Hi-tech Retail John Bertoli's post
How to build a digital & mobile-first quick service restaurant experience
MAY 01, 2019
According to a recent Zion Market Research report, the global QSR market will soar to nearly $691 billion in the next five years, an anticipated CAGR of more than 4.2 percent until 2022. The basic tenets of speed, convenience, and affordability, combined with technology and customer experience is scaling the popularity of the industry and provides an optimistic outlook, but there are many challenges ahead as well. Macroeconomic factors such as rising labor and food costs combined with price discounts are driving prices lower.
In order to right the path, quick serve restaurants need to focus on implementing digital solutions that will help restaurant owners anticipate changes in customer behavior and tackle customer demands. Reimagining the customer journey involves adopting technology that will bolster revenue and customer experience, such as mobile first payment integration, digital drive-thrus, evolved PoS systems, and building a connected restaurant.
Samsung & HARMAN invite you to watch this on-demand webinar where we'll cover mobile-first strategies, digital drive-thrus, data-driven technology, upgrading technology systems and building a connected restaurant.
Joseph Lanners, Samsung SDS, Director, QSR Digital Transformation
Anand Krishnan, HARMAN, Vice President, Analytics & Big Data
Sachin Rao, HARMAN, Sales Director
Jason Carrigan, Checkers and Rally's, Head of Digital Marketing
Bradley Cooper, Networld Media Group, Editor
Bradley Cooper: Good afternoon. Welcome to How to Build a Digital and Mobile-First Quick Serve Restaurant Experience, a webinar hosted by QSR Web and digital signage today. My name is Bradley Cooper. I'm the editor of Digital Science Today and I will be moderating today's webinar. The global QSR market will reach $691 billion in the next five years. In order to meet the needs of new customers, restaurants need to invest in technology, such as mobile-first payment integration, digital drive-throughs, point of sale systems, and connected experiences.
Bradley Cooper: Today's webinar will cover how to upgrade technology systems to create a connective restaurant, handle digital drive-throughs, and engage customers with relevant data-driven technology. I'd like to take a second to introduce our panelists.
Bradley Cooper: We have Joseph Lanners. He is the director of Digital Transformation Retail and QSR at Samsung SDS. Also joining us is Anand Krishnan, the vice president of Analytics and Big Data at Harman, Sachin Rao, sales director at Harman, and Jason Carrigan, who's the head of digital marketing at Checkers and Rally's. With that, I'll pass it off to Joseph to get us started. Joseph?
Joseph Lanners: Thank you again, Bradley. I appreciate it. What a warm welcome. It's a real pleasure to be here with a phenomenal group of panelists. As you mentioned, the QSR global market will grow to 691 billion. I mean, just two short years ago, the market was only 530 billion, which is still a very large marketplace, but the winners in the market have been growing their check sizes fairly significantly.
Joseph Lanners: Going from 2019 to 2022, we'll exceed almost $690 billion in a global market. The US, at market, on a year over year growth, we're seeing with the hectic lifestyle, and dual incomes, and very busy families that are out there in the marketplace, both the traditional quick service restaurant industry and the fast casual dining industry, which is a natural extension to the QSR industry. They're growing quite quickly.
Joseph Lanners: The types of food types that are driving this growth and the larger check sizes that are driving this growth are expected to continue. With that, I want to share with you just a few of the key trends that have been going on in the marketplace. Those market drivers and opportunities that QSR leaders are taking advantage of are both related to three key areas. The empowered customer. These are tech-savvy customers. Those who are really on their apps. They're ordering ahead. They're using Uber. They're using Lyft. They're really trying to take advantage of every moment that they have in their daily lives.
Joseph Lanners: They're using every one of those moments to essentially order the food that they want. Both casual dining as well as quick service restaurant dining, they're using a lot more order ahead technologies. You're seeing that growth very significantly not only in millennials, but even those who are in Gen X or Gen Y who have started to adopt those technologies as well. They're traveling less using their own cars, which you might see some impact in the drive-thru and you're seeing a lot more in your order pickups or order deliveries.
Joseph Lanners: Then also in 2018, after a week 2017 casual growth, we were starting to see higher ticket sales and in-store services. The QSRs that are winning, growing faster than the industry average of about 4.2 percent. That's actually being driven by more in-store services or a rise in mobile orders.
Joseph Lanners: Then lastly the third key industry challenge and the opportunity for the industry leaders is to go ahead and take care of the complexity of the digital touch-points. You're seeing a lot more digital kiosks within the stores. Roles of the employees are changing significantly. You're getting a lot more self-service. Not just from the mobile order, but now you're having some of the QSRs get a digital touch screen to be able to place an order for those who didn't order ahead on their phone.
Joseph Lanners: They're also using lots of digital sensors, AI sensors and so forth, to leverage big data, analytics, and many of the opportunities to essentially drive more operational efficiency. This is a good point to basically hand this off to Anand. Anand's going to go over some of the QSR innovations that are going on in the market. Anand?
