The Unexpected Problem With Tablet Ordering

Okay, we admit it, this may not seem like a problem to guests ordering food at a fast casual chain; but to restaurant owners who are considering switching from human servers to tablet ordering (that is, placing tablets at tables or the front of the dining area where guests can click through their order rather than speaking to a server), there’s new evidence to consider. According to a paper published in the Journal of Consumer Research, guests are actually less likely to indulge in decadent food and treats when they order from a tablet instead of a person. And while this could be good news for restaurants gearing toward the health conscious (like Sweetgreen, which already handles the majority of it’s ordering through a mobile app rather than face-to-face sales), it bodes less well for establishments like bakeries, pizza places or fast food chains.

The findings are interesting because they contradict an assumption many have, that guests are more likely to indulge if they don’t feel they can be judged by a server. Instead, the research suggests guests don’t feel judged at all – they feel encouraged to treat themselves, and are less likely to control ordering impulses when speaking than clicking a button.

There are certainly other reasons to shy away from tablet ordering, especially when hospitality is the backbone of your business. But for those considering the benefits, this research is one more factor to weigh in.

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Seamless Now Has Its Own Delivery Drivers in NYC

GettyImages-464182497.0.jpgSince 2014, Seamless has been quietly testing its “turnkey delivery service” – drivers and bikers whom restaurants without their own in-house delivery team can use to deliver food through the app. We say “quietly” because it’s impossible to tell through the Grubhub/Seamless interface which restaurants are using these delivery people, and which are using their own, and the company has declined to say just how many restaurants are using the service.

In the last few months, they’ve rolled out the delivery service in Brooklyn and Queens, mentioning popular spots like Mighty Quinn’ and No. 7 North as early adopters. It’s an attempt to compete in a crowded marketplace with companies like UberEats, Postmates and DoorDash, while still giving flexibility to restaurants that would like to continue using their own delivery teams. The pricing structure is similarly flexible – delivery is an added service, with an added commission charge of about 14%. Add that to their flat commission fee of around 15%, and the margins shrink fairly rapidly – although other delivery services top out at 30% already.

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Waitlisting App Nowait Introduces Bill Pay Feature

The App Nowait, which allows guests to add their name to digital waitlists at restaurants that do not take traditional reservations, is now leveraging those partnerships to introduce a mobile payment option as well. Nowait has been steadily growing for the past few years to incorporate a suite of software for restaurants and guests, including tools to manage seating and server rotation as well as reservations and waitlists. They already have  close to 4,000 restaurants on the platform, running the gamut from Chili’s to the Clinton St. Baking Company here in New York. Nowait has been downloaded by diners over 3 million times.

With the new mobile payment option (currently being tested in the company’s hometown of Pittsburg), guests can quickly pay their check at the end of the meal without flagging down a server. The app works with three of the largest POS systems (Micros, NCR, POSitouch), which covers around 85% of their targeted fast-casual market. Nowait claims that there are benefits all around – restaurants are seeing faster turnaround, and servers have seen higher tips. The latter may be due to the apps customizable suggested tip amount, which is now standard in POS systems like Square.

As more aspects of the dining experience go digital (and mobile), this market will get more crowded. Nowait has partnerships on it’s side, but they’ll have to make the experience seamless as well.

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New York Approves $15 Minimum Wage

New York Governor Andrew Cuomo followed closely on the heels of California yesterday, announcing an agreement with Albany lawmakers to raise the NY State minimum wage to $15 per hour over the next few years. The increase will begin with for workers in New York City employed by large businesses (those with at least 11 employees), who will have a minimum wage of $11 at the end of 2016, and an additional $2 each year after, reaching $15 on 12/31/2018.

The national labor rights movement has been fighting for $15 since 2012, and roughly half of the 50 states have increased their minimums somewhat (although the Federal minimum is still set at $7.25 due to congressional opposition). The final legislation in NY has not been approved, so it’s unclear how it will affect tipped workers. The tipped minimum in New York increased recently to $7.50, precipitating some of the gratuity-free movement. Additional increases would almost certainly prompt more NYC restaurants to raise prices and eliminate tipping altogether.

