Technology
4 ways AI can rescue restaurant operations
From supply chain disruptions and economic challenges to labor shortages and improving customer experience, AI is rescuing restaurant operations.
November 29, 2023 by Raju Malhotra — Chief Product and Technology Officer, PAR Technology
The restaurant industry faces unprecedented challenges in today's dynamic landscape. From supply chain disruptions to economic uncertainties, labor shortages and changing customer expectations, we must adapt restaurant operations to thrive.
The meteoric rise of AI applications, such as ChatCPT, which attracted over 100 million users in under two months, signifies a revolution in business operations — especially for restaurants.
By integrating AI into restaurant technology, we unlock new opportunities for optimization, management, automation and customer engagement, all while delivering next-generation dining experiences.
1. Supply chain disruptions
Supply chain disruptions have become an unfortunate norm over the past few years, complicating processes for managing inventory and preventing food waste.
AI solutions can provide predictive abilities to tackle these supply chain difficulties. Machine learning algorithms, analyzing historical data on sales, foot traffic, weather and other factors, enable restaurants to more accurately forecast demand, preventing over-ordering and food spoilage.
Real-time supply chain visibility enabled by AI allows restaurants to track shipments and react quickly to delays. Robust inventory management systems can track expiry dates, ingredient levels and upcoming menu promotions to optimize orders and reduce waste.
No restaurant brand is immune to the financial impacts of food waste; the industry produces roughly 11.4 tons annually and loses $25 billion. AI-powered supply chain optimization is mission-critical. This technological investment generates nearly instant ROI: restaurants realize approximately $8 of cost savings for every dollar invested in food waste reduction.
By leveraging predictive analytics and real-time visibility, restaurants can minimize the effects of disruptions, slash waste, improve profitability, and maintain quality customer experiences amidst supply uncertainty.
2. Economic challenges
Rising costs are squeezing the restaurant industry across the board. Ingredient expenses, labor, rent, and more are climbing with inflation — and consumers are becoming more value-conscious.
AI-driven analytics empower restaurants to make data-based decisions that ensure profitability amidst economic uncertainty. With ML algorithms constantly monitoring market trends, restaurants can implement dynamic menu pricing to optimize demand elasticity and ingredient costs. When beef prices spike, for example, an AI system can tweak menu prices to maintain margins.
According to the National Restaurant Association, 92% of operators worry about costs, and over 40% of them are planning restaurant technology investments. The data shows AI is necessary for business success, regardless of economic downturns.
AI analytics also facilitate targeted cost reduction without sacrificing quality or lowering customer expectations. By leveraging AI to understand changing market dynamics and fine-tune pricing, restaurants can confidently navigate inflationary challenges.
3. Labor shortages
Labor shortages have profoundly impacted the restaurant industry. As of July 2023, the restaurant sector's employment rate remained at 0.5% still below its peak in February 2020. The sector experienced a substantial decline in average monthly job growth between April and July, with an increase of fewer than 11,000 jobs per month. This situation starkly contrasts the average monthly gain of 53,000 jobs observed during the first quarter of 2023.
AI and robotics offer solutions to streamline operations with fewer staff. Self-ordering kiosks and AI-powered robotic servers can automate customer transactions and food delivery, freeing human workers to focus on higher-value tasks like food preparation and customer service.
Restaurants incorporating this AI-driven automation see a 30% boost in operational efficiency, mitigating the impact of labor shortages. Automation can reduce restaurant costs by 5% to 9%, and experts predict AI and robotics usage in fast food will surge 69% by 2027. Additionally, self-order kiosks can increase sales by 30% in fast-food restaurants.
As the labor shortage continues, restaurants may rely even more on AI and robotics to deliver quality and consistency with lean teams. AI helps restaurants relieve strained operations, improve the customer experience and sharpen their competitive edge in a challenging hiring market.
4. Enhancing customer experience
Customers today want hyper-personalized experiences — 66% of consumers expect companies to understand their unique needs, and 52% anticipate personalized offers.
AI presents enormous opportunities for restaurants to tailor offerings and build loyalty. Sophisticated AI algorithms can analyze customer data to understand individual preferences and offer personalized recommendations. From customized combo meals based on past orders to promotional offers for favorite menu items, AI allows restaurants to make each guest feel uniquely valued.
Restaurants should leverage AI as they shift from a one-size-fits-all model to a more personalized approach that makes every customer interaction feel special and curated. This tool's insights will enable restaurants to avoid wasting resources on broad promotions and, instead, hyper-target campaigns and offerings to specific customer groups.
The future
Future loyalty and revenue growth lies in AI-powered personalization. As competition intensifies, leveraging AI to make guests feel understood and catered to individually will be a key differentiator.
As AI transforms restaurant operations, a future defined by optimized efficiency, personalized service, and sustainable growth will emerge. However, realizing AI's full potential will require overcoming hurdles like protecting data privacy, training staff, and avoiding overreliance on technology. With proactive mitigation of these risks, restaurants can tap into the customer experience and profit-enhancing powers of AI.
One thing is certain: AI will be integral for restaurant success in the years ahead. Those bold enough to embrace it will gain resiliency to disruption and competitive firepower.
About Raju Malhotra
Raju Malhotra is Chief Product and Technology Officer at PAR Technology. In his role, he is responsible for the unified product and technology strategy and operations. He leads Engineering, DevOps, Product Management, and User Experience. Raju joined PAR through the acquisition of PAR Punchh, an omnichannel loyalty and engagement startup based in San Mateo, CA.
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