IHOP Taps AI as Restaurants Race to Personalize Recommendations

IHOP will become the first restaurant to leverage Google Cloud’s Recommendations AI for digital ordering, as across the industry, eateries compete to offer the most personalized customer experience.

The casual dining chain announced its partnership with Google Cloud on Thursday (Aug. 24), leveraging the latter’s technology to provide more targeted messaging powered by artificial intelligence (AI) and machine learning.

“One of the biggest shifts we’ve seen with our guests is a preference for online ordering, with IHOP’s to-go business rapidly growing to more than 20% of total sales in the last few years alone,” Kieran Donahue, the chain’s chief marketing officer, said in a statement.

“Our new partnership with Google Cloud infuses AI into IHOP’s online ordering experience, making it even easier for our guests to place online orders, quickly find the items they love, and discover our newest products relevant to their individual tastes and interests,” Donahue said.

Certainly, more consumers are ordering from restaurants online.

Additional findings from a PYMNTS survey of nearly 2,500 U.S. consumers for the “ConnectedEconomy Monthly Report: The Urban-Rural Health Divide Edition” revealed that digital participation in the restaurant sector is up 9% year-over-year among high- and low-income consumers (those who make more than $100,000 or less than $50,000 a year) and up 2% among middle-income diners.

Amid this rise in digital engagement, restaurant brands are competing to provide the most personalized, targeted experience both online and in stores. For instance, quick-service restaurant (QSR) giant Wendy’s, which has around 7,000 locations around the world, shared on its earnings call earlier this month that it is leveraging its rewards program membership base to drive more targeted messaging.

“Our U.S. loyalty monthly active users held strong at over 3.5 million, supported in part by continued strides in our one-to-one marketing program,” Wendy’s CEO Todd Penegor told analysts. “We have now activated more personalized user experiences and expect our progress in this area will accelerate over time, ultimately driving frequency, check and operational efficiencies.”

Meanwhile, Starbucks, the top restaurant company in the world by revenue, is turning its focus, when it comes to personalization, to the in-restaurant experience.

On a call with analysts at the start of this month discussing the brand’s third quarter FY2023 financial results, CEO Laxman Narasimhan laid out the company’s plan to personalize the brick-and-mortar experience.

“We plan to move all stores to brand-forward digital menu boards over the next couple of years to further sharpen personalization and daypart activation,” Narasimhan said.

AI is becoming more common throughout the industry. In fact, research cited in the PYMNTS report “Inflation Puts Technology on the Menu for Restaurants,” the June edition of the “B2B and Digital Payments Tracker®,” created collaboration with American Express, reveals that 76% of restaurants are already using automation in at least three areas of operations.

In fact, consumers want the kind of personalization that AI enables. Another study cited in the Tracker® revealed that 70% of consumers expressed interest in applying technological aids, such as AI voice assistants, personalized menus and smartphone apps, into the drive-thru process.