How Mobile Innovation Could Heat Up The Restaurant Industry

Consumer dining, just any other retail trend, is directly tied to the ups and downs of the economy. But unlike many other retail purchases, food is a necessity, even though consumers have the option to cut down on how and where they choose to allocate their dining budgets.

Case in point.

A recent survey from the AlixPartners, reported consumers plan to dine out more, but spend the same, or in some cases less, on food. In that survey, 76 percent of respondents said they plan to dine out more or the same number of times over the next 12 months; 77 percent expect to spend the same amount or more. In that same survey, 23 percent of consumers said they plan to spend less on dining out, which is a 10 percent dip from about a year ago.

From the payments industry perspective, what's as critical to dissect is what devices are driving them into restaurants to spend those dollars. The National Restaurant Association released information from the Restaurant Social Media Index, which spells out "why mobile strategy is essential for restaurants." Here are a few highlights:

  • Restaurant customers use mobile devices frequently: Not surprisingly, mobile customers use those devices when they are out and about and looking for places to nosh. But they also use them when they’re in the restaurant noshing. The NRA says that “65 percent of  location-based traffic on social media comes from restaurants.” Whether it’s sharing pictures of the food they are eating, the people they are eating it with, checking in, and/or a like or a recommendation, mobile has become not just a device that helps people find where to eat but as a social engagement tool once they are there.
  • Online reviews: Consumers on the go use their mobile devices to search for a place to eat. And they do that by looking for restaurant reviews as well as details about the menu. "Searching for restaurant reviews is one of the most popular mobile actions,” according to the NRA.
  • Mobile isn’t just for millennials: It’s tempting to think that mobile devices are just for those hip and happening millennials for which the devices never leave their hands. And, it’s true that millennials do disproportionately love their mobile devices, the NRA says not to count out the Boomers, “a significant proportion of whom, they say “use smartphones to interact with restaurants."

The National Restaurant Associations' forecast for 2014 pegged the restaurant business at a $683.4 billion industry. That's roughly a $97 billion increase in a four-year period. That measurement included all commercial restaurant services, including lodging, retail, vending, recreation and mobile sales. That same report took a look at smartphone activity and revealed that 24 percent of customers were likely to use a smartphone to pay with their meal. Making reservations (46 percent), ordering takeout or delivery (52 percent) or using rewards or special deals (50 percent) ranked among the other top reasons for using the mobile device.

Just like retail consumers are getting savvier about how to shop, diners are become increasingly more calculated about choosing where to eat and what to spend money on. Technology plays a key role in these decisions, data shows — and not just for the younger generations.

“It’s well known that younger consumers are more likely to accept – and even request – technology options being part of their dining experience, but we’re finding that older consumers are also willing to incorporate technology for a variety of restaurant-related activities,” said Hudson Riehle, senior vice president of the National Restaurant Association’s Research & Knowledge Group. “While Baby Boomers are currently more likely to use a computer to place orders and view menus, they seem willing to transition to smartphones in the future. As more restaurants adopt these technology features, operators would be wise to not only focus marketing efforts on younger guests."

Getting consumers through the door ranks among the top challenges in the dining industry and turning those first-time diners into regular customers comes next. Having options to attract customers through mobile technology for making reservations and paying the bill is becoming more critical to drawing in diners, keeping consumers happy and having them want to come back.

“The battle for market — or stomach — share in the restaurant industry is as fierce as ever. The winners will be those who pursue the right paths to growth and value creation, while reigning in costs,” said Eric Dzwonczyk, managing director at AlixPartners and co-lead of the firm’s restaurant and foodservice practice.

No matter which way you slice it,  mobile innovations in payments, retail and dining are interconnected in terms of capturing the consumer audience. If mobile payment leaders want to make people pay with their phones, they've got ensure the retail and dining industries adopt the technologies across their stores and restaurants. Consumers seem to be willing to use technology in both those instances, but don't always have the options offered at their fingertips.

According to the National Restaurant Association's data: "More than 40 percent of all adults say they’d be likely to place their orders at quick-service restaurants via the restaurant’s website, a smartphone app, or in-store terminals if they had the option. Nearly three in 10 adults — and four in 10 adults ages 18 to 34 — say they’d be likely to pay for their quick-service restaurant orders by mobile or wireless device if they could."

2015 could be a big year for EMV adoption and technology overhauls at restaurants as recently released figures from a POS Software Trend Report for 2015 reported: "More than half of restaurants (56 percent) say that enabling new payment options such as e-wallet is the top business goal influencing POS upgrades. Adding mobile POS and prepping for EMV is pushing 47 percent of restaurants to look at POS upgrades. Better integration is a core concern for about a quarter of restaurants, looking to build bridges to both e-commerce and other operational systems."

Restaurants say they want to adapt, but only time will tell who starts the trend. The number on top functionality upgrade listed by restaurants in the data shows that mobile wallet acceptance ranks highest among top priorities at 59 percent. Other top functionality for POS upgrades include: Tablet-based POS software (57 percent), online POS for web (39 percent and cloud-based POS (35 percent).

"Overall, these patterns reinforce that restaurants want flexibility in the way they take orders and process payments," the report concluded.

Restaurant owners are warming up to the concept that POS upgrades are needed to keep up with technology innovations that attract a wider demographic of customers. Mobile payments are still catching on in the consumer market, but for restaurants to keep up with consumer demand, they will need to deliver what consumers want. Outside of good food and quality service, the savvy dining consumer is increasingly turning to restaurants that can deliver both in service and technology to make for a more seamless dining experience.

The restaurant business is a battle to win over customers and it seems those destined to succeed will be the ones keeping up with technology innovations for the savvy consumer, which in today's market means starting with mobile.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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