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Daily news and analysis about the food tech revolution

restaurant tech

In 2021, Restaurant Tech Investment Will Be All About the Back of House

Restaurant tech investment reached new heights (and dollar amounts) in 2020, but the bulk of that went to software, devices, and other tools meant to power the restaurant front of house. By contrast, in 2021 we will see that balance shift. This time next year, I expect to be writing about the vast amount of investment funneled into making the back of house safer, more efficient, and more automated in many cases.

Investments in 2020 were, understandably, geared towards reopening the dining room in ways that were seemingly safer and less dependent on human-to-human interactions. However, as restaurants closed and reopened, then closed again, interest shifted to ghost kitchens and restaurant formats with little to no front of house in their design. As we’ve said many times over the last couple months, the restaurant industry is not retreating from this focus on to-go orders. Even when dining rooms are once again safe to eat in, ghost kitchens will remain and QSRs will have fewer seats indoors.

That makes now, heading into 2021, the time for optimizing kitchen operations. 

Anyone who’s spent time in the restaurant back of house knows it’s in a league of its own when it comes to orchestrated chaos. Un-orchestrated, too, since dozens of variables can change at any moment and affect the speed and quality at which food leaves the kitchen and gets to customers. Missing ingredients. Workers calling in sick last minute. Eggs cooked too early and drying out under the heat lamp. All of these things the food, the customer experience, and a restaurant’s margins, the majority of which are made and lost in the kitchen. 

There’s already a handful of restaurant tech solutions available right now that hint at how digitizing and automating the kitchen might help the above scenarios. 

San Diego-based Galley Solutions offers an intelligence platform that digitizes processes in the kitchen (inventory and recipe management, purchasing) and uses that data to create a more efficient framework by which kitchens can operate. This centralized data source could bring the many disparate pieces of back-of-house technology together for smoother processes when it comes to meal prep and kitchen management. For example, a centralized data source could populate the digital order forms sent to vendors and at the same time tell the chef how long to leave the burger on the grill.

SousZen, meanwhile, wants a GPS for the kitchen. At Smart Kitchen Summit: Japan, Paul Levins, who helps run the company, explained how the SousZen platform uses machine learning to recognize patterns in the restaurant — how an order is put together, when the kitchen is busy — and can make real-time recommendations for the fastest, most efficient way to do something. It’s not unlike your car’s GPS, which tells you the fastest route from point A to B and can adjust that route in real time in the event of heavy traffic or an accident.

That idea of kitchen systems learning over time and using that information to improve operations is one we will see  more of in 2021 — and, likely, one that will command a lot of investment dollars. Statis.ai is another notable example here, with its “full stack AI operating system for the kitchen” that uses live camera feeds and an electric nose to leverage smell and vision in a restaurant kitchen.

Along with a whole lot of AI will come automation. In this context, though, automation doesn’t necessarily mean a robot flipping burgers or a rotating arm mixing salad ingredients (although there will be some of that). A more widespread version of automation will take the form of systems, like those of Galley or SousZen, that can collect data and use it over time to build new behaviors and processes in the kitchen, make real-time recommendations to workers, and even guide the steps when cooking and putting together a meal. 

A growing interest in back of house tech is already apparent. Besides the above players, other restaurant tech companies that have historically only catered to the front of house are now releasing tools to improve the kitchen. Among them are Square, xtraChef, and many others. Expect funding in these solutions to follow as we head into the next year.

2020: The Year the Ghost Kitchen Got Complicated

As an old saying goes, “Anything can happen, and most usually does.”

And it sure did happen in 2020 for the restaurant industry. Pandemic. Dining room shutdowns. Permanent closures at alarming rates. A seismic shift to takeout and delivery formats. More shutdowns. Complete uncertainty over the state of indoor dining coupled with growing panic over the state of the independent restaurant. 

Personally, I think it’s foolhardy to try and meaningfully condense what happened to restaurants in 2020 into a few hundred words. So as we close out this dumpster-fire of a year and head to 2021, I’ll pinpoint one part of the biz that’s been talked of constantly these last several months: ghost kitchens.

Right around the end of 2019, we were already fixated on the ghost kitchen. In a predictions piece I wrote at the time, I said, “This is part of the restaurant industry that will change rapidly over the next year as it becomes more commonplace among both restaurants and consumers.”

All that wound up being true in 2020, not because I’m some predictions wizard but because a global health crisis forced the restaurant industry into off-premises formats like takeout, delivery, and drive-thru. Because these formats don’t require a dining room to function, they are inherently suited to the ghost kitchen setting. Ghost kitchens, after all, were designed to serve to-go customers, typically those ordering through mobile apps and other digital properties. 