Anand Krishnan: Yeah. I feel the two areas of innovation that QSRs are focusing on, one is around elevating customer experience. Secondly is around redefining customer convenience. If you look at today, there are increasing number of channels that the customers have at their fingertips in terms of door delivery platforms like Door Dash, Uber Eats, and so on. To mobile apps, to websites, and when it comes to QSRs, you have the convenience of a drive in, a drive-through, and a pickup.
Anand Krishnan: If you draw an intersection of all of these, you will see that the innovation needs to be focused around three broad areas. Within that, one is knowing the customer. Secondly, how do we increase the order size through offers and fast service that minimal reorder reduced at this stage. Towards the same we are seeing interesting implementations across different brands.
Anand Krishnan: It includes number plate recognition, voice signatures to recognize the customers in a drive-through. From a mobile app perspective features such as loyalty apps, voice integration with the Alexa’s of the world, pushing offers based on geo triangulation, and also more importantly to understand the customer behavior, but in a store. Such as which days of the week is where you have maximum amount of options. That hour of the day where you see a maximum amount of traffic.
Anand Krishnan: Based on all of this, you can create intelligent memo boards and displays that can provide customized solutions. We also see a number of implementations on self-ordering kiosks. It's no longer a talk of the town, but innovation is happening more on the payment side of the technologies like contact-less payments, facial recognition, and so one. All of this needs to be powered with the data that gets captured and more importantly provide analysis and insights to the restaurant manager to take positions on offers and at your fingertips. That's broadly the section or the areas that we feel through various discussions and implementations across different brands of QSRs. The innovations areas that everyone is focusing on.
Anand Krishnan: Back to Brad.
Bradley Cooper: Yes. Thank you. We're going to be transitioning into a few key questions about this area. I would also like to remind our audience that if you have any questions, please feel free to submit them any time during the webinar. We will be answering them during a live Q&A immediately following. One of our first key questions is, "How are quick service restaurants really implementing this technology to improve this user experience?" Jason, can you give us any information about this?
Jason Carrigan: Thanks, Bradley. Yeah, it's starting and I've uncovered some good information on a couple of points that I want to highlight is some of the objectives that we're trying to achieve our enhancing the customer experience and creating convenience with technology. Where a brand starts with this question is number one, who are the users that we're trying to design an experience for.
Jason Carrigan: I think as brands start to tackle this question, one of the starting points that they've got to get really clear on is who are the customers that they're trying to serve. Then you can start designing for, "What if convenience and enhanced customer experience mean for those customers that you've already defined?" I think the second most important question is, "How can we learn more about those target audiences over time so that we can continuously understand what does an enhanced customer experience, an enhanced convenience mean for those target customers?"
Jason Carrigan: It all starts with knowing who your target customers are and learning about them in near real time and understanding how their tastes and preferences change over time. If you know who your customers are and you're constantly learning about those customers and have fast feedback mechanisms, then that solves for the technology that you'd need in order to deliver on those things.
Jason Carrigan: Then I always talk about with my technology partners, the great partnerships and win-win scenarios build a great technology platform for retailers. Retailers have thin margins comparatively speaking and business moves fast. Consumers' preferences change very quickly and so you need great partners that will help you navigate those rapidly changing waters in order to have a relevant experience for customers.
Bradley Cooper: All right. Thank you, Jason. We would like to know how can quick serve restaurants build this mobile-first guest experience.
Jason Carrigan: Yeah. Again, starting with the customer in mind, we talk about mobile first because that's a place where a lot of customers are using their mobile device as a remote control for life. That's how this mobile-first term has become popular. Again, it's important for a brand to frame this question in terms of who are my customers and what do they need? The answer for most retail brands at this point is they need an easy way to navigate the brand through a mobile device. More and more customers are moving towards that mobile device, but you can't ignore it. For most brands it's still a very large majority that is accessing the brand through traditional channels like for a typical QSR.
Jason Carrigan: Most QSRs have a lot of people that drive in, look at the menu that's printed on a paper menu board, and they pay in cash. Those folks do not need a mobile-first experience. Another way to think about it is, "How do quick service restaurants migrate to this mobile-first experience for guests?" To use Wayne Gretzky's quote, "You want to skate to where the puck is going to be." We all know mobile is going to be the majority of the channel and that tide is shifting quickly. How do we migrate? Take care of all of our customers today and these technology initiatives have a long lead time and often involve several cycles to get it right. How do we build for the future now? How do we migrate all of our guests?
Jason Carrigan: Again, it starts with understand who your guest and how they use mobile today. What percentage of your guests use mobile? What features matter for them? I think mobile is a big convenience lever. You only have so much real estate. You've got to check the box on a great customer experience, but there's limited real estate and a limited amount of interaction you can have with your phone.
