How restaurants are turning tech into profits

Cooling inflation and an easing labor shortage are helping the restaurant industry rebound to greater profitability, and technology is becoming a decisive factor in determining success. Across the industry, tech solutions that speed ordering, reduce errors and enable upselling are being widely adopted. Operators at the forefront are beginning to embrace advanced technologies that mine data to schedule staff more efficiently, create appealing new menu offerings, take orders and more.

“The industry did a good job investing in digital technology and data during the pandemic,” says Cristin O’Hara, Restaurant Group head for Bank of America Commercial Banking. “Now restaurants need to figure out ways to use the data generated by all the equipment they’re using and the cards they’re swiping. It’s not just about collecting data but about using it.”

With developments in advanced technologies such as generative artificial intelligence, mobile point-of-sale systems and smart robotics, these innovations have been shown to deliver measurable value. The key is determining which of many possible use cases will deliver the most value. BofA Global Research estimates that IT budgets have doubled since the pandemic, now accounting for 7% to 10% of revenue, and says that “this level of spending will likely persist as restaurants seek technology solutions for operational challenges.”¹

“Restaurants have invested in sophisticated platforms and are upskilling their organizations,” says the Boston Consulting Group’s Dylan Bolden, who has deep experience driving technology transformations in the restaurant sector. “They’re experimenting, getting proof of concept, but many have yet to see the value flow through to their bottom line. The challenge now is to scale value in the investments they’ve made.”

Advanced technologies in restaurant settings can take different forms: language-based models that understand requests from drive-through customers (and never forget to upsell), algorithms that streamline scheduling and identify peak order demand — along with ingredient requirements — and chatbots that answer customer questions and facilitate orders online or in kiosks.

With employment at quick-service restaurants (QSRs) still below the February 2020 peak,² technology’s potential to address immediate challenges is helping ease lingering labor shortages. “You can use AI to replace a call center or streamline a drive-through,” says John Schmidt, senior relationship manager, Commercial Banking at Bank of America. “The industry’s biggest players made acquisitions, proved out the technology in company-owned stores and allowed franchisees to benefit from the same technology.”

But to maximize return on investment, restaurants will need to continue the arduous process of altering how and when things are done, based on an analysis of all the data generated. “Some 70% of AI’s value comes from changing processes and the ways of working,” says BCG’s Bolden. 

Payments, which are now possible through apps, delivery platforms, mobile wallets and gift cards (in addition to traditional card and cash transactions), are another area where the potential is just coming into view. “AI’s impact helps merge payments with the banking platform and integration with ERP systems,” says Melanie Whitlock, treasury sales officer for the Restaurant Group at Bank of America. “We’re seeing increasing investment in payment instant messages and instant final payments with QSRs and smaller clients as well.”

Shannon O’Donnell, senior merchant specialist at Bank of America, notes that point-of-sale systems present an invaluable source of data as well as an opportunity to use advanced technologies to streamline payment processes. Point-of-sale systems have the ability to provide detailed financial reporting and customer service while also enabling payment card industry compliance. Data regarding spend and spend patterns, order customization, frequency and visit habits is also readily available. This gives the merchant the opportunity to directly target diners with appropriate deals, specials and loyalty rewards.

In a competitive marketplace populated by increasingly tech-savvy consumers, customer convenience is key. “With the best brands, the app is seamless with little to no friction, and that results in a highly satisfied customer,” says Schmidt.

Restaurants need to create a highly tailored, personalized experience for their customers, which generative AI and data analytics can enable. Restaurants are trying to figure out who their customers are when they are coming into the restaurant and what products they are buying, O’Hara notes, and AI can help predict all of those things. The benefits of using advanced technologies to crunch data go beyond the customer experience. “Franchises use the results to their advantage in supply chain management, new products — just about every way you can think of,” she said.

One benefit of using advanced technologies, for example, would be to maximize the returns of a loyalty program. BofA Global Research found that loyalty programs that motivate customers to engage with the brand can increase consumer spending in the short term (active loyalty members spend 10% more than nonactive consumers). These programs have the added benefit of allowing restaurants to acquire a rich trove of customer data that can be used to target marketing to those customers.³

Getting the most out of data may require restaurants to expand their internal capabilities. As their knowledge of customer preferences becomes more granular, they may find additional value in analysis that helps improve the connection between their brand and their customer base. “There are lots of data use cases for marketing and personalization,” says Bolden. “You can run a quick pilot, for example, on the effectiveness of one-to-one offers to customers. But to do it at scale, you’ll need new capabilities, and maybe you’ll bring elements in-house that you used to outsource.”

O’Hara agrees that restaurants should prepare for the next phase of using technology to improve performance by investing in specialists who can analyze the data that advanced technologies produce and make recommendations on ways to profit from those insights. “Those that don’t spend the time and money on that now, I think, are going to be behind the curve,” O’Hara says.

The explosion of data also creates issues related to security and privacy, which Whitlock describes as an inevitable by-product of any technology that delivers highly detailed portraits of customers and their preferences. “Handling sensitive customer data will require continuous monitoring and human intervention to protect privacy and defend against threats,” says Whitlock.

For now, staying ahead of the curve requires more than capital investment. Restaurants need to find the best opportunities among the many good suggestions that are produced by the analysis of data from digital tools and advanced technologies. The companies that can create a synthesis between data, automation and humans will be the most likely to achieve value.

¹ BofA Global Research, “What’s cooking in restaurant tech/POS?,” June 30, 2023.

² National Restaurant Association, “Total restaurant industry jobs,” 2023.

³ BofA Global Research, “Restaurant Weekly: Mixing it up (digitally),” August 28, 2023.