But one thing that was made clear in 2020: ghost kitchens are not the end-all, be-all savior of the restaurant industry. In fact, throughout the year, multiple restaurant industry figures raised questions about the commissary model in particular.  

Back in March, when COVID numbers were initially rising, former Kitchen United CEO Jim Collins cautioned restaurants to think hard about whether their business generated enough demand to justify the cost of a ghost kitchen operation. Similarly, Andy Wiederhorn CEO of Fat Brands, said in July that ghost kitchens “simply work better for brands that have existing fanbases” (a point he repeated at our ghost kitchen event earlier this month).

I bring up these reservations not to further cast a cynical shadow but to illustrate another important takeaway from 2020: that because there are still so many uncertainties for restaurants over the traditional commissary model, other forms of the ghost kitchen concept have emerged that make running an off-premises business more feasible for more types of restaurants. 

Over the last year, we saw the growing popularity of the so-called “dark kitchens.” These are underutilized kitchen spaces restaurants are using to fulfill their delivery and off-premises orders. Fat Brands is one notable example of a company using its own restaurants as dark kitchens for sister brands. Ordermark/NextBite, meanwhile, built out its business this year of pairing restaurants with unused kitchen space in order to deliver (literally and metaphorically) more meals from virtual restaurant concepts. Another great example is Hi Neighbor, a San Francisco restaurant group that had to close because of the pandemic. Its response was to use one of its shuttered kitchens to accept and fulfill delivery orders for its own virtual concepts. Hi Neighbor is just one local example of a trend happening nationwide.

In the second half of 2020 (right after Euromonitor predicted the ghost kitchen market would be worth $1 trillion by 2030), we saw massive amounts of investment dollars flow into the space, from Zuul’s $9 million fundraise to a $120 million investment in the aforementioned Ordermark to the $700 million raised by Reef. There were plenty of other financial milestones in between those figures.

Alongside those investments, even more formats emerged of what a ghost kitchen might look like and how it could become more efficient. ClusterTruck, which has operated a vertically integrated delivery business for years, teamed up with Kroger to turn the latter’s deli counters into a kind of ghost kitchen. More recently, Crave Collective opened in Boise, Idaho to show us what a fine-dining take on a ghost kitchen looks like. And the QSRs, finally got onboard, with everyone from Chipotle to McDonald’s unveiling new store formats that minimize or eradicate the dining room and are in effect their own version of a ghost kitchen.

The most unanimous takeaway of the year was this: the ghost kitchen, in its various forms, is here to stay. We may be inching closer to a widespread vaccine for COVID, but the restaurant industry has already completed the shift to off-premises-centric businesses. There’s no going back at this point.

Even so, we leave 2020 and enter 2021 with plenty more questions when it comes to how one best runs a ghost kitchen. What is the role of the chef — an artist, by rights — in this off-premise-centric new world? How long will ghost kitchen operations be tied to third-party delivery services increasingly bent on calling the shots for restaurants? What about the mounds and mounds of packaging waste being generated by all this innovation?

If 2020 was a year about making the ghost kitchen more efficient, 2021 should be about the role the ghost kitchen plays when it comes to the restaurants, chefs, drivers, and other people whose livelihoods are now tied to it.

McSaga 2020: McDonald’s Franchisees Push Back on Tech

Like other major QSRs, McDonald’s has made clear in recent months that technology and digital developments are top of the priority list for the mega-chain moving forward. But not everyone agrees with Corporate’s approach to this plan, and McDonald’s franchisee owners are fighting back. As Restaurant Business notes, the National Owners Association (NOA) has “pushed back” against a temporary tech fee and is now considering forming a technology cooperative that would give them more power when it comes to decisions about digital strategy.

The fee in question, which is part of a series of changes McDonald’s announced at the beginning of December, would charge operators $423/month for technology investments to cover a $70 million “lag” from an old payment structure. Those tech fees would begin in March 2021 and remain until the $70 million is paid back to McDonald’s.

This isn’t the first time McDonald’s and its franchisees have gone toe-to-toe over tech, and news of these new fees reignited some old tensions. It has also prompted the NOA, an independent group of McDonald’s franchisee owners and operators, to explore the idea of forming a technology cooperative that would give them more voice when it comes to decision-making moves about tech.

McDonald’s controls most of the technology in its stores, charging franchisee owners a fee for using that tech. That arrangement might have worked well in an era when “technology” was a cash register and a credit card machine. But thanks to the pandemic, franchisees have, suddenly and irrevocably, found itself in a restaurant industry whose terms are increasingly dictated by tech in order to accommodate the shift to takeout and delivery formats. The moves follow similar ones from a host of other brands, including Sweetgreen, Chipotle, Shake Shack, and many others.

