Friday, September 29, 2023

Driving Restaurant Profits By Blending The Physical And Digital Experiences

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Shreya Christina
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Technology will help restaurants compete with other restaurants and attract more customers in a challenging economic environment. Technology can also help restaurants make more money by reducing costs, improving the guest experience, and increasing efficiency. In addition, many franchisors are looking for innovative ways to keep up with competitors and make life easier for franchisees, who can’t always invest in technology independently.

Franchisors investing in technology are looking at ways to improve the guest experience by providing better service, faster delivery, and accurate orders. For example, many chains are now betting on self-service kiosks to keep up with fast-casual restaurants. The goal is to provide guests with an easy way of ordering food and drinks without having to wait in line or interact with humans, and it seems like the trend is catching on fast: recently, we saw McDonald’s introduce mobile ordering through their app; Pizza Hut launched its automated kiosk called P’zone; Taco Bell rolled out a mobile ordering system called Tappit, and Starbucks rolled out mobile order & pay via its app.

In our article today, we interview Andrew Robbins of Paytronix. Andrew Robbins is the CEO of Paytronix Systems, Inc. A product visionary and team leader, he’s spent the last 20 years at the company in various leadership roles and transforming the restaurant customer experience. A formally trained engineer, Andrew is bullish on design and innovation as a means of business success.

Andrew graduated from Princeton University with a Bachelor of Science in Mechanical and Aerospace Engineering and received a Master’s in Mechanical Engineering from MIT and a Master’s in Business from Harvard University.

We’ll address a range of macro topics driving the future of retail, restaurant, and hospitality industries, including ghost kitchens, the competitive landscape and changes across restaurants and C-stores, and the blending of physical and digital experiences & how it’s driving profits.

Gary Occhiogrosso: Can you tell me more about Paytronix and what you do for restaurant and convenience store brands?

Andrew Robbins: We sit at the intersection of convenience, payment, and loyalty. We work with more than 1,800 restaurant and convenience store brands across 34,000 locations to help them innovate their digital customer experience by providing them with a suite of marketing services to help them connect with their guests. Specifically, we create personalized experiences by building loyalty programs and mobile ordering platforms that drive increased visits and spending, all backed by smart data and AI-driven insights.

Occhiogrosso: How are convenience stores starting to compete with restaurants?

Robbins: Convenience stores have increasingly focused on expanding and improving their food service offerings, which picked up dramatically during the pandemic. Gone are the days of dubious hotdogs on rollers, as c-stores are now offering organic, vegan, gluten-free, and locally sourced food options to their customers. One of our clients even sees itself as a restaurant with gas pumps out front!

Beyond that, many convenience stores are improving their digital strategies, with the most significant shifts happening in their online ordering and curbside pickup or drive-thrus. Since the pandemic, we’ve seen one in five c-stores add a curbside pickup to their operations, and nearly a quarter of customers say they’ve used the feature in the past six months. The National Association of Convenience Stores predicts even further digital enhancements:

  • 38% of c-store operators say they will expand their app-based ordering and payments
  • 32% will expand mobile ordering for in-store pickup
  • 14% will offer more ordering options at the pump for instore pickup

As more consumers expect this type of immediate, digital ordering experience in every aspect of their lives, convenience stores, and restaurants have both adapted to this shift in expectations.

Occhiogrosso: What does customer loyalty look like today?

Robbins: Customer loyalty means guests have a great relationship with a brand; they feel connected to it and see value in hearing from it. And the guest rewards the brand with more of their business. Too often, loyalty gets confused with discounts, but we’ve come a long way since the first coupon – merely offering a percentage off is not enough to build a long-term relationship with customers. The pandemic was a pivotal moment for customer loyalty and quickly became a critical survival tool for brands in the restaurant and convenience industries. In fact, our data shows that the top tenth of loyalty members spend ten times as much as an average customer and thus constitute around 40% of the spend that brands take in. Loyal guests are a brand’s best guests, hands down.

Occhiogrosso: It used to be that a “customer experience” happened inside the restaurant and the c-store. What does that phrase mean today, and what goes into creating that experience?

