Inflation Prompts Renewed Focus on Restaurant Technology

As food prices rise, restaurants are being challenged to digitize or face mounting costs.

In an interview with PYMNTS, Tim McLaughlin, CEO of Arlington, Virginia-based restaurant company GoTab, spoke to inflation’s effect on how restaurant managers are approaching technology.

“It’s been good for us to be honest, because they’re having to think about efficiency,” McLaughlin said. “People are finally starting to pay attention to things like labor costs going up.”

He cited the example of the GoTab’s digitization of the refund process, part of the company’s Manager App launched earlier this month, as the kind of time savings that operators may overlook in other times, given that the loss of time in the process is cumulative, with each refund not taking terribly long in its own right. However, as costs rise, those minutes add up.

Additionally, with rising costs, the app enables operators to get more involved in processes such as refunds and discounts without much more effort on their part, enabling them to review these decisions remotely from their mobile devices.

“If I want to see all the refunds that are happening in my restaurant, because maybe I’m concerned about something, or I want to see all the discounts that are being given, I can actually just subscribe to those on the manager app,” McLaughlin said, “and then it’s going to give me a continuous feed of those and who’s doing them, and I can go yet a step further and approve them.”

Bolstering the argument that inflation creates demand for labor-saving restaurant solutions is McLaughlin’s observation that the company’s “best markets” are those wherein the minimum wage has been increased to $15.

Certainly, restaurants’ profit margins have been taking hit, especially independents’ margins. In fact, the share of small hospitality businesses that believe they are at risk of closing by 2024 doubled between Q3 and Q4 of 2022, as research from PYMNTS’ study “Main Street Health Survey Q4 2022: SMBs Brace For A Recession,” which drew from a survey of more than 500 Main Street businesses, revealed.

Moreover, labor has indeed been a significant challenge for many restaurant operators over the past couple of years. Data from the 2022 edition of PYMNTS’ “Restaurant Readiness Index,” which was created in collaboration with Paytronix and drew from a survey of more than 500 quick-service and full-service restaurant managers across the country, revealed that 45% were having trouble hiring staff, and 46% struggled with retention.

One of the ways that these issues have manifested is in a decline in the customer experience, as restaurants’ efforts to afford rising food prices have caused cutbacks in other areas. PYMNTS’ report “The 2022 Restaurant Digital Divide: Restaurant Customers React To Rising Costs, Declining Service,” for which we surveyed more than 2,300 restaurant customers in November, reveals that more than a third of all diners have noticed longer order processing times, and 27% have seen lower quality service.

Looking at the restaurant technology space overall, McLaughlin argues that many providers are attempting to do too much, trying to unify too many unrelated tools through a single platform rather than focusing on doing a handful of tasks well.

“We’re focused on two parts of the business — commerce, meaning taking orders and payment for those orders, and then fulfilling them,” he said, arguing that commerce and fulfillment are inextricably linked, citing the example of Shopify’s acquisition of a fulfillment company last year. “Our belief, is you can’t manage guest expectations if you don’t know what is going on in the bar, in the kitchen.”