Technology and Restaurants: How to Drive Profitability in 2025
By Restaurants today must contend with a challenging business environment. Over the last five years, the National Restaurant Association has tracked a 29% rise in food prices along with a 31% rise in labor costs. Together, these hikes in operating expenses are pushing profitability out of reach for many restaurants.
Meanwhile rising costs in both inventory and labor undermine the typical strategies restaurant operators use to increase profits. They cannot raise menu prices for fear of driving away business, and they cannot reduce staff without harming the customer experience. In such a dynamic, technology offers an attractive alternative. By creating process efficiency, reducing waste, and preventing overstaffing, restaurant operators can have their cake and eat it too. They can lower operating costs, create profitability, and maintain the dining experience their patrons love.
Chris Tebben, CEO of Checkers and Rally’s Drive-In Restaurants, joined Fourth for a webinar conversation around the key restaurant areas where technology can make the biggest impact. With over 25 years’ experience at Mars Retail Group, Starbucks, PF Chang’s, and Yum! Brands, Tebben brings a wealth of invaluable expertise on the subject of technology and restaurant profitability.
In this blog, we’ve summarized the most important insights from the webinar. Use this guidance when developing your 2025 technology strategy and make this year your most profitable yet.
Operational Efficiency and the Role of Technology
Technology can help in two key areas related to operational efficiency: optimization of labor costs and inventory management.
For labor costs, which represent a third of the average restaurant’s annual expenses, operators can deploy demand forecasting tools powered by AI. These solutions leverage historical data while compensating for external factors like weather forecasts, holidays, and likelihood of foot traffic. Based on this data, AI-powered forecasting tools will recommend the ideal shift size to meet demand with up to 75% greater accuracy than manual forecasting methods. This enables restaurant operators to avoid overstaffed shifts and curb their labor expenses as a result. Critically, the dining experience can remain unblemished while still reigning in costs.
AI-powered scheduling tools can further reduce operating costs by accelerating the scheduling process. HotSchedules, for example, can generate a ready-for-action schedule that complies with all local labor laws in moments. Rather than spending hours each week puzzling out a schedule, operators equipped with HotSchedules can reclaim this time to focus on growing the business.
Automated scheduling tools also create a better work environment for the team. Predictive scheduling means fewer last-minute scheduling shifts, better work-life balance, less burnout, and greater transparency. Employees can view their schedule, trade shifts, request time off with minimal involvement from management and receive instant notifications if there is a scheduling change. This promotes a more positive work environment, gives employees more control of their schedule, and helps retain top talent.
An AI-powered forecast reduces waste as well. If an operator can accurately predict demand for a given week, they can extrapolate that forecast into inventory requirements. The operator can have a better, data-driven understanding of what inventory items will be consumed in that period, leverage automation to instantly source ingredients at the best price, and make purchases. The savings on inventory waste can be meaningful, considering food costs account for a third of the average restaurant’s annual budget according to the National Restaurant Association. Within that, Restaurant HQ notes that restaurants waste up to 10% of the food they purchase on average.
Enhancing Customer Experience through Technology
Though lowering menu prices may not be a viable option to drive sales for many restaurants, operators can attract more business by improving the customer experience. For Tebben, the real competitive battlefield is in the quality of the drive-thru experience at Checkers and Rally’s. “That’s what made us famous and why we’ve been around for almost 40 years. We can’t just be okay at speed. We need to be a leader in it,” said Tebben.
Some of the changes Tebben is implementing are simple process improvements. For example, at locations where there is a double-lane drive through, one lane can be reserved for mobile orders while the other lane offers the traditional drive-through experience. Tebben suggested that his team will analyze wait times from the moment the customer places their order to when they are retrieving their meal from the window. Using analytical tools, Tebben can identify at what point the drive-thru line becomes too long and customers begin to abandon the process. During these peak periods, Checkers locations can open their second drive-thru lane, relieve the congestion, and capture sales that would have otherwise been lost.
However, Tebben is also leveraging AI and automation at the drive-thru to further accelerate the process. At this stage, the AI is primarily used to facilitate orders. A conversational AI greets the guest, records their order, and delivers it to the kitchen staff with fewer errors and faster process times than a human operator.