Of all the QSRs out there, McDonald’s has been one of the more aggressive brands to push this technology. In recent months, the chain has expanded new drive-thru technology from its 2019 Dynamic Yield acquisition, introduced more self-order kiosks, and announced a new app, loyalty program, and store formats for 2021. As Restaurant Business notes, “These efforts have resulted in considerably higher costs for franchisees, whose monthly payment to McDonald’s for technology is 10 times what it was a decade ago. “

A technology cooperative would give franchisee operators more direct say in what technology gets developed and how money is spent, according to the NOA. “You should have a vote in how that pot of money gets invested,” the board said. 

As part of a statement provided to Restaurant Business, McDonald’s noted that its process “includes collaboration with a franchisee-led technology team” and that the company is “confident” it has the tools in place to “drive future growth through technology.”

The battle between McDonald’s and its franchisees is, as I mentioned above, an old one. But given the rapid deployment of tech to the QSR industry, it’s also a fight that will get more intense, not less, in the coming months.

It’s worth noting, too, that while the franchisee model is hugely popular — it allows a brand to quickly grow with less capital — it may not be the most beneficial one moving forward. McDonald’s is the largest franchise in the world, with other notable names being KFC and Burger King. But Starbucks, another chain that has grown rapidly in recent years, rarely franchises, and in fact argues that franchising can hurt brand continuity, quality control, and even company culture.

As technology continues its rapid invasion of the restaurant industry, its costs and expectations could strain more chains’ relationships with franchisees, and indeed call the viability of whole model into question at some point in the future.

Technomic: Over Half of Restaurant Operators Will Spend More on Tech in the Future

Of all the things in the restaurant industry accelerated by the pandemic, technology adoption has been one of the biggest. That’s unlikely to change in the near future, a point underscored by new survey data from Technomic that notes 68 percent of restaurant operators “believe their technology spend will either somewhat or significantly increase” over the next few years.

The research firm’s recently released report, “The State of Foodservice Technology 2020,” surveyed restaurant operators in order to uncover both the factors accelerating tech adoption for restaurants and those hindering it.

Systems that enable contactless payments are one area of restaurant tech we’ll see a whole lot more of in the future. More than half, or 51 percent, of operators surveyed for the report said they already have contactless payments in place, and another 31 percent plan on implementing it. 

What’s incredible is that less than one year ago, the word “contactless” barely existed. Now it’s a regular part of the restaurant vernacular. Front-of-house-focused restaurant tech companies rolled out “contactless” dining room kits in droves this year, all of which included the ability for a customer to pay via their own mobile device. “Contactless delivery” is now the norm, and major QSRs are redesigning their store formats to provide a more contactless experience to customers.

None of this is terribly surprising, seeing as we’re currently fighting a deadly virus that’s spread through human-to-human interaction. Investments in contactless technologies will be the norm going forward, even after the pandemic subsides.

That said, the model isn’t without its challenges, the biggest one being that it takes more than a mobile app or QR code to make a process truly “contactless.” Moving into 2021, we’ll see more restaurant tech companies attempting to solve this bigger-picture issue.   

 

Toast Launches a Winter Recovery Fund for Restaurants

Restaurant tech company Toast today announced a $35 million relief plan for restaurants as winter begins and the pandemic continues to disrupt normal operations. 

The Boston, Massachusetts-based company said today this “relief package” is in response to the status of the RESTAURANTS act, which is part of a larger stimulus plan and therefore currently stalled in Congress. Were it to pass, a $120 billion grant program would be available for those in the restaurant industry impacted by the pandemic. The point, however, is that it hasn’t passed yet, winter is here, and many restaurants are on the brink of permanent closure if they don’t receive assistance.

Toast’s Winter Restaurant Recovery Fund is not near the size of the $120 billion figure of the aforementioned legislation, but it could provide a temporary boost to restaurants in some areas. 

The fund is available to Toast’s current customers. Through it, restaurants can access funding they can put towards winterization (aka, making outdoor dining feasible in cold weather) and working capital needs. They will also receive a one-month software credit for their current Toast tech stack and complementary access to the company’s online ordering, payroll, and marketing products. Finally, restaurant customers will also be allowed to pass their one-month software credit on to another restaurant (that doesn’t have to be a Toast customer) facing greater hardships. 

According to the Toast website, restaurants do not have to take any extra steps in order to activate their one-month credit. For the funding portion of this relief package, restaurants will need to apply.

Toast has been quick to respond to restaurant industry needs brought on by the pandemic. In March, just as COVID numbers were rising and businesses closing, the company launched an initial relief plan and, like others, eliminated software fees for restaurant customers. Over the last several months, it has also released a slew of new products and features geared towards native delivery and contactless order/payments. 

