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Now at a Quick Service Restaurant Near You: A Healthy Serving of Technology

August 01, 2019

Business is booming in the QSR space: from mobile apps and kiosks to AI, technology is becoming increasingly important for franchises to compete effectively.

Business is booming in the QSR space: from mobile apps and kiosks to AI, technology is becoming increasingly important for franchises to compete effectively.

Competition is fierce in the quick-serve restaurant (QSR) space, and technology is increasingly being used as the weapon of choice to gain and retain customer loyalty.

To stay competitive, QSRs are finding they have to deliver a superior customer experience with every visit. Many are using digital technologies to do just that, including tools that streamline ordering and payments, both in-store and via mobile applications. Mobile apps also help QSRs get to know their customers better, enabling them to use the insights they glean to drive marketing programs and gain a competitive advantage.

This increased reliance on technology is prompting QSRs to take a hard look at their technology platforms and networks, to determine whether they’re up to the challenge in terms of performance, reliability, scalability, and security.

Often, QSR managers opt for a managed service provider to do the heavy lifting in terms of tech installation and even on-going management rather than dedicating restaurant staff to technology tasks, says Donna Cobb, Executive Director, Enterprise Marketing for Comcast Business.

“That’s been a big discussion point with the QSRs we work with, who are great at what they do—cooking food and serving customers,” she says. “They want to ensure technology can be installed and maintained but without disrupting operations.”

Tech-fueled Growth

It’s an important discussion because competition is steep in the QSR space, with more restaurants cropping up all the time.

In 2018, nearly 200,000 QSR franchises dotted the U.S. landscape and customer spending sets new highs every year. In 2018, customers spent $299.6 billion at QSRs, up from $187 billion in 2004, according to the research firm Statista.1

QSRs also led the restaurant industry in growth in 2018, with 7% year-over-year growth vs. the prior year, accounting for 38% of overall U.S. restaurant spend, according to payment processor First Data.2 It shows no sign of slowing down.

In the first quarter of 2019, which was turbulent for many industries, the QSR sector hit a 5-quarter high of 8.8% growth, “driven in part by continued digital penetration,” First Data said. QSRs experienced more than twice the growth of fast casual or family dining restaurants for the quarter.3

A study by Deloitte Technology confirms technology is helping to drive that growth. It found that nearly half of customers wanted to pay using their phone, especially drive-through and take-out customers. Of those, 50% wanted to do so using the QSR’s own app.

And here’s the kicker:

When technology was used to place an order, the average spend increased 20% and frequency of visits increased 6%, Deloitte found.4

“It’s clear that technology can help boost customer loyalty as well as revenue. Upgrades often pay for themselves quickly,” Cobb says.

But a 2018 study by the consulting company BRP found a significant gap between what customers want and what restaurants say they are delivering when it comes to technology, especially with respect to younger customers.

Nearly three-quarters (74%) of millennials and Gen-Z customers said ease of ordering and payment was extremely important to them, but only 45% of restaurant executives said they offered “excellent execution” in this area. A similar gap exists with mobile/web ordering: 41% of millennials and Gen-Z’ers said it’s extremely important but only 26% of restaurant execs rated themselves excellent in this area. The same goes for interactive digital content: 43% vs. 22%.5

“Operators need to redesign their business processes and invest in technology to meet and exceed guest expectations,” the study said. “They can’t lose sight of the fact that the underlying infrastructure and network is what powers the experience. The digital dining experience is a pipe dream without a high-performance network.”6

Meeting Expectations Through Technology

In terms of what exactly customers are looking for when it comes to technology, it essentially amounts to anything that eases the ordering and payment process.

Mobile applications that enable guests to place an order and pay in a single transaction are one avenue. Such apps also typically drive loyalty programs through which guests earn points, discounts or other offers.

In-store kiosks for ordering and paying are also gaining traction, Comcast’s Cobb says, with some even supporting facial recognition capabilities that enable the kiosk to “welcome back” a customer.

Mobile apps and kiosks can each support opportunities to upsell customers, such as by suggesting a dessert, drink, limited-time offering, or an item from a past order. It’s just such capabilities that drive the 20% increase in spend from mobile orders.

Offering customers access to an in-store Wi-Fi network is becoming table stakes, as customers increasingly expect to be connected at virtually any public establishment.

In the BRP survey, 70% of respondents rated Wi-Fi as an important factor driving their dining decision. And they don’t want just any Wi-Fi. “Guest expectations of Wi-Fi performance are conditioned by their experiences with blazing-fast speeds at home and work. Operators must ensure they provide high-performance guest Wi-Fi. In this case, slow Wi-Fi is worse for business than no Wi-Fi,” the survey says.7

More forward-looking technologies include automated checkout, which can take at least a couple of different forms, Cobb says.

One is when a customer places an order from a mobile app for in-store pickup. When the customer enters the restaurant, beaconing technology, and analytics that operate over the Wi-Fi network recognizes the customer and checks off the order as paid, enabling the customer to grab the order and go.

Another variation is placing mobile orders in an in-store locker. Upon arriving at the restaurant, the customer scans a code from their phone to determine which locker the order is in and to unlock it.

Technology in the Back of the House

In addition to all of the customer-facing technology, QSRs are also implementing back-house technologies to streamline operations and increase sales.

Artificial intelligence is gaining traction, as QSRs experiment with capabilities such as using AI to make ordering suggestions and drive upsell opportunities. Maybe it recognizes that a customer ordered a milkshake in the past, so a mobile app or kiosk offers it as a suggestion.

