperative to serve the growing demand for more delivery, takeout, and curbside orders. But those businesses who do accommodate mobile orders find themselves in an operational nightmare on a daily basis, whether it’s finding space for the dozen tablets from third parties, figuring out how to integrate mobile orders with the in-house POS, or simply staving off overcrowding in the front of house as customers and Grubhub drivers alike wait in line to pick up their orders.

“Every brand we talk to is struggling with how [mobile] growth doesn’t fit within their current operational model,” says Eatsa’s CEO, Tim Young. And while his company’s overall end-to-end tech system is designed to alleviate chaos in general, the company’s latest offering, the Spotlight Pickup System, is aimed specifically at the front of house.

The modular system, which launched last week, is part of Eatsa’s end-to-end system and, physically, can live pretty much anywhere in the restaurant. According to Young, one of the key selling points is that with Spotlight, restaurants don’t have to physically alter anything in order to accommodate mobile orders. “One of the fundamental things we focus on is making this easy to bring into your existing restaurant with no friction,” he says.

So instead of installing a wall of cubbies, which has been Eatsa’s offering to-date, restaurants using the Spotlight Pickup System can stack together individual automated surfaces called “spots.” Each unit (see picture above) is a little less than a foot long; put together, these units look much like a bookshelf and can be easily hung on some empty wall space or set on unused countertops. Restaurants choose the number of “spots” they need based on the volume of to-go orders. A large operation might have 20 spots; smaller businesses may need only three.

The spots are equipped with sensors that know things like when a spot opens up or how long food has been sitting on a spot. When an order is ready, the system will tell the restaurant staff which spot to place the order on. Meanwhile, the customer, or driver, or whoever is picking up the food can walk into the restaurant, find their name on the digital menu board, and grab the food from the corresponding spot.

For restaurants, the obvious benefit here is less crowding in the front of house. Since all orders are placed via mobile, and digital display boards clearly state the customer’s location and spot number, there will be (in theory, at least), fewer people waiting in line or hanging around to ask where they pick up their order.

Another benefit, according to Young, is the potential for integrating branding with the product. Restaurants can customize a digital message on the front of the spots, and even change the background to match the overall restaurant design and colors.

Young indicates that the Spotlight system isn’t so much an improvement over Eatsa’s cubby system as it is a different option for restaurants. “We tried to make both systems really branded and fun and magical so it’s not just a lifeless fixture,” he says. “What it really comes down to is, what is your space like, what are you trying to accomplish? And that really just comes down to the choice of the brand.”

Currently, Eatsa is testing the Spotlight system at three different restaurants, all of whom have partnered with the company in the past: MAC’D in San Francisco, Evergreens in Seattle, and Wao Bao in Chicago.

Robots, Instagram, and Flan: Highlights from our Future of Restaurants Meetup

For our latest food tech meetup, we decided to do things a little bit differently. We were lucky enough to work with Chef Eric Rivera (formerly of Alinea in Chicago) and host the event at his new incubator space, addo.

We knew Chef and his team had high standards, but we were still blown away when we walked in the door. Addo is a creative culinary mind’s dream: the space is a coffeeshop during the day and plays host to pop-up dinners, cooking classes, and community get-togethers (Mario Kart tournaments, salsa classes, etc.) during the evening and weekends. “Basically, it allows me to do whatever I want,” he said.

That means that he lets chefs — usually ones who are up-and-coming or have been recently let go — to host pop-up dinners there, and fills the pastry case with locals who want somewhere to display their baking chops. The space opened its doors 2 months ago and already has a staff of 20.

Part of the reason that Rivera could even create a place like addo is because of new technology. When he returned to Seattle to cook after working in the legendary Alinea, where he was Director of Culinary, Rivera hit a lot of roadblocks. People told him he couldn’t start a restaurant without a certain amount of money, or investors. But Rivera decided to forge ahead and create a space inspired by his own struggles — powered, at least partially, by technology. Culinary booking services like Tock allowed him to do things like host 2-seat dinners out of his home kitchen before he got the addo space, and food delivery from his current operation pads his business.

Over a Puerto Rican meal of roast pork with chimichurri, fried plantains, and flan (Rivera’s mom’s recipe), the chef joined The Spoon’s Michael Wolf and Modernist Cuisine’s Scott Heimendinger in a conversation about how technology big and small is changing the restaurant — from robotics to sous vide to Instagram.

Instagram may seem relatively banal when it comes to restaurant tech — after all, most of us use it to post food pictures all the time — but for bootstrapped entrepreneurs like Rivera, it’s been game changing. “I don’t have the money to hire a marketing or PR firm,” said Rivera. Instead, he uses Instagram as a marketing platform, as well as a way to target certain demographics.

It’s also a tool for him to tap into another trend we cover a lot in the food tech space: personalization. When diners reserve a spot online, Rivera has them fill out a questionnaire to get their dining preferences, but he also does a little sleuthing on their social profiles to see what restaurants they like to eat in, food preferences, etc. It’s a little Minority Report-y maybe, but when you’re paying a hefty price, you want each dish on the menu to be something you really want to eat.

