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How the rise of third-party delivery, tight labor market forcing restaurants to evolve POS systems

Executives from Revel and Toast discuss how relying on third-party delivery companies is forcing fast casual brands to change their POS systems.

Photo provided by Toast

January 16, 2019 by Cherryh Cansler

Editor's note: FastCasual interviewed executives from a variety of tech vendors to reveal some of 2019's most promising tech trends. Part 1 of this series featured executives from Paytronix and CoInspect. Part 2 discussed customers relying more on near-me and voice searches to help them decide where to eat.

The third-party delivery market was worth $7.1 billion by Q3 of 2018, according to Technomic, and that number will continue to grow as customers become more familiar with using them to place orders. The shift is forcing fast casual brands to change their POS systems and is triggering a digital consumer tsunami, said Erick Kobres CTO, Revel Systems, an iPad-based point-of-sale system based in San Francisco. 

"The tidal wave of alternate ordering processes will continue to bear down on merchants as consumers continue to drive digital channels (e.g., mobile ordering, voice ordering) to merchants and retailers alike," he said in an interview with FastCasual, predicting that large restaurant chains and international franchises will continue to keep pace with consumer demand to deliver anywhere, anytime.

That means independent and smaller restaurants will have to embrace technology to stay relevant, which is already leading to what Kobres called the "delivery apps dilemma."

"If you have a well-established digital strategy and digital marketing plan, third-party delivery apps can help increase your business," he said. "On the flip side, if you choose to outsource your marketing and branding to these third-party companies, you could potentially find yourself in a position where these companies will own your customers moving forward."

Another tricky aspect of the third-party ordering conundrum — and one that POS providers are trying to solve —  is how they require merchants to use their proprietary tablets for processing orders.

"Restaurants who find themselves in 'tablet hell' juggling multiple systems may see light at the end of the tunnel as POS providers double-down on removing the friction that exists when integrating third-party delivery apps," Kobres said.

Aman Narang, co-founder and president of a POS provider, Toast, agreed and predicted that customers demanding delivery service will be one of the most disruptive trends in 2019.  

"One of the Top 3 delivery providers will announce a surge pricing model to better optimize yield and margin for restaurants," he said in an interview with FastCasual.

How labor issues will evolve POS systems
The rise of delivery isn't the only trend changing how restaurants do business this year, Narang said. A tight and competitive labor market is another area that is inspiring innovation. Over the past year, the restaurant industry has added 221,000 jobs, about 600 jobs per day, but there aren't enough workers to go around. The Bureau of Labor Statistics projected that the demand for cooks will grow 6 percent over the next 10 years, and the National Restaurant Association reported in 2017, that 37 percent of its members said labor recruitment was their top challenge — up from 15 percent two years ago. 

"Labor issues (both access to strong candidates and minimum wage) will continue to shape how technology/POS evolve for restaurants," he said. "Self-service platforms (such as) like kiosks, mobile apps, Amazon Go, plus a mobile form factor for the POS device to help ease some of the pressures on labor will continue to grow fast. "

Voice is another trend that has the potential to make the ordering and checkout experience better, but it’s likely a few years out, said Narang, who expects to see at least one robotics/automation-driven restaurant startup announce a major expansion plan in the back half of 2019.

"Also, 2019 is finally the year that fast casual goes mainstream with a (less than) 20 percent cost of labor model vs. 30+ percent in full service," he said. "A lot of older chains that have not adapted (will) start to falter."

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Revel Systems is an open cloud order management platform at the heart of our clients’ business. Through flexible architecture and open API, Revel ensures brands have the freedom they need to design a full tech stack that meets their needs, enabling them to provide an unmatched customer experience, diversify revenue streams, and scale with ease.

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