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The Financial Toll of Chipotle’s Troubles

Now that the saga of Chipotle’s food safety issues, stock market tumbles, and attempts to win back loyalty are finally dying down (or so it seems), it’s reasonable to ask: what exactly was the cost of that widely publicized downfall? When a company sees a 25% drop in shares, and a 14% decrease in sales in one quarter, what does it actually cost the executives behind the brand?

In Chipotle’s case, it meant about a 50% decrease in profits for the two CEOs, Steve Ells and Monty Moran – or 15 million dollars each. While that is a steep hit, it’s worth keeping in mind that the two are among the highest paid executives in America, each reportedly earning more than the heads of McDonalds, Starbucks and Panera combined prior to 2015. So it stands to reason that Ells and Moran will weather the storm – even if the company’s struggles continue.

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The Yelp Underpaid-Employee Saga Continues

140245452.jpgThis weekend a (now former) Yelp employee, Talia Jane, wrote an open letter to her employers revealing the financial struggles brought on by her low paycheck, and criticizing the irony of the company spending millions on a food delivery app while employees “can’t afford to buy food.” The post was widely shared, and Jane was subsequently let go – a move which, predictably, Yelp Human Resources claims was not caused by the letter but which Jane herself says was a direct result.

Yelp CEO Jeremy Stoppelman has since taken to Twitter to acknowledge Jane’s point that the cost of living in San Francisco is much to high, but skirt around her direct attacks. Both Stoppelman and other spokespeople have mentioned expanded entry level employment in areas where the cost of living is cheaper.

It’s likely that this event will blow over without too great of an effect on Yelp’s sales or stocks. But the viral nature of the original post reveals a distrust for the large companies like Yelp and Seamless which increasingly act as middlemen between restaurants and their guests.

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Ravi DeRossi Turns an Empire Vegan

18712231573_877fb3734a_o.0.0.jpgRavi DeRossi, the restaurateur behind Death and Co, Avant Garden, Mother of Pearl and 12 other bars and restaurants around the city, is making a serious push to turn all of his operations fully animal-free. He’ll be starting by expanding the already vegan Avant Garden into multiple spinoff concepts, as well as closing the charcuterie-focused The Bourgeois Pig and reopening it as vegan wine and tapas bar LadyBird. All of his restaurants are in for some sort of shake-up, and it seems his mixologists won’t be safe either, as cocktail and beer lists will be purged of the often ignored animal ingredients that are sometimes used in drinks.

DeRossi himself has a long history with veganism, and feels passionately about the environmental and animal welfare impacts of factory farming. Before becoming involved in the hospitality industry, he spent many years living completely meat-free. As he describes to Eater, “You don’t realize that the average restaurateur does three times more destruction [to the environment] than the average person,” and, “If we’re going to do something to help this planet, it needs to start. It needs to be me not just preaching, but me just doing it. I’m in the position to do it.”

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Uber Eats has Steep Costs for Restaurants

The food delivery market, once handled primarily by restaurants themselves, has gotten more and more crowded lately as both start-ups and established companies muscle their way into the fray. As the field grows, the importance of differentiating oneself is obvious – whether it’s by offering more options or fewer, a shorter delivery time or a cheaper surcharge. But one factor that’s largely invisible to the end user is the percentage these companies charge to the restaurant themselves.

A typical rate for standbys like GrubHub and Seamless falls in between 10 and 15 percent, while others (like Caviar), charge nothing to the restaurant and make their profit entirely from delivery fees paid by the customer. Uber Eats, on the other hand, will be rolling out services in major cities this month at a 30% rate – even worse than the current high of 25% charged by Amazon.

It’s worth noting that, unlike GrubHub and Seamless (who do not supply their own delivery people), Uber and Amazon offer a more complete service to restaurants. Beyond the interface they offer, the delivery itself is taken care of, not to mention promotional assistance and photographers. To some, these services and the exposure they provide more than justify the cost. But to others – particularly those with lower profit margins per-item to begin with – Uber Eats is simply out of reach.

