5 Things PAR’s Acquisition of Punchh Has Taught Us About the Restaurant Technology Industry

If you look back at the very first iPhone, you might not be particularly blown away by its touch screen, camera, or operating system. However, Apple’s take on the cell phone more than lived up to the promises they boldly made with their slogans, “This is only the beginning,” and “Apple reinvents the phone.” 

Nearly 14 years (and a dozen iPhone variations) later, the cell phones we carry in our pockets have taken the place of almost every single piece of technology in our homes. The same is true for other industries, including the restaurant space. Sure, Moore’s Law doesn’t perfectly apply to restaurants, but as we’ve seen in the high-tech and computing industries, advancements are aggressively altering the way concepts engage with their guests. 

PAR’s recent acquisition of Punchh, a premier customer loyalty company, ultimately helps concepts view their operations on a macro level and highlights where the future of restaurants will likely trend in the next few years. Long gone are the days of punch cards and haphazard marketing efforts targeting everyone and no one at the same time. Today’s concepts are keenly aware of what their guests crave, knowing everything from their favorite menu item to when they’re most likely to walk through the door. 

If the recent acquisition has taught us anything, it’s that standing still is no longer an option. The phrase “digital arms race” has been thrown around a few times recently, and as concepts inch toward full visibility into their operations and their guests, five facts have become abundantly clear.

Customer Loyalty is Evolving, And Companies Are Desperate to Figure it Out   

PAR President and CEO Savneet Singh participated in a Clubhouse call for PAR shortly after the Punchh acquisition and was quick to point out that loyalty adds a critical piece of information to an operation’s marketing strategy. 

“Loyalty, as a category, I think is evolving quite significantly,” Singh said. “Early on, people looked at loyalty more as ‘Let me send you a promotion or a marketing offer,’ and Punchh does an amazing job with that, but what I think it is turning into is a data platform. It’s transforming from ‘Hey, send a promotion,’ into ‘How do I use artificial intelligence to build great insights to manage my business.” 

Hyper personalization is the name of the game these days. It shouldn’t come as a shock to anyone that the better a brand aligns with its customers, the better the lifetime value of that customer will be. In 2018, Motista released its “Leveraging the Value of Emotional Connection for Retailers” report and determined that, compared to satisfied customers, emotionally connected customers are more likely to recommend their favorite brands to others; they’re also likely to spend more too. 

For the restaurant industry, where margins are historically tight, creating raving fans out of casual guests through personalization and targeted engagement can lift revenue – even during difficult times.  

“You have this interesting change happening across the restaurant tech stack, but particularly when it comes to guest information,” Singh explained. “The last couple years, and particularly the last year with the pandemic, you’ve seen dramatic acceleration. Imagine if you didn’t have mobile or loyalty; it was probably pretty hard to survive. You’re seeing this great pull to figure this out.”  

As Singh pointed out, the days of impersonal points programs are dying out and getting replaced by more robust and engaging programs that reward guests for their time and, more importantly, information. Ron Shaich, whose Act III Holdings helped finance the $500 million Punchh dealhas been instrumental in elevating other brands’ loyalty programs, including Panera Bread.

“Panera 2.0 was built on loyalty,” Singh said. “[Ron Shaich] understands Punchh really well. He’s nitty, he’s gritty, he understands the execution side and all the cultural side that comes with it. You get to leverage someone who was built a multi-billion-dollar business and you get to learn from that wisdom. 

Shaich, who was the founder and former CEO of Panera Bread, was able to realize the brand’s full potential by investing in a powerful, personalized, and easy to use loyalty system that guests enjoy, resulting in millions of downloads.

According to a 2017 Accenture report, 57% percent of respondents said they spend more with brands and providers they are loyal to. By providing users with the right level of personalization, combined with the right offers, brands can take their loyalty program to the next level. 

 

Concepts Will Eventually Need to Rethink How Their Loyalty Programs Impact Profitability 

As restaurants across the U.S. and globally recover from the pandemic, the question of overall profitability will become a larger issue. For years, operators and managers pored over statistical data to determine the overall health of the restaurant, but as technology improves those same metrics will now need to be applied to individual customers. 

Loyalty programs are capable of so much more than sending out automated messages and push notifications. As concepts get a better handle on how the technology works, the better their results will be. For example, restaurants with a good loyalty program can increase restaurant visits by about 35%Combine that with an increase in check totals due to upsells, cross-selling, and appropriate promotions, and operators can generate more revenue with minimal additional work. 

“Today’s restaurant concepts manage their profitability on a perstore basis,” Singh explained. “Over time, that will change to a percustomer basis. In reality, you don’t need one loyalty or marketing program, but you need one for every customer you have.” 

Curating and maintaining a great loyalty app does a few things. First, it helps you easily reward your best customers just for being members. Whether it’s free delivery at certain times or a free combo meal on their birthday, your guests will appreciate the gesture and take you up on those offers. According to one study, about 85% of people surveyed said discounts and deals impact where they decide to eat. 

Personalized loyalty programs also build a better relationship between restaurants and their guests. More than half of customers surveyed in one report said they would recommend a restaurant they were loyal to. And among millennials, nearly 45% say they’re more loyal to their favorite concepts than ever been before. When those fans make recommendations, people listen to them, and ultimately, the restaurant reaps the rewards.  