The restaurant industry in all likelihood stills need major assistance from Congress. (Honestly, it probably just needs a bailout.) In the meantime, assistance packages like those from Toast and other restaurant tech companies are able to provide some breathing room and help businesses keep the lights on one more week.

‘Just Do What Domino’s Did’ – Takeaways From The Spoon’s Ghost Kitchen Deep Dive

It’s our weekend restaurant tech news wrapup. You can subscribe to our newsletter here to get this delivered to your inbox.

And now for some final thoughts on The Spoon’s ghost kitchen event, which we held this past Wednesday.

For the (virtual) event, we gathered restaurant operators, tech companies, ghost kitchen infrastructure providers, and thought leaders together to discuss not just the promise ghost kitchens hold for restaurants, but also the realities those businesses must face when using this model.

Last week, I covered a couple of the major points made at the event around building a virtual restaurant brand and the risks of relying on a 100-percent delivery-only operation. 

To top that off, here are a few more noteworthy points raised by event panelists and attendees throughout the day:

Ghost kitchens and virtual restaurants are here to stay. Many of the developments in recent months have been in reaction to the pandemic, but the ensuing focus on ghost kitchens, delivery, and virtual restaurants will stay long after vaccines have been administered. Huge numbers of consumers have found new ways to interact with food via online channels. Even when it’s safe to dine inside a restaurant again , those new behaviors will continue driving the industry towards the off-premises model.

There is a lot of under-utilized kitchen space out there. From extra space in existing restaurant kitchens to hotel facilities to coffeeshops not open during dinner time, plenty of kitchen infrastructure already exists for restaurants to turn into a ghost or dark kitchen operation. The benefit of this route, versus renting space for a commissary, is that restaurants can leverage fixed costs that are already there. For example, if you are running a virtual brand out of an unused part of your own kitchen, you’re not paying for additional electricity, staff, or equipment. As restaurants plan for off-premises orders and virtual brands, they should consider the infrastructure assets they already have as an important factor in determining how to approach the ghost kitchen question. 

Third-party delivery: Love it or hate it, we still need it. More than one panelist felt that, despite high commission fees, restaurants need third-party delivery services right now. Some went as far as to say the industry would have been decimated over the last nine months without them. Others said restaurants need third-party delivery services in the initial stages of an off-premises/ghost kitchen strategy because of the visibility these services are able to provide via their online marketplaces. 

However, restaurants absolutely must invest in their own native delivery platforms. After a restaurant has attracted an initial following on a third-party marketplace, the big challenge is converting repeat customers to one’s own website and getting them to place orders there. A good deal of marketing and communication has to go into this process, not to mention investing in actually building out that direct channel. Technologically speaking, this is very expensive, but numerous companies exist that help power the back end of native storefronts without demanding 30 percent of each transaction.

Just do what Domino’s did. Quote of the day goes to Lunchbox’s Nabeel Alamgir, who said, “The best thing you can ever do is just do what Domino’s did—invest in it 20 or 30 years before everyone else did.” Of course, he quickly followed up with some actionable advice about delivery and ghost kitchens. But his half-joking, half-serious comment also serves as a reminder and a call to action to the entire industry to keep on innovating, even — nay, especially — amid the uncertainty that has defined the restaurant biz in 2020.

Data :Full-Service Restaurants Are Still Flailing When It Comes to Sales

Apparently it was the week for new data on just how badly the restaurant industry is struggling right now, especially when it comes to full-service restaurants. Payments company TableSafe just released data that found transaction volumes at full-service restaurants declined to 50 percent of pre-pandemic levels in November after recovering 60 percent of pre-pandemic levels in October. 

These numbers follow those from Black Box Intelligence, which found same-store sales growth at restaurants at -10.3 percent, a 3.8 percentage drop from October’s year-over-year sales growth rate. Black Box Intelligence called November “the worst month for the industry since August based on year-over-year losses in sales and traffic.” Sales may continue their decline in the coming months, too.

Both those reports coincide with the National Restaurant Association’s recent letter to Congressional leadership that detailed the rapid economic decline of the restaurant industry and more or less pled for restaurant relief from Congress. 

All this data is also coming at a time when cities around the country are operating under indoor dining restrictions and cold weather has made outdoor seating a non-option for many. 

We’ve said many times before that continued focus on off-premises channels — takeout, delivery, drive-thru (where applicable) — should be a priority for restaurants, both as a short-term response to the pandemic and as a longer-term play. Off-premises channels won’t provide the same level of assistance as, say, stimulus relief or a bailout, but they can provide an avenue to extra revenue that, judging from the above data, is badly needed right now.