In the future, Tebben hopes to incorporate the upsell strategies that have proven to be effective in the remote ordering and pizza-delivery space. Based on an individual’s order history or commonly paired menu items, a digital menu can recommend popular side dishes, beverages, or desserts to increase the average order value. In the drive-thru, Tebben hopes to replicate this experience. Joe Park, Chief Digital and Technology Officer at Yum! Brands spoke with the Wall Street Journal about what this could look like at Taco Bell, Pizza Hut, and KFC chains. Park explains,
“On your Taco Bell mobile app today, you can check into the drive-through with a unique four digit code, and that connects you to our systems to know who you are, to know your purchase history. As we collect more data, we see AI playing a role in personalizing the menu board that you see or the kiosk that you’re at, to know what you would more likely purchase at that moment, what kind of promos attract you.”
Tebben is clear-eyed about the value AI can deliver, but he recognizes that Checkers and Rally’s are still at a disadvantage. As quick-service restaurants, they must compete against some of the largest corporations in the world. They do not have the same resources and budget, so they have to use their dollars wisely to punch above their weight. To make their marketing spend more effective and increase their average order value, personalization is the key. By aligning their digital platforms and creating an omnichannel experience, Tebben can gather information on the individual customer’s preferences, desires, and appetite then use this information to provide greater value.
Strategic Use of Data to Drive Decision-Making
Data is only as valuable as it can be used to improve processes, drive greater revenue, and reduce costs. For that reason, technology investments do more than generate reports or aggregate information. Restaurant operators need actionable, real-time insights to optimize their decisions and streamline processes.
Jay Altizer, COO at Fourth, explained the importance of this dynamic, “It helps make the manager’s job easier. Rather than that person having to read through a bunch of reports, just serve up to them the next best action. ‘Get your eye on this!’ ‘Here’s the next thing to work on’,” Whether in regards to scheduling, pricing, inventory, or another area of the business, this frees operators to focus on creating improvements instead of time spent on analysis.
Overcoming Challenges with Digital Transformation
Any digital transformation is a large undertaking. It involves the evaluation, purchasing, and deployment of a new technology solution; the decommission of legacy systems; and finally training and adoption. It can be easy to become overwhelmed or take on too much change at once. Tebben offers a useful guideline repurposed from the legendary basketball coach, John Wooden, “Be quick, but don’t hurry.”
He elaborates that the restaurant needs to move quickly to overcome competitive pressures of the industry, but don’t hurry and implement the solutions incorrectly.
Instead, the best approach is a thoughtful one. Start small in areas that are sure to deliver quick results or start with a handful of pilot locations before expanding to the rest of the chain. Not all technology solutions integrate together, and many will have overlapping functionality. Be sure to conduct proper due diligence when evaluating technology solution providers to ensure that the tools will be able to work concurrently and communicate effectively.
Tebben put is best when he said, “Digital transformation is the gift that keeps on giving. If you set it up right.”
The Future of Technology in Restaurants
The value of AI is apparent, and already restaurants are making great use of the technology. However, AI is a technological revolution that has only just begun. Whatever marvels it delivers today will be minimal compared to what the technology can offer in the decades to come. Compare AOL email in the 1990’s to the modern Discord server to understand just how far technology can progress.
With that in mind, what can we expect next from artificial intelligence? Here are just three examples:
- Real-time pricing: Operators will be able to use AI to make automated adjustments to menu pricing based on demand, inventory levels, special promotions, and competitor pricing. For example, we may see surge pricing opportunities similar to those found in ride-share apps like Uber.
- Internet of Things (IoT) devices: AI will be integrated into other smart appliances in the restaurant, such as kitchen sensors, smart refrigerators, and ovens. These will help reduce food waste, lower energy consumption, and improve order consistency.
- Advanced chatbots: Chatbots are already being used to ease the burden on customer support teams in other industries. For restaurants, sophisticated chatbots will be able to field increasingly more complex queries from customers, from managing feedback to order alterations to taking reservations.
AI and Technology Are the Way Forward
In a business environment in which the largest areas of expense are growing rapidly, changes must be made to keep pace with competition and maintain profitability. Though an organization can make some adjustments at the margin, reductions in staffing, ingredient quality, plate sizes, and other changes also diminish the dining experience.
Technology is the way forward, enabling operators to make significant cost reductions while providing the same experience that made the restaurant a success in the first place. Be agile. While the competition is standing still, your restaurant can begin the digital transformation that delivers sustainable profitability in 2025.
Listen to Chris Tebben’s full conversation with Fourth in our on-demand webinar. Catch the full recording here.