In a collaboration between TechTable, a platform and annual summit dedicated to innovation at the intersection of hospitality and technology, and The Mixing Bowl, a platform to connect food, agriculture and IT innovators, we unveil the 2018 Restaurant Tech EcoSystem map, which represents a current view of the many layers within the restaurant technology ecosystem.
In order to help operators, entrepreneurs and investors better understand this quickly evolving landscape, we are sharing our thoughts on some of the most important themes and trends currently impacting the industry.
Setting the Table
In recent years operators within the hospitality industry have increasingly moved past pen and paper, adapting to the mindset that technology is crucial to running their businesses. Now, with the increasing digitization of the sector, we continue to see tech startups popping up in every category related to managing a restaurant – with surges of funding in some categories, growing consolidation via mergers/acquisitions, and numerous pivots among existing players. Thus, as each month passes by, mapping the restaurant technology landscape has become considerably more complicated.
As such, our goal in creating this industry map is to help operators visualize the myriad of distinct and overlapping capabilities across the restaurant technology ecosystem. In this iteration of our 2018 Restaurant Tech Ecosystem map we have focused specifically on guest facing technology (outer ring), and B2B operations and systems (inner ring).
The POS Silo and Data Divide
While the restaurant industry has laid the digital foundation for transactions and data capture, a significant portion of that data still remains silo-ed across separate systems. Thus while operators are now better able to measure and manage the “what” and the “why” related to operational efficiencies, they are often still limited in their ability to truly leverage those insights to optimize or automate efforts based on that intelligence.
With the progression and evolution of the restaurant tech stack versus even 24 months ago, it is clear it will soon become more commonplace for operators to be able to close the loop via POS data integration, and respond more fully (and rapidly) to a real time picture of the guest and operations.
For example, unlocking POS data to further understand guest behavior and patterns on both a micro and macro level is a major opportunity. A few years ago, operators knew which guests made reservations in their restaurants, but didn’t know what they ate. Fast casual and QSR concepts relied on survey data and outdated demographic research. Now, as everyone is focusing more on guest behavior and personalization, operators shouldn’t be limited to a single reservation profile view of the guest. Rather, their view should include all channels including social and online ordering to get a holistic view of the customer.
For a deeper dive on this topic, last fall the TechTable featured the co-founders of Resy and Omnivore in a watch-worthy session titled “What’s the Point if We Can’t Connect?” where they discussed the importance of connectivity to POS data. Underscoring the point, Lauren Hobbs, Co-Founder of TechTable, noted, “It’s companies with this mindset that we think are leading the way towards greater access to information to make holistic decision making possible for operators.”
That said, very few POS companies have successfully built out strong offerings across multiple categories in order to truly enable that holistic customer view. As the stakes get higher, this is a clear area for near-term consolidation as POS leaders/incumbents will aim to continue to buy, build and selectively partner in order to provide (their version of) the next-gen best-of-breed solution.
Data to What End?
It’s increasingly clear that the companies and operators who are best using the underlying data, have first taken the time to understand their business goals, and made decisions on how they would prefer to drive the guest experience and/or operations. Otherwise restaurant operators can find themselves investing in expensive technology and capturing endless amounts of data but seeing no actionable avenues for performance improvement.
Fast casual brand CAVA is a good example of how a close partnership between their CEO and Chief Data Scientist to marry the data collection and insights with operational improvement, helped to land them on Fast Company’s 2018 Most Innovative Companies list.
Delivery: Friend or Foe?
Consumers everywhere have clearly voted yes for delivery as the next generation of drive-thru, and as demand has exploded in the past few years, so have new companies and investment into the space. While a number of market entrants have flamed out, the delivery category is here to stay.
In response, restaurants across the spectrum, from quick service to fine dining, are struggling to decide how much they should rely on third-party online ordering and delivery frenemies. Similar to what has gone on in other service industries, third-party aggregators are getting bigger and bigger via acquisitions and partnerships, but as aggregators control more volume, many restaurants are increasingly struggling with how to maintain margins after factoring for additional third party fees.
While keeping all ordering and delivery efforts in-house is not really realistic for most operators, there are a growing number of compelling SaaS solutions which are helping restaurants maximize and grow their existing customer base in conjunction with volume via third-party aggregators. From white label ordering platforms like Olo, to logistics platforms like Bringg, these B2B and B2B2Guest solutions help enable the restaurant to better know, serve and ultimately “own” their customers, versus paying high fees to delivery aggregators who “rent” customers to restaurants.
As the fight intensifies among the larger incumbents like GrubHub, Uber, Square, Amazon, OpenTable and others, we expect this to be an area of further consolidation.
Feeding the Winners
In light of the weak market performance of some of the last mile delivery and meal-kit delivery companies in particular, it remains to be seen if “Food Tech” will be able to regain its luster with general technology investors or if we will see their interest subside. That said, substantial investment is continuing to flow into the restaurant-related tech sector, which in turn has supported a robust ecosystem full of incumbents, growth-stage companies and hopeful startups all angling for additional distribution or broader market fit.
There are a handful of restaurant industry operators making investments within the tech space, like Danny Meyer or David Barber, who are leveraging their experience as owner/operators, but the bulk of restaurant tech investment has been driven by general technology investors, who may lack the hands-on knowledge of restaurants or the food industry. Often these tech investors are excited to enter the space, as they see it as an extension of the consumer internet or B2B SaaS sector, and while the market opportunity is indeed huge, they can have unrealistic expectations for tech adoption, growth trends, or meaningful KPIs to the industry.
As such, we have seen some general tech investors lean towards a playbook which encourages “Grow at all costs” or “Be profitable at all costs,” and as a result, the industry is seeing a number of restaurant tech companies propelled forward with capital infusions, but these same companies may not be employing a practical growth approach or developing a fully-baked standalone product.
Thus, while investment is feeding the current winners which are meeting expectations on growth and profitability, Barber wisely observes that, “the capital is [also] reinforcing the fragmentation.”
Although there aren’t that many dedicated “Food Tech” investors that have both the operations and technology backgrounds, those that can adopt a realistic outlook will be more apt to feed the next generation of winners by providing a more nuanced perspective regarding the balance between product development, customer growth and profitability.
Where We’re Headed
As these technology solutions become more integral to meet the growing complexity and cost of operations, the restaurant industry itself is starting to demand more. As Maureen Cushing, co-Founder of TechTable (and VP of Technology at Union Square Hospitality Group) notes, “Gone are the days where timelines are months–product roadmaps should be in days and weeks.”
In turn, while restaurant tech companies need to continue to rapidly iterate to meet restaurants’ needs with additional functionality, these companies need to see adoption to sustain their business and/or attract outside investment. It serves no one’s interest to see technology innovators walk away from serving this sector, so it’s important for both operators and knowledgeable investors to help companies that have a good product/market fit scale. Through collaboration and partnership with technology providers, scaled industry players and incumbents can help achieve more technology success cases.
A Note on Mapping the Landscape
The 2018 Restaurant Tech EcoSystem map, while clearly not exhaustive, is meant to illustrate the layers of technology solutions within the front of house and back of house.
Companies that primarily support guest experience are on the outer ring, and companies supporting B-to-B operations & systems are on the inner ring. Companies in each section are organized alphabetically, and companies that service multiple categories repeat across the map. Each ring is then broken into verticals and companies are attached based on their primary capabilities.
The Mixing Bowl and TechTable teams welcome the continued wisdom of participants within the restaurant tech industry. Have suggestions or ideas about companies to include? Reach out to us at: firstname.lastname@example.org or email@example.com.