Robbins: The customer experience is defined by the guest. And after two years of pandemic living and experiencing great digital interfaces with brands such as Amazon, they’ve embraced a blended, omni-channel in-person and digital experience. The need to connect with your guest is just as vital when they walk in the door as when they login to your mobile app or get on your website. For a restaurant, that means having the right tech infrastructure and sending relevant promotions through effective segmentation, building customer profiles, and knowing the right follow-up message to send after a transaction – all on an individualized basis for each customer. Achieving the right balance of this matters for every brand. The question really becomes, how far can you stretch the offering? The goal is expectation-plus, which means hitting on your guest’s baseline expectation and improving one or more elements of the experience, whether that’s order accuracy, delivery time, or personalized recommendations. We should really start thinking of the concept of customer experience as “customized experience,” – and artificial intelligence is key to creating this level of service guests expect today.

Occhiogrosso: Many brands resistant to technology before the pandemic have fully embraced technology. How has tech reshaped their operations?

Robbins: The biggest area where technology shapes the restaurant business is the experience with the guest. Even before the pandemic, one of the biggest drivers was the entrance of third-party marketplaces, such as DoorDash and GrubHub. Many expected these apps to usher in a new era of the business – Restaurants 2.0 – and in response, many restaurant brands began adopting them to protect their operations. Early on, brands saw that they could get new customers on these channels and then very quickly realized it was costing them a lot of money. So the next phase became figuring out how to create the experiences customers want, which are direct one-to-one interactions, in a way that didn’t cost restaurants so much but still delivered the ease and immediacy customers have grown to expect.

A good example of this is McDonald’s. When they initially embraced their digital strategy, they promoted Uber but shifted to their own McDelivery. From there, they added on loyalty and began expanding services via their mobile phone app, which makes it easy to order and pick up via drive-thru or curbside. They’ve created a fully integrated digital and in-person experience with their technology.

When the pandemic hit, many restaurants were in survival mode. They were challenged regarding staffing – how do you keep the Kitchen running while keeping employees safe? – and the frequency of meals ordered and the dining experience changed completely. We saw exponentially more online ordering and pickup and technology-enabled this. We essentially saw five years of technology get adopted in 3 months.

Occhiogrosso: What are the new use cases of advanced tech like AI in restaurants?

Robbins: There’s a sushi restaurant down the street from me, and they have little robots that you can call and order from on a screen. They are making all-tech a novelty and part of the experience. But it isn’t a one-size-fits-all approach. What works for one restaurant or c-store may not make sense for another. Generally, the things to think about are, what are your customers’ expectations, can they go more digital, and how do you enhance your human-to-human interactions? Panera is a good example of where technology can sit side-by-side with staff members. Their in-store ordering kiosks are effective for the guest who wants to control the experience; they know exactly what they want and desire a fast pickup. Alternatively, the guest who wants to connect face-to-face with an employee can order at the counter with staff and maybe ask a question or two – do they prefer the broccoli cheddar soup or the BLT sandwich? Advanced tech in restaurants is about enhancing existing experiences – not replacing them.

I would tell restaurateurs to think of AI as a tool to solve specific problems – and can apply it to seemingly small aspects of the experience, such as re-organizing your online ordering website. So for a new guest, you may want to focus on and present the best sellers. But when they return, you can change the menu to highlight their favorite items and preferences. For instance, maybe this particular guest hates mayo. So when they are ordering their turkey BLT sandwich, you can add a reminder to remove the mayo. This makes the order experience easier and more accurate and helps brands deliver on this concept of expectation-plus.

Occhiogrosso: How are these changes impacting the guest experience? How are they impacting loyalty and online ordering?