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Evolution of the Fine-Fast Casual Enterprise

The restaurant industry has gone through a dynamic shift in dining habits.  Guests spend their money differently and seek to be more enagaged in their food experience. This change has incubated a class of restaurants—the fine-fast casual segment—which is, as we all know, fully blossoming.

With this, we are now also starting to see differences in service styles within the segment – We have highlighted 2 standard bearers to this and a new model that we call the Cafe-Table.

1) Assembly Line

Chipotle popularized this and made the envy of every restauranteur.  Guests enter the enterprise, get in line, and are engaged by a string of team members who assemble the order in front of the guest before ending at the cashier.   Countless enterprises have come to market as the “Chipotle of” their category by substituting pizza or Indian cuisine or salad for burritos.  And for good reason: this is the simplest, most efficient, and low-cost model.  Because the majority of the food is prepared ahead and assembled to order, labor is streamlined, and the delivery time is kept low, as guests are spending the majority of their wait in line to begin the process.  

However, the model does have some drawbacks; namely, there is little room for hospitality and it inherently feels more transactional.  Guests feel pressure from the line behind them and are shuffled from one team member to the next, making it nearly impossible to build any rapport.  But for moving people through the enterprise, nothing is faster.

2) Counter Only

Starbucks, Shake Shack, Panera—many of the major players are using this format.  It’s a model almost as old as the restaurant itself: guests place their order at the register, wait for it to be prepared, and are called back to the counter when it’s ready.  

The added benefit here is twofold: a sense of freshness and service.  While guests do notice the increased ticket time more, it also elevates the sense of occasion, which in turn increases average check.  Because the food is prepared to order, though, labor tends to be slightly higher.  

3) Cafe-Table

Lastly, what we are seeing become more and more popular as quick-casual eats up more of the full-service segment is this slight hybrid, counter service with a runner, the Cafe-Table Model.  For decades, cafes have utilized the system wherein guests place their order at the register, take a number, and identify their seat with that number for the service staff to deliver to when the food is prepared.  

As the market has become saturated with the aforementioned models, more and more operators are looking to differentiate and elevate their fine casual enterprise.  This is often how they’re achieving that.  Bringing the food to the table doesn’t add much in labor cost, but the guest experience changes dramatically.  Additionally, with team members in the dining room to run and clear, table turns can actually speed up in comparison to the Counter Only model.  This does require a more skilled team member—someone capable of reading a dining room, clearing tables, and interacting with guests.  

We anticipate this trend increasing as food and labor costs rise.  As third-wave coffee shops, bakery-cafes, and the like cope with the Fight for $15, they will need to either increase check averages or foot traffic.  Elevating the guest experience is a chance to improve from within your four walls.  If you’re considering this service format, do keep in mind that it also requires a compelling menu and strong kitchen to match.  Read about our most recent experience with the format in this month’s Retail Spotlight here.

How Bad was Jonas for New York Restaurants?

Storm-Jonas-deadly-blizzard-snow-storm-403909.jpg

In preparation for the blizzard this weekend, residents up and down the East Coast cleared out grocery stores and prepared to hunker down for the weekend. Many restaurateurs followed Mayor De Blasio’s urging and shut down operations on Saturday, although there were notable exceptions (including Mario Batali and Andrew Carmellini). It’s no surprise that restaurants took a financial hit; according to restaurant reservation app Resy, same-day reservations were down 88% on Saturday and 38% on Sunday, decreasing weekly reservations by 25% from the previous week.

Food delivery also suffered, and GrubHub reported to Bloomberg that they were dealing with a record number of refunds for undelivered orders. They did not offer any exact numbers, but considering they were also offering a 10% discount during the storm, it’s likely the weekend was particularly hard on their bottom line.

New York is cleaning up this week, and most restaurants are open for business once again. If you’ve burned through all the milk and bread you purchased last week, considering heading out and giving your neighborhood spot some love. Just make sure to wear your snow-boots.

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