Jason Carrigan: It really is a way for customers to have convenience. A really tangible example of that is being able to reorder with very few button pushes. I think it all centers around who your guests are and what does convenience mean for them? Then how can you execute that on a mobile phone or other technologies to create the desired outcomes?
Bradley Cooper: Thank you, Jason. One of our next questions is, "What are some major challenges facing the QSR industry?" Jason, can you give us some perspective on this?
Jason Carrigan: Sure. I'll kick it off. In the QSR industry, in any retail industry, brands are trying to get to know their guests better and serve them in more meaningful ways. In order to get to know guests better, you have to track their behavior, understand their behavior. Traditional channels are starting to show their age. The old focus groups and self-reported customer feedback, those are channels that have worked for a long time, but quite honestly competition and the demands of the consumer have moved past some of those traditional channels of getting customer feedback and learning about customers through those ways.
Jason Carrigan: We need to come up with new ways to know our customers and have relationships with them. Digital channels are a great way to do that. That being said, there's still a large number of customers that come in, pull up to a paper menu, pay with cash, and then we can't get to know them better very easily. We have to use those more traditional channels to get to know them in order to serve them better. Again, the outcome is we want to know our customers and serve them better. We certainly want to increase chat. We certainly want to increase visits. There's tactics we can do through digital channels to encourage that behavior, but if we don't care about the guests first, then we will never get the check or the visits.
Jason Carrigan: It all centers on getting to know the guest. For a brand the Checkers and Rally's, there's a lot of folks that come in and pay cash and we can't track them as easily as we can track people through digital channels. Making those digital channels as inviting as possible and as easy to onboard new customers as possible is not an easy thing to do. It certainly is a challenge. Then just general consumer trends. There's just a limited number of people that are using everyday retail through their mobile devices. That channel is growing, but it's still a minority of the visits.
Jason Carrigan: I would say the key challenge is we need to have modern practices to get to know our guests. Compare a QSR with a hotel chain where they get full information on their guests. Just the fidelity of information that a QSR gets is not as high fidelity as some of the other retailer hospitality channels. We need to, again, leverage the right partnerships, leverage the right technologies and customer experiences in order to know our guests and serve their needs better. Anand, do you have anything to add to that?
Anand Krishnan: Yeah. Jason you very nicely articulated the importance of fidelity in terms of data. Especially where do you have cash-paying customers. I also want to highlight the other side of the business where if you look at it from a QSR perspective and if you analyze P&L, some of the big cost line items are also making a big dent in terms of the headwinds. You have wage inflation and you have an additional labor shortage that is becoming a bit of a challenge today.
Anand Krishnan: If you look at many of the big QSRs are focused around price discounting despite commodity inflation. Historically we have seen that SRS sales, which the same restaurant sales generally lack cost inflation by two quarters. There is a lot of work that a QSR needs to do to optimize the cost and the spend as much as it's trying to understand the customer better.
Anand Krishnan: One of the big line items where we see and an area of improvement that everyone needs to focus is primarily around inaccurate orders in the drive-through. It beams anywhere between 8 to 10%. Any way to reduce that inaccuracy of orders or repeat orders will help in improving the bottom line in a large way. Those are some of the other challenges over and about what Jason and you alluded to.
Bradley Cooper: All right. Thank you Jason and Anand. We also need to consider when deciding an on and off premise and a delivery strategy, what should quick service restaurants consider? Jason and Joseph, would you mind giving some perspective on this?
Jason Carrigan: Sure, I'll kick it off. There's a lot of conversation going on with this right now. A lot of folks are using off-premise and delivery service providers to get fast food. You can listen to the quarterly reports from the publicly traded companies to understand some general customer behavior around this with some of the big brands. I think number one what you've always got to start with is your customers and who you're serving. That is going to ultimately design your off-premise strategy.
Jason Carrigan: Second, it's very important to pick the right technology partners that are going to be able to have well up time with your customer experience. When there's an issue, the resolving time to resolution on those issues is also very important. There's a number of partners that QSRs have to choose from in order to create that technology stack and selection of those vendors and partners. They have a long-term impact for better or for worse. It's hard to unwind that technology stack, so picking the right partner is going to be very critical. It's a combination of partners that help you get there.
Jason Carrigan: Then there's the economics of it. Everybody is aware, including consumers, that delivery carries a cost with it. While consumers are aware of the fees associated with deliveries, with delivery brands they'll have to deliver food at a reasonable cost and we all have to take home a reasonable profit. These technology initiatives are long-term initiatives that require profit in order to continue to invest in those platforms and build customer experiences that are going to serve customers for the long term.
Jason Carrigan: There are a lot of things to hang in the balance. There's the capital-intensive technology investment, picking the right partners so that that investment produces the right yield. Then most importantly satisfying customers and constantly learning about their off-premise needs in a way that allows you to stay current and deliver the service that guests expect and exceed expectations there.