Restaurant Tech ‘Round the Web

Hand-hygiene system PathSpot this week announced an ongoing partnership with Opus, which makes a text-based training tool for employees. Together, the two companies will provide a more comprehensive onboarding and training program for restaurants using PathSpot’s device in their stores. 

Can’t go out for a holiday steak? Restaurant chain Ted’s Montana Grill will deliver it to you via its new Butcher Shoppe service. Customers can buy bison and premium beef as individual steaks, fresh grind, and specialty boxes via the new e-commerce site. All orders arrive fresh the next day.

Guardian writer Oliver Holmes got a chance to head over to The Chicken, a restaurant in Israel that happens to be the world’s first location for testing cell-based meat in a restaurant setting. Check Holmes’ review of his experience and the food here for a meaty (sorry, not sorry) weekend read.

Report: November Was ‘The Worst Month’ For Restaurant Industry Sales Since August

Restaurant sales struggled in November, according to Black Box Intelligence, which shared the information in a post on Nation’s Restaurant News this week. The stumble coincides with both rising cases of COVID-19 and colder weather that has made outdoor dining unrealistic. 

From Black Box Intelligence: 

Same-store sales growth was -10.3%, which represented a 3.8 percentage-point drop from October’s year-over-year sales growth rate. November’s -16.3% same-store traffic fell by 3.3 percentage points compared to the previous month’s performance. This was the worst month for the industry since August based on year-over-year losses in sales and traffic.

Sales worsened throughout November, with same-store sales during the last week of November the worst the restaurant industry has experienced in almost four months. Black Box Intelligence suggests this could mean we are “in the middle of a new restaurant downturn.”

These numbers arrived the same week the National Restaurant Association shared new findings on the restaurant industry via a letter sent to Congressional leadership. In that letter, the Association noted that restaurants of all types are in “economic freefall,” with sales declining and more layoffs and furloughs expected in the coming months.

Without large-scale measures, like a relief package from Congress, the restaurant industry’s situation will only get worse, particularly since we’re only at the beginning of winter. Outdoor dining options won’t be possible for at least a few months in many places. Off-premises channels, like delivery and takeout, are important, but as we discussed at length this week, running a restaurant entirely through these channels is economically and operationally challenging for most businesses.

Black Box Intelligence did note that despite poor sales in November, guest satisfaction was higher. Positive reviews of restaurants online grew by 7.0 percentage points compared to the same month in 2019. Intent-to-return scores have almost returned to pre-pandemic levels.

Survey: Restaurant Industry in ‘Free Fall,’ 10,000 Closures in Three Months

The National Restaurant Association sent a letter to Congressional leadership this week sharing new survey findings on the state of the restaurant industry as it continues to navigate the pandemic. The Association’s letter didn’t mince words: “What these findings make clear is that more than 500,000 restaurants of every business type—franchise, chain, and independent—are in an economic free fall.”

The Association conducted a survey of 6,000 restaurant operators and 250 supply chain businesses from Nov. 17-30 of this year. Among its findings are:

  • Eighty-seven percent of full-service restaurants, including chains and independents, reported an average drop of 36 percent in sales revenue. Equally disconcerting is that 83 percent of full-service operators expect sales over the next three months to be worse.
  • Costs have not fallen, despite declining sales. Over half, or 59 percent, of operators said their total labor costs (as a percentage of sales) are higher now than before the pandemic. 
  • At the same time, 58 percent of chain and independent full-service restaurants expect more furloughs and layoffs “at least the next three months.”

The letter topped off this bleak serving of news with some numbers on the state of closures around the restaurant industry. As of right now, more than 110,000 restaurants in the U.S. have closed permanently or are closed for the long term. The majority of those were established businesses that, on average, had been open at least 16 years. Others had been open at least 30 years.

“For nearly nine months, restaurants—our nation’s second-largest private sector employer—have been in an economic free fall as a result of mandated closures and capacity limits due to the coronavirus pandemic,” states the letter, which was written by Sean Kennedy, the Executive Vice President of Public Affairs for The Association.

Further down in the letter he adds that, “for every month that passes without a solution from Congress, thousands more restaurants across the country will close their doors for good.” 

As The Association’s letter suggests, the restaurant industry faces a bleak few months as more cities face restrictions and outright bans around indoor dining and cold weather makes patio seating unfeasible. The letter urges lawmakers to “reach agreement on a compromise coronavirus relief package for our industry and employees, our suppliers, and the communities that rely on the strength of the industry.” 

Congress is trying to pass a stimulus compromise before the end of the year that would pump an additional $300 billion into the Paycheck Protection Program for small businesses. The bipartisan $908 billion proposal is something of a last-ditch effort to get more aid and unemployment benefits to restaurants and other small businesses. 

