Restaurant operators are always looking for ways to enhance the customer experience, but that’s become a gargantuan task in a post-Covid world of labor shortages and supply chain issues. We know how much mobile ordering and delivery has surged since the pandemic. But what’s the next restaurant tech wave?

Here Come the Robots

One answer is automation and robots. Robots can provide many benefits in the kitchen if they are implemented correctly. For one, they can fill multiple orders quickly and accurately, which can improve customer service.

“There is a lot of buzz about robotics and technologies that can automate repetitive tasks, such as flipping hamburgers, for example,” says Erik Szyndlar, a managing director at Harris Williams. “In their quest for profitability, restaurant companies are beginning to look at operations inside the restaurant that could be automated and at potential third-party solutions to do that. For the most part, these solutions are in early stages and attracting largely venture capital investment, but it is certainly an area for private equity to watch.”

Strategic buyers are investing in startups to help their operations too. In July 2022, Chipotle Mexican Grill (NYSE: CMG) invested in Hyphen which makes a robotics system called Makeline. The latter assembles digital orders under the counter through automation production while allowing staff to assemble in-house orders from the top of the counter. Chipotle made the investment out of its Cultivate Next venture fund.

Filling in the Labor Gaps

The restaurant industry, like many others, has been plagued by labor shortages. The issue has put an enormous amount of pressure on frontline workers and managers. To ease the problem, operators are turning to technology.

Adam Birnbaum, GP Bullhound

“So much of what’s been going on in restaurant technology has been on the front end,” says Adam Birnbaum, an executive director at GP Bullhound, a technology advisory and investment firm. “How do we get something delivered? How do we change the menu faster? How do we get insights into what people have been ordering? I think the fact that we’re going into the backend of the house more is really interesting, and I think the holy grail is addressing labor.”

One company came up with an interesting way to help restaurants find employees by using remote workers. Whoever thought this was possible in a business where in-person service is essential?

Bite Ninja offers a virtual workforce to restaurants so they can staff their drive-thrus and front counters. The “ninjas” work from a remote location and appear onscreen to customers at menu boards.

Bite Ninja was founded one night when co-founder Will Clem decided to use his laptop to take orders for his restaurant from home and nobody noticed he wasn’t actually in the kitchen. Clem was able to scale the idea, and eventually turned to M&A to grow. The company acquired Zenu earlier in 2022. Zenu provides software to restaurants such as digital menus, online ordering and mobile payments.

“I think the conventional way of getting people to work in restaurants, if current trends continue, is going to be a major issue for people to address,” Birnbaum adds. “I think there’s going to be an emphasis on ways to make the labor pool more efficient or look for replacements.”

All About the Customer

“The customer-facing technology landscape for quick service and other high-volume, multi-site restaurants is rapidly moving toward software that helps restaurants create more personalized experiences,” Szyndlar says. “This may be through digital engagement, point-of-sale integration or loyalty programs–anything that makes the customer experience feel more intimate and the customer feel valued and appreciated.”

Restaurant technology company Olo Inc. (NYSE: OLO) bought Wisely Inc. for $187 million in November 2021. Wiseley’s customer relationship software includes marketing automation, table management, waitlist and reservations and tracking guest reviews.

“Restaurant technology falls into two broad categories: software that will help bring more people into the restaurant and drive revenue, which many refer to as front-office technology, and software that will help increase profitability, or back-office technology,” adds Szyndlar. “We are seeing significant focus among restaurant chains, and among investors, on back-office, profitability-related technologies.”

The restaurant sector is capital and time intensive. Any technology that allows operators to run their businesses more efficiently will produce greater cash flow, making the industry poised for M&A.

“There are many options available to help restaurant companies increase sales and profitability. And, for investors in restaurant technology, there’s a significant opportunity for platform building as the best assets rise to the top of what remains a highly fragmented sector,” Szyndlar says.