Robbins: This idea of Restaurants 2.0 addresses the guest’s needs. And while the digital transformation we’ve witnessed over the last two years happened at an accelerated, breakneck speed, I would argue it’s been for the better. We’ve learned that consumers want more control over the experience, and that’s exactly what digital delivers. For example, order ahead and pickup in-store is now a standard expectation. Like every other aspect of the restaurant experience, digital ordering has evolved the loyalty experience. And although ordering through an app or online may cut down on the face-to-face interaction with an employee at the restaurant — at one point, the sole indicator of a customer experience — digital ordering offers a new and arguably, even more personalized experience than ever before.

Occhiogrosso: What are your thoughts on virtual brands and ghost kitchens? Do they present a new model for reinvention or expansion for brands?

Robbins: Absolutely. We saw Chili’s move into the chicken wings business with the launch of their virtual concept “It’s Just Wings,” In six months, they went from zero dollars in sales to $100 million in sales. It was a ghost brand out of its own Kitchen that was marketed as delivery only. Wow Bao is another great example, where they’ve licensed 600 virtual kitchens to sell Wow Bao anywhere.

The one concerning piece of this trend is that you set the stage for consumers to view a brand separate from its Kitchen. Until now, the brand promise has always been tightly coupled with the brand’s ownership of the Kitchen. Wow Bao is showing they can control the quality through other kitchens and, by doing that, massively increase the geographic availability of their brand to customers.

Olga’s Kitchen in the Detroit area is an interesting example of a popular regional brand using ghost kitchens to expand nationally. At one point in the 1980s and ’90s, up to 70, Olga’s Kitchens were scattered throughout the country. They’ve launched Olga’s Express, which offers both online delivery and pickup, and has become extremely popular in the surrounding area. Building on that success, they’ve partnered with Goldbelly, a national O&D distributor, to identify key regions around the country where there was previously brick and mortar locations and demand is still strong. They will open virtual kitchens or physical stores based on order volume.

Occhiogrosso: How does loyalty fit into this new digital-first world?

Robbins: Loyalty programs do more than foster goodwill between consumer and brand; they provide tremendous insight into guest behavior and preference, inform and enhance marketing efforts, and provide a line of direct communication to the guest. As the industry continues to see new advances and shifts in how brands digitize the experience, loyalty will serve as a cornerstone of that transition. For instance, in May, Wow Bao actually launched the first virtual kitchen rewards program, Bao Bucks. It’s a program we helped them launch in conjunction with DoorDash Storefront.

Loyalty is not separate from the digital experience; it’s foundational. But, at the same time, it’s important to not lose sight that loyalty and technology are tools, and their impact will be limited to how well restaurants maintain other critical aspects of the experience – customer service, food quality, ease, and accessibility, etc.

Occhiogrosso: Where does the industry go from here?

Robbins: I think we’ll continue seeing more AI applications, machine learning (ML), and predictive analytics. It’s important to recognize that AI and ML aren’t just one thing. For instance, we use about a dozen algorithms for what we do with restaurants and c-stores. We have predictive scores that can tell us how likely a guest is to come into a restaurant or store in the next seven days, segmentation programs that can help us determine which images in a newsletter will appeal most to an individual customer, and which day of the week you’re most likely to open a promotional email from your favorite brand. By using these technologies to improve the relevance of communication to guests, they respond better, and you can reduce the frequency of communication which they also appreciate. We also have AI to make recommendations based on guests’ past purchases and profiles. This makes ordering easier and more fun which improves the overall experience. When experiences are better, guests return more frequently.

In terms of what’s next for customer experience, I think voice ordering will become more prevalent, particularly in the car and home. Some brands are working on this now, but it is very hard to refine because a menu is quite broad with many modifiers and options, so the technology needs to be able to discern the words a customer uses when ordering. For example, two similar sounding requests, “Tomatoes on the side” and “no tomatoes,” are very different, and the benefit of this digital experience is to make it easier for a customer, not more frustrating. I suspect this will be achieved in the next three years.

My takeaway from the interview is that, in the end, it’s all about how we use technology to enhance the guest experience. That’s what people want when they go out for dinner—which makes a restaurant successful in today’s very competitive market. With more restaurants relying on technology to provide an innovative and personalized experience for their customers, Artificial Intelligence will play an increasingly important role in the food service business.

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