Moving away from the dining room and to more off-premises channels, such as takeout, has added incremental revenue for restaurants (with varying levels of success). However, The Association’s letter more or less states that without a large-scale measure like a relief package from Congress, the situation will get worse, not better, in coming months, with more restaurants will closing their doors forever. 

Requiem for the Dining Room

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At one point most figured it would take about five to 10 years for off-premises to become the industry-wide norm in the restaurant biz and for QSRs to change their store formats accordingly. Instead, those changes around restaurant store formats have unfolded in a matter of months and are soon to be everyday realities.

Ever since Burger King unveiled a new store design with space-saver kitchens suspended over drive-thru lanes and conveyor belts handing food to customers, we’ve seen a non-stop stream of announcements from fast-casual and QSR restaurant with similar plans. Two more chains joined the list this week — El Pollo Loco and La Madeleine. But rather than simply list the new features slated for those brands’ revamped store formats, it’s now worth our while to comb through all the major announcements in this realm and find the common denominators driving these new store formats. There may be a lot of unknowns in the restaurant industry right now (aka everything), but the following developments give us a pretty good hint at some certainties for the future.

With the biz going virtual at a blinding clip, it’s only natural that future store designs will have a smaller physical footprint. From the aforementioned Burger King to El Pollo Loco, more brands are significantly reducing the size of their dining rooms or getting rid of them altogether. The fast rise of ghost kitchens, which cater to takeout and delivery orders only, is partly responsible for this trend. The pandemic and ongoing lockdowns across the country are an even bigger driver, and one that’s accelerated the timeline of these smaller store formats.

But of all the concepts fast becoming the norm for QSRs, it’s the multiple-drive-thru-lane scenario — that is, stores are being designed with double and triple lanes (or more) to accommodate the uptick in customers. KFC, McDonald’s, Chipotle, El Pollo Loco, and Shake Shack are some of the top names on the list of restaurant chains literally expanding their drive-thrus. La Madeline is actually adding drive-thru for the first time, and Dunkin’ was doing the whole multi-lane concept long before the pandemic. There’s a good reason for the widespread emphasis on this particular format: with the pandemic keeping us out of dining rooms and in our cars, the length of time one spends waiting in the drive-thru is getting longer.

Anecdotally speaking, I’ve visited three drive-thru lanes in the last week where the wait time was longer than 20 minutes. (Joke’s on me for staying in line that long.) More lanes, some of them dedicated to mobile order customers, will go some way to alleviate this problem. More commonly used developments, like extra parking spaces for curbside pickup and geofencing technologies, could also reduce some of the drive-thru congestion.

Meanwhile, predictive selling technologies aren’t widespread at the moment, but they will be. McDonald’s was first to put this concept — which involves using AI, machine learning, and other tech to analyze customer preferences and upsell relevant items — on the industry’s radar when it acquired Dynamic Yield. Over the last few months, Restaurant Brands International, which owns BK, Tim Horton’s, and Popeye’s, announced plans to use something similar in its drive-thrus, and KFC has hinted at using AI as well.

While predictive selling tech doesn’t directly alter store formats, it expedites channels like pickup and the drive-thru, which are integral parts of the QSR of the (near) future. It’s also a good example of how technology will influence the physical restaurant going forward. Tech that makes off-premises channels faster and more efficient will help drive more sales through those channels. That in turn will make those off-premises channels more valuable than their dining room counterparts, both now, during lockdowns, and long into the next decade. That makes these new developments in store formats less of a trend than a really big step into the restaurant industry’s next version of normalcy.

Upcoming Event: The Ghost Kitchen Deep Dive

Is now the right time to adopt a ghost kitchen strategy? The epic fallout of the restaurant industry suggest yes, but before you take the plunge, there are many things to consider. How much will it cost? What kind of set up do you need? How do you scale a virtual restaurant business?

Join The Spoon on Dec. 9 to discuss these things and more at our latest virtual event, The Ghost Kitchen Deep Dive. Throughout the day, we’ll be joined by Reef, Kitchen United, Ordermark, Fat Brands, Wow Bao, and many other companies enabling big changes in the ghost kitchen space.

General admission is free. Register for a Gold Ticket and get special networking opportunities, a month of free access to Spoon Plus content, and exclusive live tours of some real-life ghost kitchen operations. 

Restaurant Tech ‘Round the Web

California imposed new stay-at-home orders for certain regions in the state late this week. Looks like it’s back to takeout- and delivery-only meals for Golden State restaurants for the foreseeable future.

Uber completed its $2.65 billion acquisition of Postmates this week, and the two companies have started to integrate their U.S. operations.