Jason Carrigan: To tie onto Anand's point before, there's borders that are missing items. There's mistakes in the process. You can't lose track of those operational metrics when you're executing these types of services. Keeping an eye on the basics. Don't. You've got to have the table stakes there and deliver hot fresh food that's accurate and in a timely manner. Then you have to do it on a channel that's a new channel both for consumers and QSRs and do it in a way that's relevant to the consumer. Then constantly be learning about the consumer's behavior on that channel so that you can be in lockstep with the consumer in terms of what their expectations are and always stay current. Joseph, what else would you add to that?
Joseph Lanners: I think you did a great job, Jason, covering a few things. I mean, you absolutely have to know your customers. You have to understand your costs. Choose the right partner. Technology's key in some of the off-premise strategies. I think I would add a couple of things. I'll talk a little bit about the market itself and how much it's growing, but I would also add, and I think you probably alluded to this, continuing to test those off-premise strategies and then listen to the customer feedback throughout that process.
Joseph Lanners: It gets intrinsic into what you were alluding to. I'll say this. About 38% of restaurant sales now are done through off-premise strategies. If you're not getting 38% of your dollars from an off-premise strategy, as a QSR, you probably need to start looking at a strategy to capture some of the expected growth that's going to continue to accelerate over the next couple of year. We're seeing right now about a 6% growth in an off-premise strategy. Now, that could include different types of drive-throughs, delivery methods, some catering opportunities, food trucks, potentially order kiosks that are used to order as part of an off-premise strategy as well.
Joseph Lanners: Then Anand alluded to some of the other things that are important. POS integration with voice ordering capabilities. These technologies that are required to look at the operations side. The packaging, the temperature control, food quality. Off-premise strategies that incorporate potentially some of these other sensors to maintain quality or improve quality, or monitor quality, or monitor the uptick of off-premise consumption. That's also going to be an important piece.
Joseph Lanners: Yes, select your technology partner. Not just a technology partner. A consulting partner who can help you develop the right strategy and capture this immense growth that's been going on and the accelerating growth that we're going to see. I think I just want to re-echo that those are important components. With that, I'll hand it back over to you. Take us to the next slide, Brad.
Bradley Cooper: Thank you Jason and Joseph. There are many factors to consider with new technology. Jason and Anand, what factors should quick serve restaurant franchisee managers keep in mind when considering new technology. If you don't mind starting us off, Jason.
Jason Carrigan: Sure. This is a very important question that has massive impact on a brand's ability to be successful. Selecting a technology partner is something that some brands, most brands that I'm familiar with, the Samsung guys can probably speak a little bit more broadly in terms of their experience with working with lots and lots of brands, but technology selection is not inherent in the few brands that I have exposure to. It's not inherent in their culture and DNA. They really need expertise in order to select the right partner and stack of partners in order to get results out of their technology strategy.
Jason Carrigan: One important component, one question I always ask upfront, and one question I always advise people to ask upfront is, whatever technology they're buying, "How does it talk to your POS?" POS is a piece of technology. Now, there's a lot of POS companies out there that have been in business a very long time. Some people's POS in their store may be older versions of POS. So you've got to get really clear on how a certain piece of technology interacts with your POS.
Jason Carrigan: If it takes your POS down or the time to resolution when issues do occur if they affect the operation of your POS, then when the cash register's not ringing, you're not collecting cash. That is very impactful to a business and the operators that you're asking to operate these technologies in restaurant environments. They get frustrated very quickly if they're tripped up by issues with the POS. The first thing that I look at when I'm talking with other brands or talking with my colleagues is understand what their POS environment looks like. Is it a legacy system? Is it a modern system? Is it out of date? Is it a good foundation to build consumer-facing technology on top of? You've got to get that right first.
Jason Carrigan: Number one most important question there is, "Is it secure?" You've got to get the cyber security right on your POS before you put customer-facing technology on top of it. Second thing. Once you get a good understanding of your POS environment and how you collect cash, and then how these new technologies are going to stack up on top of that POS, then you've got to understand what does an integration mean between your technology and your POS. This new customer-facing technology and your POS. Is there actually a stack of technologies that you need to put in place to ensure stability and cyber-security?
Jason Carrigan: One general approach that I try to take with any customer-facing technology is to make sure that the customer-facing part of it is abstracted from the POS. If the customer-facing technology goes down, then it doesn't impact my POS in-store. The cash register can keep ringing. They can keep running credit cards. They can keep collecting cash. They can keep ringing in new orders. That's critical functionality. If the customer-facing technology goes down and it impacts the in-store operations, it's extremely disruptive.
Jason Carrigan: The operator loses trust with the customer-facing technology. They start rejecting the coupons or the orders, or whatever is coming in through there. They try to just shove it to the back of the house, and keep it out of sight, and keep it from being successful. Building that trust with the operator that even if there's issues, number one, we're tracking time to resolution, and we're resolving those issues quickly, and we're being highly responsive to those issues.
