Rising costs, labor management, and operational complexities are among the top challenges for independent restaurants
-
81% of independent and small chain restaurant operators are still using traditional POS systems
-
3 in 4 operators are likely to adopt new technology in the year ahead, and 71% plan to increase their spend on tech
-
Operators are spending more than 16 hours per week on labor-management tasks like scheduling, payroll, tip distribution, and compliance
SpotOn, the top-rated software and payments partner for restaurants, today announced the release of its State of Restaurant Tech Report, providing insights from independent restaurant operators on the rate of technology adoption, emerging challenges, and predictions for the year ahead.
Tech Investments on the Horizon
While the rate of technology innovation and adoption has risen sharply over the past few years, a vast majority of independent operators (81%) are still using legacy point-of-sale (POS) systems. However, that appears likely to change, as 75% say they are likely to convert to a new technology system in the next 12 months. Among Fine Dining restaurants, that number surges to 85%.
While POS systems remain the leading technology, other forms of restaurant tech are emerging. Roughly 1 in 4 respondents report that they are currently using accounting platforms (25%), loyalty programs (25%), employee scheduling (24%), QR codes for menus/ordering/payment (24%), and online ordering capabilities on their brand’s website (24%). When asked about future investments, more than half of the respondents indicated that they planned to invest in these technologies in 2023.
Challenges: Cost, Complexity, and Labor Management at the Forefront
Operators face various challenges, but three rose to the top as anticipated challenges in the next 6 months: rising costs, operational complexity, and labor management. An uncertain and fluctuating market has caused prices to skyrocket on everything from ingredients to energy, while labor shortages and complex regulations have required operators to take a much closer look at how they manage their workforce. And operators don’t see those challenges abating.
The rising cost of operations ranks as the top challenge for independent and small chain operators, driven by food costs (29%), labor costs/wages (24%), increased beverage costs (19%), and increased packaging/disposable costs (19%). Other challenges operators anticipate facing include employee retention (21%), supply shortages (20%), decreased customer spending (20%), and a recession (18%).
Labor management follows closely as the second most pressing challenge. SpotOn found that managers spend more than 16 hrs per week (or two full days) on labor-management tasks, including:
- payroll: 3.3 hours / wk
- calculating tips and payout: 2.9 hours / wk
- staff scheduling: 2.3 hours / wk
- maintaining labor compliance: 2.2 hours/wk
- managing overtime: 2.2 hours / wk
- tip distribution/tip management: 2.1 hours / wk
- verifying staff clock in, clock out punches: 1.6 hours/wk
When asked about increasing operational complexity. operators also pointed to labor management tasks as the primary drivers, with 44% citing payroll as an increasing challenge and 38% citing labor compliance. Regarding payroll, 51% of operators report that they experience payroll problems at least once a week. In Quick Service and Fast Casual restaurants, that number exceeds 60%.
“We’ve found that operators can save 20 hours each week when utilizing the right technology to manage the increasing complexities of running a profitable restaurant,” said Kevin Bryla, CMO of SpotOn. “Investments in technology will become critical for operators to improve their restaurant’s performance and focus on supporting their teams to create truly memorable dining experiences.”
Despite Challenges, Profit is Slowly Returning
Earlier this year, SpotOn launched Points of Profit, a guide to help restaurants boost their notoriously slim margins. Despite continued challenges with inflation and labor complexity, SpotOn is thrilled to see that 78% of operators surveyed reported an improvement in profit margin over the last year, with 31% improving by double digits.
Technology has played a significant role in how restaurants improved their margins. SpotOn’s suite of integrated solutions are designed to help operators increase revenue and lower costs, so they can incrementally improve their profit margins. For instance, after using QR codes for 12 months, SpotOn clients saw a 3% increase in check averages and a 9% increase in total sales.
Read More: A5 Recognized Leader In Salesforce Partner Innovation Awards
One area of opportunity for operators to claw back more margin is to follow the lead of fine-dining restaurants and encourage customers to order takeout and delivery directly through their restaurant, avoiding third-party fees. Consumer demand for takeout and delivery has risen dramatically, making takeout and delivery technology essential for operators, which accounts for three in ten orders, most of which come through a third-party order platform.
With strong data to demonstrate the impact of integrated technology in a restaurant, what prevents operators from investing? The survey found that cost is the primary barrier, followed by training staff on new technology (29%), concerns around the speed of service and repair (29%), and ease of use (24%). While cost is cited as the primary barrier, it is not the only consideration when making technology purchases. Overall, 48% of operators prioritize effective solutions or services and support over price in the technology purchasing process, with both fine dining (50%) and fast casual (31%) operators placing the most effective technology solutions, regardless of price, above all.
Operators recognize the important role technology will continue to play in their business and are making plans to invest in technology to address the challenges they are facing today and in the future.
Looking ahead at 2023
As restaurant operators look towards 2023, investment in technology is rising and doesn’t show signs of slowing down. Seventy-one percent (71%) of independent and small chain restaurant operators expect to increase spending on technology systems in 2023, with fine-dining operators likely to make the most significant investment. At a unit level, operators generally expect to invest up to $30K in technology next year. What do they plan to spend on?
- 68% plan to invest in payroll management
- 66% plan to invest in employee scheduling
- 64% plan to invest in CRM or Email Marketing program
- 63% plan to invest in online reservations/waitlist management
- 63% plan to invest in a loyalty program
- 63% plan to invest in accounting
- 63% plan to invest in QR codes for menus, ordering, or payment
- 59% plan to invest in digital kitchen display systems (KDS)
- 58% plan to invest in a staff communication tool
- 57% plan to invest in online ordering capabilities on their brand’s website
- 54% plan to invest in cloud-based POS
Nearly half of operators plan to pursue a business loan in the next year, with the majority supporting the growth and expansion of their restaurant concept. SpotOn found that limited-service restaurants are more likely to plan for a loan than full-service restaurants. What’s standing in the way of operators obtaining a loan? 23% of operators say interest stands out as the most significant barrier to obtaining a loan, while 17% had concerns about repayment and 15% were worried about getting funds in time. SpotOn Capital offers fast, affordable funding, so the owners of Bardo and Vana in Charlotte, North Carolina, could fund the expansion of their business to a new location with money from their current businesses while paying at their own pace.
Read More: SalesTechStar Interview with Andrew Arocha, Chief Revenue Officer at Drift
As restaurant operators continue to navigate the uncertainty of what lies ahead, SpotOn is ready to provide restaurateurs and operators with a fully integrated restaurant management platform complemented by 24/7/365 support from Restaurant Success Managers that know restaurants. From a lightning-fast, cloud-based point-of-sale to labor management tools, SpotOn’s robust hardware and software solutions are built for restaurateurs by restaurateurs with input from industry leaders like Michael Mina and Matthew Kenney. SpotOn technology is built to drive restaurant efficiency, boost profit, and simplify the employee experience so they can deliver an incredible guest experience.
The data cited was developed by Technomic, a leading restaurant industry market research and consulting firm, on behalf of SpotOn. To obtain the data featured, Technomic conducted surveys with 300 independent and small chain restaurant operators in August 2022. Participants were not compensated or otherwise incentivized by SpotOn. The data presented accurately reflect the survey questions posed and participant responses.