Restaurant tech platform Allset this week launched a new feature, Dietary Preferences, to its takeout and contactless dining app. Customers can add their dietary needs and preferences as well as any food allergies to their search to further refine results on the app.

Report: Restaurant Tech Company Toast Is Now Valued at $8B, Could IPO in 2021

Months after laying off half its staff, Toast has reached an $8 billion valuation, according to a new report from CNBC.

That new valuation, up from $4.9 billion in February of this year, is the result of a secondary sale Toast closed out last week. Through that deal, both current and former employees could sell up to 25 percent of their vested shares for $75 each. Toast said the deal was for up to 800,000 shares, totaling $60 million. 

It’s a big change from April, when the company cut 50 percent of its staff. In a letter to employees, CEO Chris Comparato said the layoffs were in response to “massive disruption” caused by COVID-19 that “hit the industry virtually overnight.” The move also called into question the value of restaurant tech in general, which runs the gamut in terms of providing businesses with products that deliver on ROI and those that are, as a friend of mine likes to say, solutions in search of problems. 

Toast has sat squarely in the middle of those two extremes for a long time. Once offering just a humble POS system, the company has over the years  added payroll and team management, email marketing capabilities, and a massive list of third-party integrations. There were plenty of valuable uses for the Toast ecosystem, but that seemed to be part of the problem, too. One glance at the company’s sight shows how easily overwhelmed a restaurant owner or manager could get by the number of available options. 

Toast, however, seemed to grasp the idea that too many bells and whistles can be no good thing, and more recently (since the pandemic hit), the company’s new features have been focused on the most important area of the restaurant biz right now: making off-premises orders more efficient, faster, and of better quality. The company released a platform to process delivery orders in April. It has since also launched a “contactless” suite of products for ordering and payments. Nowadays, a restaurant could easily run an entire off-premises business using Toast’s platform. With more restaurants than ever adopting digital ordering and off-premises channels like drive-thru, curbside, and ghost kitchens, Toast’s recent focus on the to-go world could wind up being very fruitful for the company. Hence the $8 billion valuation.

CNBC noted that Toast’s rebound “has been so rapid” that investors on the secondary market have recently put in bids above the $8 billion valuation. People familiar with the matter who spoke to CNBC also said the company “is viewed as a potential 2021 IPO candidate.”  

Survey: More Than Half of Restaurant Sales Will be Digital by 2025

Digital sales will make up more than half, or 54 percent, of all quick-service and limited-service restaurant sales by 2025, according to new survey numbers from market research firm Incisiv. That’s 70 percent higher than pre-COVID estimates, the firm notes.

That projected growth isn’t hard to understand. It’s been an all-out dumpster-fire of a year for restaurants, with hundreds of thousands of restaurants permanently shuttered and billions of dollars already lost. Currently, restaurants across the country are reverting to off-premises-only models, which lend themselves more to minimal interactions between restaurant staff and customers.

But as we saw early on in the pandemic, even limited/quick service restaurants struggled to manage the sudden influx of takeout, curbside pickup, drive-thru, and delivery order channels. Bigger brands with money to burn and existing digital strategies have obviously fared better over the last eight months than those without many tech investments in place. As of July, Chipotle had increased its digital sales by over 200 percent thanks to the brand’s pre-COVID focus in that area. Another example is Starbucks, which as publicly said 80 percent of its orders before the pandemic were already for to-go channels.

Separately, Incisiv notes that while restaurant chains are making investments in tech, they are “not necessarily addressing the highest priorities nor the solutions that will deliver the best maximum ROI across diverse customer expectations.”

It’s a point we make all the time here at The Spoon. There are seemingly endless options for businesses when it comes to tech, but they’re not all equal in terms of the value they provide to a businesses trying to serve customers quickly, safely, and with the same quality they would get in the dining room. For example, the so-called “contactless” kits that address the in-dining room experience may become a staple of the future, but they can’t exactly add value when dining rooms are shut down. On the other hand, focusing tech investments on tools that will make digital ordering and fulfillment easier and cheaper should be a priority. To that end, Incisiv’s report urges restaurants to “make enhancements in digital tech.” Those that do, according to the report, “will be better positioned should another shutdown occur.” Which, if you hadn’t noticed, is happening as we speak.

As noted above some of the bigger QSR brands are clearly leading the charge when it comes to digital sales trends, but Incisiv says there is plenty of area for both growth and improvement. Customer satisfaction actually remains low in a few key areas. Only 40 percent of survey respondents were satisified with their pickup experience; that number drops to 25 percent for delivery. Half of guests prefer paying with a mobile wallet, but fewer than 20 percent of QSRs provide expanded payment options.