Jason Carrigan: Number two, they're not going to mess up your in-store operations. You're going to be able to find a work-around even when one of these technologies goes wrong. That's a lot of stuff to hang in the balance. I think the common denominator there is building great partnerships with your technology partners. Technologies are multi-year initiatives and, like I said earlier, they're hard, and expensive, and sometimes impossible to unwind depending on who much you've stacked on top of them and the scale of your operation.
Jason Carrigan: Understanding who your partners are, what they believe to be true about technology and how it serves the customer, you've got to check that against what you know about your customer and how you want to drive. How a brand wants to drive their business and develop their customer base, and determine if those two points of views mesh or if there's misalignment between those points of view. Not everybody's going to have the exact same point of view, but a good partner is going to be able to flex, and move, and challenge brands in the right way in order to help them stay current with customer's trends and a brand's responsibility as a partner with that technology partner and help them understand what is convenience, what is meaningful to my guest in these different day parts, in the different product groups.
Jason Carrigan: The brands take a hard stand for the consumer so that the technology provider and the consumer can work together in order to build a good experience for the guest. If you don't have that great relationship, that partnership, that willingness to work together and give and take together, it's going to be very challenging to get the yield on the technology investments that's required.
Bradley Cooper: Anand, what would you add to that?
Anand Krishnan: Yeah, sure Jason. I mean, you certainly nailed it. Two key points that your brought out. One is everything is centered around POS. Secondly and more importantly, QSRs are not tech-savvy companies, so it's very important to partner with the right technology solutions provider who not only brings in hardware/software capabilities, but also be able to understand the location importance. Understand where the issues are in able to work in line with the SLAs.
Anand Krishnan: I would want to share some of the interesting insights that some of the QSRs are taking up recently as one of the top IT projects. At least as you said, again, most of these IT projects are a long duration. They stack up anywhere between a few months to more than a year I would say. Some of them are one is to manage, control, and monitor restaurant end points. What we are seeing and one of the implementations that we are doing is to provide standardized and remove all redundant all-in-one hardware, which will serve as a boot server for all the end points. That's one thing.
Anand Krishnan: Secondly, minimize end point outages. Focus on business infrastructure. Lower It hardware costs, which is focusing on low-cost inclines. Simplify and standardize the restaurant IT processes. This is a common trait that we are seeing in a number of franchises who are managing brands. A single brand as well as multi-brands. They want to move towards more of a virtualized environment rather than having physical boxes in a given store.
Anand Krishnan: I recently came across this problem when one of the customers said, "You know what? I have a lot of stores inside an airport. If there's an outage, how would we solve it?" I said, "We have all the technology acumen and so on, but entering an airport requires a different amount of credentials, let alone technology skills. It's very important that people move away from traditional hard-bound boxes. To move towards more of a software-oriented architecture, which gives them leverage, which reduces dependencies on individuals within a store.
Anand Krishnan: Such projects need to have a clear walk, crawl, run, fly kind of a program. Initially start off with the low-risk items, define the success criteria. Run stability tests. Sharpen your own knives, your own cost savings. Lay the foundation to move towards a managed service. Then start with the platform expansion. Build in resiliency announcements. Lay the foundation for automation. Then platform offering where you get into more of a monitoring and altering. Then do a large-scale rollout. It's more of a crawl, walk, run, fly kind of a program where you have to hand hold the brands together as you roll out massive IT transformation projects.
Bradley Cooper: Thank you Jason and Anand. We're moving on to another question. I would just like to remind our audience again, if you have any question during the presentations, please submit them for a live Q&A following this session. Out next topic is how can automation machine learning really improve back-of-house operations? Sachin, do you mind taking this question first and then Anand also giving your perspective?
Sachin Rao: Sure. Thank you Brad. Jason, Anand, and then Joseph all mentioned some great points on how technology is being implemented to focus around the customer and provide a better experience all and all. One thing that we have seen on the back-of-house side of things is that these technologies have an impact on the kitchen and back-of-house side where the back-of-house is common denominator, which is kind of creating your end product.
Sachin Rao: It is imperative that while other aspects of the QSR move ahead in technology, does invest in automation and machine learning, even in the back of house side of things. Bring in efficiencies, order accuracy, and reducing order times. Keep in mind that it's elevating these already preexisting conditions of increased labor costs and other external factors. Some things that we have seen, some of the partner companies that we're working with implement across food prep, supervision, and employee management.
Sachin Rao: Some brands are building autonomous or investing in autonomous robots that are using artificial intelligence, machine learning, to take care of repetitive tasks and automate them, such as flipping burgers. We're having automated ovens now operate through the night so that employees do not need to come in at 7:00 in the morning and start the process of baking. We're having smart refrigerators. Use sensors, feedback control systems, and data analytics to automate the management of food quality.