AI-driven applications can also offer customers coupons to entice additional visits. If a family comes in once per month and shows a clear preference for chicken over beef, an AI application may entice an additional visit by offering a coupon on chicken items, she says. If even a small percentage of recipients take up the offer, that’s significant additional revenue to the bottom line.

Such offers may be especially effective for Millennials and Gen-Z’ers, who tend to find ways to eat out often even while balancing the need to manage finances and pay down student loans. “The mindset is “I am going to dine out as often as possible but take advantage of a deal, whether it’s a coupon, an incentive for checking in via social media or an app and other ways,’” says Darren Tristano, Founder and CEO for Foodservice Results and a longtime industry analyst.8

Point-of-sale (POS) systems are also becoming increasingly integrated with other functions to streamline operations. For example, if a customer orders a chocolate shake, the POS can send a signal to the shake machine to start preparing it.

POS systems can also integrate with customer relationship management (CRM) applications to help drive loyalty programs, by keeping track of exactly what customers ordered, and when.

Some restaurants are also now employing hands-free access to data via voice commands, such as to check on the status of orders, staffing schedules and more. Others have voice-controlled applications that managers can use to streamline inventory tasks, resulting in significant time savings.9

Building the Technology Base

Implementing all these technologies requires companies have a technology architecture that delivers not just fast connectivity, but that is also flexible, reliable and secure. Increasingly companies rely on software-defined and virtualized network services to address all of those requirements.

Software-defined wide-area networks (SD-WAN) are one example. For QSRs to function properly, they need a network that meets three fundamental criteria. The network must be:

Reliable, to ensure applications work as promised at all times.

Scalable, to keep up with increasing demand as more customers adopt mobile technologies and QSRs roll out new applications, as well as seasonal variations in capacity.

Secure, to protect confidential customer data. Breaches are unacceptable, both in terms of the dollar cost to address them and the damage they can do to a QSR’s reputation.

By abstracting network control functions from the underlying network, SD-WANs enable QSRs to choose the WAN service option that most closely matches the requirements for each application. Some may require the performance and deterministic characteristics that private lines provide while others may be served by lower-cost Internet links. SD-WAN also makes it simple to configure backup links, using Internet or wireless services as secondary options to ensure reliability. And security services such as firewalls and intrusion detection/prevention are typically built in to the SD-WAN appliance at each QSR location. The physical or virtual appliances also make the service simple to deploy, which is important for restaurants chains that are not likely to have IT personnel at each location.

SD-WANs help QSRs modernize their networks to support growth and business innovations that are important to gain customer loyalty. They also enable IT to gain the visibility and control they need to manage multiple distributed locations through a centralized, single pane of glass, or even from a mobile device. SD-WANs also simplify policy management and control, ensuring IT can define user and service policies for each site, right down to ensuring each application gets the bandwidth it requires.

With the ability to easily configure backup options should a primary WAN connection fail, SD-WANs also ensure reliability and business continuity.

For many QSRs, the managed SD-WAN option makes the most sense. It relieves store managers from having to deal with network assets, freeing them up to spend time analyzing business intelligence to drive customer satisfaction. They can still be kept apprised of what’s going on in the network via a dashboard that works from any browser.

Serving Up Technology

While it’s great that QSRs are experiencing a period of record customer spending, there’s no denying the competition for those customer dollars is fierce.

Technology is increasingly important to effectively competing. That includes customer-facing applications like mobile ordering, in-store kiosks and fast Wi-Fi as well as back-of-the-house applications like AI and POS integrations.

It all requires a reliable, scalable, secure network, which makes SD-WANs a good fit. Software-defined networks minimize the equipment footprint inside of the restaurant. As space management becomes more and more important inside of restaurants, any help technology transformations can offer in freeing up space that could be leveraged for food prep or other avenues that drive revenue is an improvement for the Operators. It’s even better if it’s managed by a service provider, so QSRs can focus on keeping customers happy—and returning them.

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[1] Consumer spending in the quick service restaurant (QSR) sector in the United States from 2004 to 2018 (in billion U.S. dollars), Statista.
https://www.statista.com/statistics/259148/consumer-spending-us-qsr-sector/

[2] “3 Guides to QSR Growth in 2019,” Dec. 26, 2018, QSR Web.
https://www.qsrweb.com/blogs/3-guides-to-qsr-growth-in-2019/

[3] Quarterly SpendTrend® Report: 1Q19, First Data Insights.
https://www.firstdata.com/downloads/spendtrend-pdfs/First_ Data_SpendTrend_Report_1Q19.pdf

[5] “Restaurant Digital Crossroads: The Race to Meet Guest Expectations,” BRP in partnership with Windstream Enterprise. 2018.
https://brpconsulting.com/wp-content/uploads/2018/10/Restaurant-Digital-Crossroads-The-Race-to-Meet-Guest-Expecta- tions-06-26-18.pdf

[6] Ibid.

[7] Ibid.

[8] “Foodservice Industry Forecast for 2019: Steady State,” Sept. 4, 2018, Fesmag.com.
https://fesmag.com/features/foodservice- news/16150-foodservice-industry-forecast-for-2019-steady-state

[9] “9 Trends for 2019 That QSR Brands Can’t Ignore,” Dec. 12, 2018, Ansira.com.
https://ansira.com/insights/blog/9-trends-for- 2019-qsr-brands-cant-ignore/

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