Digital transformation is restaurants' new secret ingredient

If 2021 was the year restaurants could rejoice because hungry patrons were finally returning to dining rooms after a long pandemic pause, a more complicated picture emerged in 2022. 

Overall sales numbers are fine, if uninspiring—and inflation isn't helping. Guest counts continue to lag. And consumer habits and expectations are changing in ways that suggest that the formula for success in the next era of restaurant dining isn't going to look like the last one. 

The continual march of digital transformation and pandemic-era behavioral changes are forcing restaurants to continue to adapt. Restauranteurs know it, too: eight in 10 said technology in the restaurant provides a competitive edge, and many indicated they planned to step up their tech investments, according to the National Restaurant Association's State of the Restaurant Industry 2022 report

What does restaurant innovation currently look like

One popular area for tech investment is online ordering, whether for takeout or delivery. The growth in off-premises dining is among the major pandemic trends that appear to have staying power. A Deloitte survey conducted in September 2021 found that 61% of consumers continued to order either a takeout or delivery meal at least once a week. Perhaps unsurprisingly, that's more than three times higher than before the pandemic—but it's also more than two times higher than the number from Fall 2020 when dining rooms were largely closed. That points to a meaningful, long-term change in consumer behavior, and industry leaders and observers are taking notice. 

Indeed, the online food delivery market is expected to grow at a compound annual growth rate of 9.8% annually over the next decade, according to Future Market Insights. Brands like Buffalo Wild Wings, Chili's and TGI Fridays are investing in spinoff, takeout-focused concepts to better serve off-premises consumers. 

Even QSR restaurants that already catered to a drive-thru audience have seized on the opportunity to do more, from Taco Bell's small-footprint "Go Mobile" concept that emphasizes app-based ordering to a partnership between McDonald's and food-delivery giant DoorDash

The changing of customer expectations

The reimagining of the restaurant-customer relationship isn't limited to the explosion in popularity of off-premises dining. Customers also expect a more seamless experience in the restaurant. That could be kiosks that support ordering and payment or mobile device-based solutions ranging from dedicated apps to third-party integrations that use tabletop QR codes to display menus and even integrate with POS systems. (In fact, the impact of digital transformation on back-of-house operations is likely to be as profound as the customer-facing changes, as more connected devices monitor food freshness and safety, and more supplier orders are placed automatically based on inventory levels or order volume.)

It's also increasingly important to offer options to consumers on their preferred channel—and the number of those channels seems to be proliferating weekly. A survey conducted by PYMNTS and Paytronix found that consumers regularly use four different channels to place food orders. Mobile ordering—either through dedicated apps or aggregators such as DoorDash, Uber Eats and GrubHub—ranks ahead of orders placed via restaurant websites or phone calls to the restaurant. 

Nor is ordering the only emerging digital touchpoint for restaurants to be concerned about. Younger consumers expect to interact with their favorite brands via social media—and even in emerging forums like the metaverse, where Wendy's (in the Horizon Worlds metaverse) and Chipotle (the Roblox virtual world) already have piloted virtual locations. Many other restaurants have indicated plans to test the waters, as well. 

Restaurants that have operated at the forefront of digital transformation are now benefiting from years of experimentation, refinement and growing maturity. Those who have thus far stayed on the sidelines can benefit from the industry-wide learnings and best practices that have emerged over the last few years. But now is the time to get in the game before the restaurant industry's digital makeover takes hold to such an extent that it poses an existential threat to businesses that fail to adapt. 

That pressure applies to loyalty programs, too. Now that customers are handling more data and dialing up the frequency and sophistication of their digital interactions with their favorite restaurants, they're also looking for more out of the loyalty and rewards programs at those businesses. That means eliminating friction and using loyalty programs to offer rewards and the associated data-generated insights to stitch together rich customer profiles that facilitate custom offers and recommendations. (The ability to serve up compelling offers takes on special importance in difficult economic circumstances, which means digitally savvy restaurants are poised to have a leg up on their competitors as inflation rises and recession looms.) 

How restaurants can thrive in the new era

The first-party data expertise needed to glean those insights and convert them into actionable intelligence is an Epsilon specialty. Our PeopleCloud solution helps brands solve for customer identity across various touchpoints and to supply personalization at scale using multi-dimensional segmentation. It also enables marketers to identify the contexts and offers needed to facilitate the "right message, right time" communications with their customers. Likewise, Epsilon's loyalty and CRM expertise enables clients to drive deeper engagement with their best customers. 

The good news for restaurants is that many kitchens are humming at full speed once again. Consumers are rediscovering the fun and convenience that a great restaurant experience can provide—whether the food is consumed on- or off-premise. The challenge is that the contours of that experience are changing as consumers adopt new habits and expectations in response to emerging technologies and the behavioral rewiring sparked by the pandemic.

To thrive in the next era, restaurants must embrace technology and digital transformation to an unprecedented extent. That may sound intimidating, but there's a bright side: technology promises to enable restaurants to connect with their customers more seamlessly than ever before while providing added value and convenience along the way.