Sachin Rao: On the labor and employee side of things, you're having software and automation technology that is helping with training, scheduling, and shift tracking that is easing the burden on the store and restaurant managers and helps employees getting breaks, trade shifts, and so on and so forth. All in all, what we are seeing on the back of house side of things is that automation is helping eliminate or replace repetitive tasks so that the employees and labor can now start focusing on that key requirement which is elevation of the customer experience. Anand, anything that you would like to add to this?
Anand Krishnan: No. Sachin, you've covered most of the points. I feel the only one that it's very important to tie in back of the house operations with the customer inflow be it within the premise or in a drive-through. It's very important to understand where they're coming from. Today you have a number of ways by which you can capture that information. Be it through cameras, which are already there, or be it sensors. It's imperative to understand the customer behavior, the pattern, and then tie it back to the back of the house operations to ensure reduced waste at stage one and improve the touch point with the customer.
Bradley Cooper: All right. Thank you Sachin and Anand. So our next question is, "What role do AI and advanced analytics play in improving the drive-through experience?" Joseph and Jason, do you mind giving us some perspective on this?
Joseph Lanners: Yeah. This is Joseph. Thanks again for the question. I think Anand and Sachin both covered some really good points. They were talking about back of the house in terms of AI and the way that artificial intelligence can play a role. All the sensors that are used out here in the marketplace today to look at food temperatures and IOT integration. Artificial intelligence is just a natural extension of it. I loved the reference to crawl, walk, run, fly. I think AI puts us in the situation where a lot of the leading QSRs are not flying or even going supersonic.
Joseph Lanners: There's a huge labor shortage out there in the market today. I'll integrate into or I'll touch base on the drive-through component of the experience, by let me expand a little bit on how AI is going to be particularly capturing a lot more data, analyzing that data, and those are sensors that are in drawers, and packaging areas. There are video analytics sensors that can count the number of people in certain zones of the restaurant. They can even pick up data and information about a little areas that needs to be cleaned and then can integrate in alerting systems.
Joseph Lanners: Those alerting systems can be integrated into the back of the house or the front of the house to alert employees that they need to go get some things done. They need to pick up some things. They need to go create a customer. Maybe they need to take a mobile order out to a guest. I think the drive-through experience, I think that you're going to see a significant change. You're beginning to see it already. Voice automated integrated applications. I mean, we can mention several brands.
Joseph Lanners: One could be Alexa. Another one could be Google. Could be IBM. Watson. Using voice analytics and voice recognition capabilities to enhance the drive-through experience. That could go into a situation where you even have an Alexa built in to that order experience with better microphones, better displays. I think digital out of home displays and digital signage can play a huge roll in the making sure that an AI engine applied to that. Analyzing the data, look at all the advanced analytics. You can turn dumb digital signage or dumb drive-throughs or static drive-throughs into dynamic intelligent drive-throughs as well as potentially kiosks inside the quick service restaurant.
Joseph Lanners: I think it's really more than just the drive-through experience. It could be inside the store as well. To provide just like Jason had mentioned early on in the webinar, the best customer experience. Knowing your customer is critical. Knowing where your franchises are. Knowing where those locations are, knowing which markets to apply some of the advanced analytics first is going to be a key point of this strategy.
Joseph Lanners: As you go and you're already finished your crawl/walk strategies. Most of you are running already and you're hitting the flight path, this is how you're going to be able to go supersonic. Potentially reduce the risk of not being able to fill some of these positions because there's a huge labor shortage in the market. Then be able to take advantage of the predictions that say Gardener is saying by 2020.
Joseph Lanners: You're going to have a huge number of quick service restaurants with some sort of AI interaction. Meaning 85% of customers will have some sort of AI interaction by 2020. Now that being said, it's not going to be everything, but you need to be smart about the way that you implement those, and trust your partner, and select the right partner. Jason, what would you say you would add to what you're saying in the industry and how both the direct experiences been addressed and how AI might play a role?
Jason Carrigan: Yeah. So it's right in line with your last comments about what do you implement first? The way that I look at this is the Samsung’s of the world are going to be the professionals in AI and advanced analytics. Checkers, and Rally's, and other brands are not going to have as much experience, as much depth, as much insight and leading edge thinking as the Samsung’s of the world. I need to rely on those partners to bring those solutions to the table. The way that I think about using those solutions are partnering with folks like Samsung is I have a ton of data about my brand.
Jason Carrigan: Some of it is well-organized. Some of it is not well-organized. Some of it is structured. Some of it is not structured. Some of it may live in really weird places where it's difficult to pull it out, but it's all meaningful and it all paints a picture of, again, who my customer is and what do they care about. I want to use AI and advanced analytics along with a very capable partner that understands my business. In order to understand what capabilities should I be implementing next in order to make the biggest impact that creates convenience and enhances the user experience.
