How OpenTable, Paypal, NCR and Google are bringing technological innovation to Restaurants and Food Chains

Consumer experience in restaurant industry has undergone a dramatic change in the last decade. Technology advancement at each consumer step is revolutionizing the overall consumer experience. The technology changes we have seen in last decade have not only helped large chains, fine dining restaurants but also the smaller restaurant shops. Cloud, PaymentTech, Analytics, Mobility are bringing fundamental changes through technology-driven disruptions. In this article we will look at the evolution of the technology landscape at Restaurants and Food Chains in the US.

This has been particularly aided by increasing acceptance of technology by the end consumers. As per a recent survey by National Restaurant Association, 2/5th of adults surveyed were open to use of smart phone app if it were to be offered by a quick-service restaurant and nearly 1/3rd of adults were open to use of mobile apps if it was offered by a full-service restaurant.

Pre 2005: The Early Days

With growing popularity of internet, restaurant reviews websites like Opentable emerged in this period. These review websites evolved as a single greatest source for restaurant discovery and selection. This was in addition to physical restaurant magazines. Though, bulk of reservations was done through telephone/in person mode, some of these websites initiated reservation services through internet. Menu was mostly in the physical format for decades but a few of them went for digitization of Menu early on. Payments were enabled by desktop based POS with credit card acceptance in most of the restaurants. POS hardware was perceived costly by smaller restaurants. Loyalty and rewards were run through CRM software integrated with the retail POS hardware but only at limited places. Smaller ones didn't have one. Most of shifts in this period were driven by Internet based technologies on the discovery side.

2005 – 2010: The First Wave

I would like to call this phase as the first wave characterized by increasing influence of Mobile and SMS/Internet driven services

Smart phone penetration in US grew from less than 5% in 2005 to ~25% in 2010. During this period a revolution came in the form of mobile apps, (Driven by Apple from 2007, Google and Windows OS platform) to serve various services segment in the US. This period saw emergence of multiple apps serving one or two steps in restaurant consumer experience described in the exhibit below. Yelp, Foodspotting and Urbanspoon emerged as alternatives for restaurant search. Use of GPS on mobile added more teeth to restaurant search apps making them more effective.

2010 – 2013: The second Wave

This phase can be called as the second wave marked by the availability and increasing influence of Full Mobility, Cloud, Analytics, Contactless payment technologies, geofencing and faster Internet

With growing penetration of smartphones, restaurant services were increasingly being offered through mobile apps in this period. Grubhub, Seamless offered menu/ordering for delivery through mobile apps. This period saw emergence of online coupons as a loyalty and rewards medium for restaurant in US. With evolution of contactless technology, the payments part of consumer experience underwent most significant change. Starbucks stands out as major adopter of mobile payment system with QR code based payment app in the initial period. Starbuck processed more than USD ~1bn of transactions in US using mobile payment solutions. Their location, app based face recognition checkout system at the POS was nothing less than amazing. At the same time, Tablet/Mobile based menu and order taking adoption increased significantly during the period. Ability to use these tablets for receiving payments and linking it to the back end CRM, made this solution attractive.

2014 and Beyond: The Third Wave

Integration will be the cornerstone of this phase as tech firms expand beyond their current scope of services to become full blown restaurant tech providers

Till 2013, most of players were focusing on using technology to serve one or two steps/processes of consumer’s restaurant experience (exhibit). In 2014, players in this technology space are trying to do integration of 3-4 or all steps of consumer experience through a common technology solution. Opentable has been one of the few incumbents looking to integrate each and every step through its solution. Paypal has also been working on its wallet app which allows search, pre-order and payment services for consumers. LTP believes that this year we will see more such players coming up with this kind of integrated services for providing a holistic consumer experience in restaurants. Look at the exhibit below.

Players to watch out for:

There are more than 100 companies operating in the restaurant technology solutions space in the US. LTP believes there are a few companies in this spectrum to really watch out for as they try to expand beyond one or two steps to a bigger play in the restaurant technology space.

  1. Opentable: It is the leading restaurant search and table booking company in the US. It is piloting its payment app in San Francisco which integrates table booking and bill payment through a mobile app. Opentable has made series of acquisitions to integrate the entire consumer experience steps on a single platform. Opentable bought Ness Technology, Foodspotting and Guestbridge to strengthen its restaurant search and recommendation service. Opentable acquired Quickcue to strengthen its reservation feature by adding the waitlist functionality. On the other hand, Opentable also acquired Justchalo to develop the payment functionality on its mobile app. Opentable strengthened its payment loyalty program by acquiring Treat technology (Gift card app). With 30,000 restaurants onboard they would be looking at a bigger value added play now
  2. Paypal: It is global leader in P2P money transfer business. Paypal is also piloting its new apps which allows consumer to search restaurants, pre-order and then make payments and even Share the tabs. POS players are working with Paypal to integrate Paypal wallet in their POS solutions. Paypal is also working on its Beacons solutions. We believe Paypal will emerge as a leading player in the restaurant technology space namely Menu/Ordering, Payments and Rewards/Loyalty. And perhaps reservation and search as well.
  3. Foursquare: Foursquare app allows restaurant search through its check-in app. It has now integrated with Visa and Mastercard (Earlier had tie up with Amex) to drive its marketing and discount services for restaurants.
  4. Dash: Dash is mobile app allowing mobile bill payments at restaurants in New York. It has initiated to integrate iBeacons with its app, to allow an additional automatic check-in feature.
  5. Google: Google, the global leader in search engine has launched it wallet in US for mobile payments. This wallet enables payment at lots of places including retail POS, Service restaurants and Take-away. Couple of day back it added one more feature to its search engine which allows user to see restaurant’s menu along with the restaurant search. With this Google now has services/solution for 3 out of 5 major steps (Discovery, Menu and Payments) in consumer’ restaurant experience. Though, Google has not yet integrated them as part of a single platform.
  6. Cover: Cover launched its mobile payment platform in October 2013. It started off by offering payment services in Michelin starred restaurant. But over a period of time, its gaining momentum with takeaways and Bars. It is in the process of integrating its services with Rezhound for table booking and with Foursquare for restaurant search.
  7. Chownow: Chownow is a customizable online ordering platform for restaurants. It allows consumer to order online or through Facebook page of restaurants. It has initiated developing CRM tool which can be integrated with the ordering app to make restaurant’s marketing more effective.
  8. Tabbedout: Tabbedout app is major app for Bars in US that allows consumers to make bill payments, share tabs and receive loyalty and reward points.
  9. NCR: It is one of the leading restaurant POS companies in US. It has launched NCRpay a mobile app to enable mobile based restaurant bill payments. Its one of the first POS companies to aggresively adopt mobile payments as the consumer behaviour shifts towards mobile.
  10. Seamless: IPO bound Seamless-Grubhub roots are in online ordering for delivery. In 2013, the merged companies generated more than USD 1 Bn of transaction through their platform. They are present (small or large way) in the Discovery, Ordering/Menu digitization, Payments and Reward/loyalty section of consumer's restaurant experience (see the exhibit).