Chef Rivera in front of his beloved smart oven.

Of course, we also had to cover a contentious subject for the future of restaurants: robots. “Robots are better than people for almost everything,” said Heimendiner. Especially for when you need to do something that’s highly repeatable or requires lots of accuracy.

Which is obviously useful in places with high volume and basic tasks, like flipping burgers. In Rivera’s kitchen, at least, robots won’t be replacing people — they’ll just help them do their jobs better. That might be an exoskeleton to help workers unload heavy boxes of produce, or Roombas vacuuming up at the end of the day.

Possibly the best leftovers plate we’ve ever seen.

For restaurants, food delivery is a blessing — and a curse. It can increase overall sales, capturing people too lazy to get off the couch, but on the flip side it also reduces foot traffic. Heimendinger made an interesting comparison: “The trend in ordering delivery from restaurants follows a little bit the trend of going to the movies,” he said. People are streaming movies at home instead of going to theaters, and are ordering food delivery instead of dining out. “This will change some of the function of a restaurant’s physical form,” predicted Heimendinger. He thinks it won’t be just a space to eat food: it will also, more than already, be a place to relax, meet up, have a meeting, etc. Which changes the business model. “It turns it into a community space,” he explained, “Not just a dinner table.”

Addo is certainly more than just a dinner table. Based on the interest we saw last night in addo’s far-ranging dining experience and community vibe, I wouldn’t be surprised to see a lot more incubators popping up in the future.

Want to hear more of Chef Rivera’s perspective on how technology can help lighten the load of restaurant workers and open up new revenue streams? He’ll be speaking at the Smart Kitchen Summit in Seattle on October 8-9th — get your tickets now! 

We ended the night by making some crepes with the Hestan Cue!

Uber Eats’ Move Adds to a Noisy, Competitive Delivery Market.

The food delivery business has suddenly shifted from being about consumer convenience to a battle of market competitors more focused on profits and flattening the value chain than providing options. An industry focused on giving hungry consumers the opportunity to select from a wide array of dinner-time choices has morphed into pizza delivery 2.0 and that’s, at best, boring. Simply said, the home chef faces a lot of cacophonies when it comes to grocery delivery, meal kits, and restaurant fare (home and away).

Profits are a good thing, especially for public companies or ones with an eye on expansion or acquisition. However, what we find in recent announcements is a change from the initial concept of turning a fleet of rideshare drivers into a virtual extension of a city’s best restaurants.  When Uber Eats acquires Ando, a “dark kitchen,” its fare likely will become the focus of its New York delivery options.  The king of all rideshare firms thus sends a signal to its customers that Ando’s bibimbap and fried chicken will be tonight’s special every night. The food delivery business is heading for a 180-turn, moving from delighted consumers (as we see in the GrubHub ads) to one of supplier vertical consolidation.

“We are committed to investing in technology that helps consumers, delivery and restaurant partners alike,” Jason Droege, Head of Uber Everything told TechCrunch. “Ando’s insights will help our restaurant technology team as we work with our restaurant partners to grow their business.”

None of this is to say that Uber Eats is wrong or alone in seeking ways to increase its bottom line. Others such as Deliveroo and Amazon are connecting pieces of the value chain—that is owning the food prep and delivery segments of the business—to streamline its operations. And, from a business 101 perspective, it is a sound idea if the founding principle of consumer choice remains intact.

Even with innovations, such as robotic delivery and ordering food based on your specific health DNA, this is an industry headed for a major reckoning. Why? Here are a few good reasons:

  1. The barrier to entry is low. Take Evansville 2 Go for example. A local man in Evansville, Ill., has built a food delivery service for his local community by hiring some drivers and connecting with a handful of local restaurants. There are many similar examples taking place around the country where entrepreneurs in markets too small for the “big guys” to tackle are building simple versions of GrubHub, Uber Eats, and Amazon Restaurant delivery. As pizza parlors as far back as the ‘60s (that’s the 1960s) knew, all it takes to deliver a fresh pie is a telephone and a trustworthy person with a car.
  2. Dark kitchens are a weak link in the restaurant delivery business. When a customer looks at his or her menu options for food, what is the more likely choice—an establishment at which they have had a memorable meal or one that may be run by a celebrity chef but lacks the cache of a local favorite?
  3. Competition for the consumer dollar. The average American dines out a bit more than four days a week. That leaves three days for restaurant delivery and home meal kits (of all varieties) to battle it out for the consumer dollar. Given dining out often costs more than these two alternatives, there’s not a lot left in an individual or family’s food budget after those four out-of-home meals.

For those who believe that millennials will drive the restaurants delivery business, here’s some interesting news from economists at Bank of America Merrill Lynch. Millennials are losing their taste for restaurant dining.  Spending at restaurants went down more than seven percent since 2015.

“It stands out as a bit unusual how soft restaurant spending has been considering where we are in the business cycle,” Michelle Meyer, head of U.S. economics at BofA Merrill Lynch told CNBC. “The consumer should be spending more on a broad range of items. But we’ve seen restaurants slowing more akin to a recessionary environment.”

Take heart—pizza delivery isn’t going anywhere.