Jason Carrigan: As Joseph listed off, there's a ton of things that you can do. A lot of capabilities that are market ready that you can put into your brand and make available right away. The question that the brand has to answer is, "Are they meaningful to my guest?" To answer that question, you've got to know who your guest is and know what gaps exist or what opportunities are there in order to create more convenience and an enhanced customer experience. How are those going to help the customer form a better relationship with the brand so that you get more loyal behavior out of that customer? The loyalty will bring you your higher check and your increased visits.
Jason Carrigan: Again, it all comes down to knowing that guest, continuously learning about the guest and the changes in their preference so that you're always in lockstep with what they want. Then taking this massive amount of data and making it meaningful, and usable, and also very current to the decisions that a brand has to make in terms of what technology investment are they going to make that's going to impact the customer experience for the next several years? How does that roll out and how does that get reported on and show impacts to the P&L.
Bradley Cooper: All right. Thank you Joseph and Jason. With that, we'd like to move into a little Q&A session. Our first question in today is, "How can restaurants experiencing margin pressures invest in technology to upgrade their customer experiences?"
Joseph Lanners: Yeah, Brad. Thank you. Joseph here again. I think I would direct this question probably to Jason first. Talking about margin pressures that he might be experiencing or have experienced over the past few years. Then maybe hand it over to Sachin to make a couple of comments.
Jason Carrigan: Yeah, the way I think about this question is, again, the need of technology and helps solve a customer problem. If I have a customer that's coming in and paying cash, there's not a lot of technology that's needed in order to support that transaction. Most brands are aware of the average ticket size that are associated with cash visitors. For most brands, a cash transaction is their lowest average ticket time. It also requires the lowest amount of technology, so there's not a lot of costs against it.
Jason Carrigan: Credit card is the next channel of transaction type. For most brands, again, a credit card transaction carries a higher average ticket value and you'd need a little bit more technology in order to manage the security and the execution of those credit card transactions. The increased check size is worth the extra technology investment.
Jason Carrigan: Then I look at digital as just another tender type. At least that's how I think about it in terms of the amount of investment. Most brands see a higher ticket value with digital transactions than they do with credit card or cash. So that helps to inform the right amount of investment that's available to execute those transactions. Also, the size of that channel helps them right-size the investment so that they're not buying a giant piece of technology that's too heavy for the amount of volume that they have going to that channel. They mature that technology stack over time.
Bradley Cooper: Sachin, do you have anything to add to that? Do you think you could?
Sachin Rao: Yup. Thank you, Jason. All I would like to add is that on the modern side of things, probably one of the largest cost items brands face is the labor cost. As we all know, as we're seeing, this trend of increase in minimum wage as well as high turn rates in staff in industry, it becomes important for brands to invest in technology to manage that cost item better. Anything that can be done produce training costs, move repetitive tasks to machines, so that the employees are elevated to do functions that are more customer experience-centric. That will help ease some of the cost burdens and thereby improve the models.
Bradley Cooper: All right. Thank you. Our next question is, "What type of customer data is available to better understanding the on-site customer experience or help with staffing decisions?"
Joseph Lanners: Brad, this is Joseph. I'll take first stab at this. Then I'd like to head it over to Anand to see if he's got anything to add. I'm sure he does, being focused on analytics and big data. There's a ton of data that's already available. You've got your credit card processing data, transaction data, point of sale data. There are systems now that are becoming even more and more intelligent on the back office side.
Joseph Lanners: You've got intelligent refrigerators. You've got intelligent cooking machines. There's data constantly being collected by IOT sensors that are a part of these machines. The real question is what are you doing to capture that data? Do you have a good master data management plan from a back office standpoint? Is that data clean? If it is clean data and you can capture it all, there are incredibly powerful tools that many of the QSR companies have invested in and are continuing to invest in and now applying artificial intelligence to. Even deep learning algorithms.
Joseph Lanners: These types of technologies can be easily applied to the data strategy that you have. That data can come from video cameras, video analytics, touch screens, sensors, a myriad of things that are already deployed in most of the quick service restaurant industry deployments. Now it's just a matter of unlocking the data that's there and capturing new metrics, implementing new processes, automated alerts, automated tasks, a list of tasks that can be integrated in. This can help with our immense labor shortage that we have in the quick service restaurant and the heavy turnover that Sachin just referenced as well. With that, I'll probably hand it over to Anand and let him make a few comments as well. Anand, what do you have to add?
Anand Krishnan: Yeah, sure, Joseph. I feel you summarized most of the data elements that a QSR would capture from a customer data standpoint. I would just like to add a couple of more things. More data elements that can be leveraged. The data exists in some shape or form. It's more about harnessing that data and curating the data that can be used for business solutions.
Anand Krishnan: One of them that comes which we are implementing is through the existing cameras that are there in the drive-through, even if I know the number of vehicles that are there in the queue, based on that, I can optimize what can be pre-cooked, the number of organs that need to be restocked and reheated, et cetera. Based on the queue length, that you can analyze. That's one.