Concepts Want to Buy Products from Fewer Vendors, But Need Pieces that Work Together Well

The one-stop-shop methodology doesn’t only apply to big-box retailers anymore. A growing number of restaurant concepts are looking for all-in-one platforms that help them do everything from point of sale and payment processing to loyalty, back office, and beyond. The problem is it’s difficult to find vendors that seemingly do everything well.

“Customers don’t want to be forced into different solutions, but I think they believe the platform is the winning formula, and we have to deliver it,” Singh said during the Clubhouse event. “We have to prove that if you buy the platform, it creates more ROI and value to you. If we do that, I don’t worry about forcing them to take one or the other. The moment you start telling people you don’t get one without the other, you start jeopardizing that relationship with the customer, and you become the extractive old-school legacy provider that they hate so much.”

Restaurant concepts today will typically utilize three or more integration partners to streamline operations for staff and guests. However, some of the world’s largest concepts are bypassing the need for multiple vendors by simply acquiring the companies themselves, such as McDonald’s blockbuster purchase of DynamicYield in 2019.

For most concepts, the idea of buying an entire company to create a powerful in-house solution isn’t feasible, and that’s where many POS vendors have stepped up to offer as many products as possible under one roof. PAR’s commitment, for example, has long been to be an open platform for customers, giving them the freedom to choose what partners they work with. As the company continues to invest and build out its platform, customers have the option of rolling everything together or continuing to work with the companies and products they like.

Restaurants Need to Get More Value from the Tech That Serves Them

For an industry that was once risk-averse when it came to new technology, restaurants have increasingly relied on it to help them connect and engage with their guests. At face value, having access to a ton of technology has brought the entire industry to the forefront and has given them unlimited access to their customers.

However, despite the fact that restaurants have more customer data and better insight into their operations, it occasionally seems like the vendors are getting a better deal than the concepts they serve.

“Technology has, in many ways, driven a wedge in the restaurant technology industry,” Singh explained. “If you look at some of the biggest restaurant technology companies, I’d argue that they have extracted that value on the backs of restaurants as opposed to bringing the restaurants along with them. The restaurants have not prospered as well as the restaurant technology companies that are supposed to serve them. I think when [concepts] have a loyalty product and the transaction data, [they] can win back that relationship and build on it.”

The average restaurant has about 13 applications, and this twisted network of integration spaghetti hampers their ability to adapt quickly. This means the average restaurant is forced to deal with a variety of applications, ranging from KDS and payments to loyalty, delivery, payroll, and marketing. In the case of third-party delivery, those eateries are left with a hellscape of tablets, wires, and systems that form a physical barrier between their staff and guests.

“A lot of what I hope we become is the outline for the restaurant,” Singh said. “Here is the platform to help you build your own innovative feature and actually control your destiny again.”

The Kitchen is an Area of Off-Premise Opportunity

It might sound like a broken record by now, but the reason why so many brands were able to survive the bleakest days of the pandemic was because of an increased focus on off-premise ordering for takeout and delivery. And while dining rooms are reopening, operators and guests alike don’t think off-premise is going anywhere anytime soon.

Operators are seeing how their guests are ordering and investing more time and resources into expanding those avenues. According to the National Restaurant Association, more than half of operators in the casual- and fine-dining segments said they were planning to expand off-premise ordering, while nearly half of family dining and fast-casual operations were planning it.

But unlike the days where orders were only coming in from dine-in or call-in orders, kitchens now have several order sources to consider and are still ironing out issues. This includes learning how to efficiently manage order flows, figuring out how to organize the many types of orders and payments coming in, and streamlining kitchen operations to handle an influx of outside orders during lunch or dinner rushes.

“In many ways, the kitchen is almost like an Amazon fulfillment center now,” Singh said. “It’s gone from servicing diners coming into your restaurant to servicing diners coming to your restaurant, but also diners coming in for curbside pickup, for delivery, DoorDash, UberEats. It has become a mess, and I think we see a great opportunity to build a product there.”

The importance of streamlining the kitchen, especially given the number of ways a guest can order from the restaurant offers a huge opportunity for growth. Restaurants can determine when orders need to be fired, reducing incorrect orders, late or early orders, and upset customers. If the kitchen can reliably sustain high volumes and implement a system combining every order point into one format, they’ll likely find themselves well ahead of their competition.

What Can We Expect Going Forward?

Our industry is innovating at the speed of light. Still, none of that means anything if the technology they rely on is creating a barrier between the restaurant and its guests. If they haven’t implemented one already, concepts will need high-quality loyalty program that engages and personalizes experiences for every guest. They’ll need kitchens that can adapt quickly to more diverse ways of ordering and will need solutions capable of helping them appropriately handle staffing for their kitchens. They’ll need streamlined operations that prevent them from drowning in a sea of cables or trapped behind a wall of screens. Lastly, they need to receive value that is more than the cost of what they’re paying, one plus one needs to equal more than two.

The future is bright, especially coming out of a year like 2020. However, we need to keep in mind that restaurant-focused technology is constantly in a state of flux and creating tech for tech’s sake doesn’t move us closer to innovation. It’s creating value beyond the sum of its parts that moves concepts forward with the vendor working closely with those they serve.