Jan. 4, 2017
By David Cantu, chief customer office, HotSchedules
The past year was a busy one for restaurant operators. While you were out on the front lines managing your business and driving success, the industry felt the impact of a one-two-punch.
The first blow came in a wave of wage increases and legislative changes to labor laws - some of which are still shifting. The second was a jab of slow, if not stale, same-store sales growth across nearly all segments of the restaurant industry.
And we can't have a conversation about the state of the industry without mentioning the never-ending employee turnover and retention challenges you're facing. Could the labor pool get any shallower? Let's hope not.
The times are-a-changin', but then, hasn't that always been the case? We're such a huge part of the U.S. and global economy — a huge part of the lives of a lot of people who dine with us daily. As a result, we're always going to be at the center of change and we'll always have to deal with a degree of unpredictability.
Looking forward to 2017, the technology trend line will be in lock step with the complexity trend line. As labor, operations, supply chains and food safety compliance issues (just to name a few) become more complex, the more restaurants will lean on existing and emerging technology to combat and control their operations while protecting their profit margins.
Here we look at a few 2017 restaurant technology trends through the lens of the complex issues that today's restaurant brands will face over the next 365 days.
1. Wage increases
The Fight for $15 wages is on, and we can expect to see more action this year. Restaurants operating in states and cities where the minimum wage was raised are dealing with the implications. Even operators in states that haven't raised their minimum wage remain mixed on how best to approach the rise in payroll costs.
Some companies voluntarily raised their workers' wages before their state passed any official law. In some cases, the decision was a financial one. Others see a wage increase as a key contributor to their hiring and retention strategy. In a shallow labor pool, it might actually pay-off to pay more.
Whether or not restaurants are in favor of paying employees more, wage increases will put pressure on profit margins. Operators will need to leverage labor management technology to solve the complicated labor equation and somehow break-even on what some experts say will be a 2-4 percent increase in payroll.
2. A spreadsheet in the cloud may not be enough
When it comes to labor issues, wages are really just the tip of the iceberg. The labor pains continue to hit hard on all fronts.
For example, the Gig Economy and new, flexible jobs are attracting millions of hourly workers away from the restaurant and hospitality industry. Then there's the Affordable Care Act (although it's on the table with the new U.S. administration). The overtime law is currently delayed, but could still pass some time in 2017. And mulling around in the background is the Joint Employer Legislation, which has the potential to disrupt the entire franchise model.
When you couple this kind of complexity with increasing pressures on your bottom line, really simplified online schedulers aren't going to cut it. Sure, they may cut the time it takes to create and manage a schedule, but they won't offset the rising costs of labor. Operators who choose to use labor management tools that allow them to forecast and generate shifts that align with sales trends (and other external factors like events, weather, holidays, competition, etc …) will find their profit margins are more padded.
3. Deliver on experience to buck moderate growth trends
When traffic goes down, operators often lean on quick-hit strategies to earn their share of diners' money. But all of those are short lived spikes if you don't have the experience, service and hospitality boxes checked. Long-term, consistent growth and high guest-satisfaction ratings are achieved when you have the right people, in the right place, at the right time. When staff levels are darn near perfect, the result are higher levels of productivity, appropriate workloads, as well as consistently great food, service levels and ultimately, happy guests. Operators have to get this level of predictability down to a science if they're going to master the market of the moment.
This is where advanced labor forecasting technology is crucial. When you have deep insight into your labor drivers, you are able to better understand and plan for the right number of shifts needed to accommodate sales and guest volume. This is also, by the way, why training and development will be a critical player in 2017 as well.
4. Culture and development 2.0
In 2017, big brands will continue to reignite their image with store makeovers and menu innovations or in some cases, consolidations. Winning brands also understand that trendy design and food alone aren't enough. They must also renew their focus on employee growth, development and collaboration.
There's a real connection between happy, productive employees and a great guest experience. This year, we'll continue to see operators, human resource teams and trainers improve their guest experience by improving their training and development using learning management systems that focus on delivering training through the one device that the workforce can't seem to take their eyes off of: their mobile device.
And where in previous years, there wasn't a real way to show how that training improved things like sales or guest ratings, the best learning management systems will pull in key performance indicators and align it to training programs so that HR can once and for all come to the executive table with proof that their programs deliver bottom line results.
5. Watch out for a summer recession and get systems in place
In late October, Moody's Investors Service slashed its operating-profit growth forecast and revised its outlook of the restaurant industry from “positive” to “stable.” Instead of the previous forecast of 5 to 6 percent growth, the rating agency expects profit to grow 2 to 4 percent in the next 12-18 months.
What Moody's shift in projections points to, experts say, is a summer recession.
The signs have been there. Wage increases and a string of legislative changes have pushed labor costs to almost unbearable levels. Traffic has been static if not slowing for most segments. Meanwhile, the restaurant sector has seen some dim earnings reports from the likes of Sonic Corp, +1.52 percent, Burger King parent Restaurant Brands International Inc. QSR, -3.53 percent and Chipotle Mexican Grill Inc. CMG, +6.93 percent
How will this impact technology decisions? We expect IT teams and C-Suite executives will start looking at how their systems and vendors work (or don't work) together. What legacy systems can be replaced? What systems can be integrated to build a best-in-breed set of systems? What can current vendors do to the core product? These kinds of questions will influence how corporate and its franchisees make decisions about the backbone of their technology.
6. The battle between consumer vs. employee-centric tech
Brands that want to stay competitive are investing in and prioritizing both consumer and employee-facing technology initiatives. But which comes first? It depends. Consumers are attracted to brands that make it easy to interact and dine with them through a mobile app. But they won't do it at the expense of poor service. An excellent experience - your service and hospitality - is driven by your employees. And what do your employees want and need to succeed - better technology that makes their jobs easier and their work environment attractive enough to stay. And if you can do both simultaneously, well, you're one step ahead!
What we know for sure in 2017, is that technology is no longer a nice-to-have, it's a competitive edge with your consumers and your employees. Staying competitive, means restaurants will have to cultivate a culture of technology, engagement and collaboration and then empower their teams to use to navigate, control, optimize, plan or power through and succeed in spite of whatever the market throws your way.