Anand Krishnan: Secondly, even from the traffic patterns of people walking in within the store, within the dining area, the day of the week, et cetera. You can then optimize the content and the menu within a store so that you can give the relevant promotions to the customers. That's the other area. I'm just taking the data at a slightly aggregated level. That can be used to harness a number of decision points that can enable their top line or include the check sizes as Jason was saying. More importantly, have a touch point with the customer.
Anand Krishnan: Lastly, I would like to also emphasize that thought the segment of customers using mobile phones, er cetera, is tiny, but you get a wealth of information around from where are they ordering. You can get a lot of geo-specific data. That can be used by both corporate and franchisees to look at where should they open their stores next. It's more from a planning perspective to look at that kind of data. To help plan out new stores and look at new menus to serve the neighborhood.
Bradley Cooper: All right. Thank you. Our next question is directed directly to Jason and asks, "What are your thoughts on using digital out of home advertising along with in-store digital signage to create cohesive digital display messaging?"
Jason Carrigan: Well, I think the idea there is that the customer has a consistent experience of the brand along all digital touch points. I think, to everyone who's spoken today, there's big focus on data. In order to deliver that consistent customer experience, you have to be gaining insights that have a global impact on every channel that you're advertising on.
Jason Carrigan: I have seen with various marketing campaigns that a consistent customer experience across all channels, whether it's out of home, or social media, or display advertising, or free roll on YouTube, if the message is consistent and the creative is consistent across all those different asset types and channels, then the message gets through to the customer and it influences purchase behavior and ultimately grows sales.
Jason Carrigan: Customers use out of home signage one way. They use digital signage at your restaurant another way. Both of those customer touch points meet a different need for the customer at different times. You still have to meet the need on the appropriate channel, but if they see a piece of advertising, you know they have a half a second to look at that out of home advertising. If they show up to the drive-through and the image is there that they saw on the out of home sign, then it's going to trigger that memory and remember what it was that drove them into the restaurant and probably order that item.
Jason Carrigan: Consistency is key. That comes with data-driven insights and understand what should you put on every single channel. Then what's converting what. Creative converts, it all comes down to knowing that customer and learning more about them in real time. Very important stuff. Difficult to execute. You need the right technology partners in order to execute it and make it a continuous test and learn process for how you run your business.
Bradley Cooper: Thank you, Jason. We have one more question then. That is, "How does newer technology allow you to expand your target market?"
Joseph Lanners: Yeah, this is Joseph again. I think newer technology allows any customer to expand their target market when they utilize the data the right way. When they apply it to true customer needs. As long as you know who your target customer is or who your customers are, I'll allow or I would say that Jason should probably make a comment because he's actually dealing with his customers in the quick service restaurant market.
Joseph Lanners: In our markets in technology, it's critical that we listen to our customers. It's allowing us to expand our market and leverage digital technology, mobile technology, even video analytics today. It's become commonplace and mainstream. It's easy to implement and it's easy to capture that data, and leverage it, and add it to essentially what you already know or even test new concepts within the quick service restaurant industry. Any last comments, Jason before we close things out today?
Jason Carrigan: Yeah. Quick things. I would just encourage folks to understand the technology investment that you are making. Build a business case with your technology partner in a very transparent way so that they understand the business objective that you're trying to achieve and you understand the technology that you're buying. If you can both shake hands on, "This is the business objective and this is the right technology in order to get us there," then you're both held accountable to that outcome.
Jason Carrigan: You can work together to give your technology partner good information about what's happening. How is this rolling out? It's over-performing. It's under-performing. It's on-track. That will help guide your technology partner in terms of the support and additional investment that they need to make into the technology in order to deliver the customer experience that's going to create this sales outcome.
Jason Carrigan: All of that, which is a relationship. I would answer that question and saying just be very aware of the technology investments that you're making. Make a business case with your technology partner so that you can both invest the right amount of effort to get the yield that you need in order to pay for it and deliver a great customer experience.
Joseph Lanners: I'll add one quick thing to Jason's comment there. Specifically if Randy, you were looking for some of the specific newer technology, definitely digital signage and digital out of home is driving an ability to capture more customers and create a cohesive message. That's essentially attracting a new target markets depending on where you're deciding to place that advertising. Then you can also add on top of that all of the out of home services. The mobile ordering and the mobile pickup integrate solutions.
Joseph Lanners: You're reaching newer customers. Different customers. Millennials. Those who are more busy. That's another great way to specifically use some of the technologies that are inherent in what you're seeing in the trends right now. Yeah, you can add the video analytics. Yes, you can add artificial intelligence. Voice recognition systems or voice AI systems. Those are going to help you improve the drive-through experience and they capture a greater customer return and higher check values as well. It's kind of an open-ended answer to your question, Randy, but hopefully that helps.
Bradley Cooper: All right. Thank you so much for joining us. I'd like to thank all our presenters. I want to remind everyone that you will be getting a recording of this webinar sent to your email. Thank you so much for joining us today and I hope you have a great day.
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