The survey found that “close to 70 percent” of restaurant chains have “stated their intent” to increase investments in mobile ordering. Over the long term, digital sales are expected to dip slightly once in-dining room service is resumed with some semblance of its former days. However, the return of the dining room won’t mean the end of off-premises, not if recent developments around condensed store formats and expanded drive-thru lanes are any indication. Incisiv also notes that share of delivery sales is expected to grow 23 percent by 2025 versus a pre-COVID forecast of 15 percent.

As the report notes, if all of this holds true, it will be QSR chains making the most progress in terms of digital ordering and setting the example for the rest of the industry. 

Outsource the Turkey, Help a Restaurant

The whole “Thanksgiving-to-go” concept used to be the territory of just a handful of restaurant chains — the Bob Evans and Cracker Barrels of the world, for example. That, of course, was pre-pandemic, and now that the CDC has told Americans not to travel on Thanksgiving and the whole “home for the holidays” phrase has new meaning (like, you’re literally stuck at home), restaurants of all types and sizes are offering up their own take on the Turkey dinner.

At one point in the not-so-distant past, I might have thought Thanksgiving in a box was a bit bleak. But let’s be real: it’s been a stressful, scary year. People are alone and lonely, many are struggling financially, and the ever-present threat of the pandemic hangs over everything. Rather than spend hours in the kitchen cooking too much food for too few people, check out some of these restaurants, which are ready to do the hard work for you.

The Classic Thanksgiving Meal. You’ll find the old standards in this category: Cracker Barrel’s famous Heat&Serve Thanksgiving, Denny’s Turkey & Dressing Dinner Pack, and Boston Market’s takeout Thanksgiving (which, for the record, I’ve actually had and it was delicious). Thrillist has a big ol’ list of other restaurants here. There’s nothing fancy or unique about most of these options, but if you’re dead set on a turkey dinner but don’t want to deal with cooking it, these options are your best bet.

The Plant-Based Thanksgiving. Demand for plant-based foods has skyrocketed this year. It follows, then, that many restaurants around the country are offering 100 percent vegan takes on the Turkey Day dinner. VegNews has rounded up some notable ones here that include California’s Cafe Gratitude, the Veggie Grill chain, and many other restaurants, both local and national. 

Higher-End Thanksgiving to Go. If the industry-wide shift to off-premises has taught us one thing this year, it’s that even high-end food can be put in a box and delivered to your door. In keeping with that, a number of higher-end restaurants are offering Thanksgiving feasts to go. Some notable ones include Chart House, Fleming’s, and McCormick & Schmick’s.

Not-Thanksgiving Thanksgiving. Or you could just be totally over it all and have no inclination whatsoever to celebrate this year. Can’t say I blame you. For the usual QSRs and fast-casual joins, from IHOP to Sonic and every McDonald’s in between, Thursday will be business as usual.

Go Local. One quick glance on Twitter shows the sheer number of small, independent restaurants offering some kind of service on Thanksgiving. Encouragingly, there’s also an unbelievable high volume of tweets from folks that are ordering from these establishments in order to show their support.

An added bonus of ordering in for Thanksgiving instead of doing it yourself: most of these restaurants need the revenue. With no end in sight to either the pandemic or the struggles eating establishments face as they struggle to keep the lights on, the more support they can get on Thanksgiving, the better.

Upcoming Event: Food Waste Strategies for the Supply Chain

Restaurants are one stop along the food supply chain where a whole lot of food gets wasted. For restaurants, there are financial consequences to so much waste; for the entire world, there are environmental and human ones.

On Monday, November 30, The Spoon will be holding a virtual fireside chat with Apeel founder and CEO James Rogers to discuss how this waste happens and what we can do to stop it. That goes for restaurants as well as grocery stores, farms, distribution centers, and your own fridge.

Join James and myself on the Hopin platform at 2 p.m. PST that day to be a part of the discussion. You can register here.

And oh yeah, it’s free!

Restaurant Tech ‘Round the Web

Chick-fil-A officially made ordering via its website available after tests in the Baltimore, Maryland, and Washington, D.C. this past summer. Those that can’t or don’t feel inclined to download the chain’s app can now order digitally through the brand’s website.

Papa John’s is the latest restaurant brand to employ an AI-powered voice assistant to answer the phone. The chain will use AI company Kea’s platform, which can learn a restaurant’s menu as well as take orders, answer questions, and even upsell items. 

Washington, D.C. is allocating $35 million in COVID-19 recovery grants to restaurants as part of the city’s $100 million “Bridge Fund” for the hospitality industry. D.C. restaurants are still open, though Mayor Muriel Bowser suggested new restrictions could go into effect soon in response to the pandemic.