Can music makeup the shortfall in restaurant sales in 2024?

What if the restaurant industry isn't just facing a temporary downturn, but a fundamental shift in how it operates? Join us on this thought-provoking episode of The Digital Restaurant as we scrutinize Technomic's bearish forecast for 2024, digging into the reasons behind sluggish traffic and rising price sensitivity among consumers. Discover how cutting-edge technology helps us track these trends in real-time yet surprisingly hasn't managed to slash operational costs. We also bring you fresh insights from Inciso's latest report, capturing the thoughts of IT and digital e-commerce professionals across various restaurant segments on the future of the industry.

In the second part of our episode, we turn the spotlight on McDonald's recent pause in its partnership with IBM for voice AI in drive-thrus. Could this signal a shift in how fast food giants approach technology? We share personal experiences and insights about voice AI, comparing McDonald's approach with Taco Bell's successful implementation. Additionally, we explore the strategic use of music in restaurants, examining how different tempos influence customer behavior and reinforce brand identity with real-world examples from industry leaders like McDonald's and Starbucks. Don't miss this engaging conversation that ties together technology, consumer behavior, and the evolving landscape of the restaurant world.

Transcript

Speaker 1: 0:00

Can music drive sales in your restaurant? Technomics a bearish industry forecast. And why has McDonald's stopped its voice? Ai drive-through test that's all ahead on this week's Digital Restaurant. The Digital Restaurant works like this we're going to ask each other five questions about headlines that affect the worlds of restaurants, off-premise and technology, but in some way tie back to our book series Delivering the Digital Restaurant. Are you ready? Let's go? Happy Monday, meredith. How are you doing today? Very good. Carll, how are you very good? We are almost at the midst of summer.

Speaker 2: 0:52

Can you believe it?

Speaker 1: 0:52

I would say we're almost at the beginning of summer okay, you're being literal midst fire and I'll say we're a few days away from the longest day right, yeah.

Speaker 2: 1:03

well, I guess, if you define the longest day being the middle and us approaching it and then us leaving it, I could say that yeah.

Speaker 1: 1:11

No matter what the weather, no matter what the season, the restaurant technology and off-premise world continues to be a plum with plenty of material. So let's get into it. You're going to start us off with. It seems a bit bearish. Meredith Technomic is suggesting that 2024 sales may not be as high as they originally suggested. Tell us more.

Speaker 2: 1:30

Technomic has taken their forecast down for restaurant industry sales for 2024, and they're citing the slowness in traffic. Now, of course we have talked about this many times on the podcast that there does appear to be some price sensitivity showing up in consumers. Whereas restaurants have taken their prices up and taken them up Importantly, in excess of food at home or grocery, traffic has been slow to declining, and this is not a great stage of affairs for restaurants. They rely on folks coming in to keep their businesses healthy and of course, you can charge infinite price increases, but if no one's there to pay them, that's not good, right. So Technomic is saying this is starting to affect total restaurant spend, and that's probably with the backdrop of overall inflation and the consumer getting increasingly anxious about the economy, which we see in a number of data points.

Speaker 2: 2:27

As it relates to technology, specifically, two things. One, we can measure more specifically because of technology what price is doing? You found an article that referenced some place, or AI data showing that in California, where minimum wage hikes have caused higher price hikes than in the rest of the country, traffic is down even more right? So technology is really letting us see at a very fine level what happened to traffic with prices going up. Now you probably know more about that than I do with your dynamic pricing background, but that is one of the beautiful things that data and restaurant has allowed us to see.

Speaker 2: 3:05

You know, my heart is in affordable access to nutrition. When I look at those price increases I see, yeah, okay, the underlying commodities are going up Yep wages, that's really tough. But why hasn't all this extra technology helped restaurants offset those increases? Why aren't we seeing them use less labor? See that labor get even more productive? It's a mystery to me that we've added on so much technology and we are not seeing it make a dent in the cost of running a restaurant. My call to all those technology companies out there is how can you make the restaurant more efficient and more effective at what it does so that it is able to keep those price increases reasonable and within the range of what's happening?

Speaker 1: 3:52

at grocery? It's a fascinating question, but you remember in our first book we had a chapter called why Pizza Works and we talked about how the technology comes together to make the pizza cuisine site so seamless from an off-premise perspective. In the Osborne household for date night recently, we ordered pizza and it was for two pizzas Meredith $65 before cost of delivery. And then I said well, this is ridiculous. This must be just a particularly expensive restaurant. And I looked through three, four, five, six others, including some of the bigger brands, and it was all around that same kind of price. So you're right to point out about the technology, but if pizza is also expensive, what is going on out?

Speaker 2: 4:30

there. That is certainly true, but pizza also. Although they were the first of the e-commerce restaurants, they have also added a bunch of technology. It's just there's some systemic problems in restaurants that I am positive technology can solve that I am positive technology can solve and for some reason, instead people are using the software differently than I would expect.

Speaker 2: 4:51

And, of course, part of I think the challenge is that technology makes it so much easier to layer in fees right. So when you have rapid digital calculations happening online and a digital form of payment, it is so much easier to slide in a 2% fee or a 299 rush fee or whatever, because the consumer probably is going to be less likely to notice it. Versus if I showed up at a pizza restaurant with 50 bucks to spend on pizza for my family and a bunch of added fees later with 58, I actually wouldn't have enough money with me to pay it. So there's something about technology that I think makes it easier for price increases, and especially fees, to go through All right. Next question for you you have a new report to share with us, Carl. This one's from Inciso. Tell us about it.

Speaker 1: 5:40

Yeah, that's one of the states of the industry reports, meredith. Let me do this, let me bring it up here for those of you watching us on about 51 units and 250 being about 42% of the respondents, about 40% in that 250 to 1,000 mark and the residual 18 in the 1,000 plus. So this isn't really reflective of the independent restaurant, I think it's fair to say. But there is a good blend between quick service, fast casual, which both have about 40%, and then casual dining and family restaurants in the 21% space 40%, and then casual dining and family restaurants in the 21% space. And most of the folks that were spoken to were in the IT or digital e-commerce environment and I think, as we go into this here, you're going to see why, because it's quite interesting talking about some of the in-restaurant dining and digital aspects associated with dining that really are starting to play through, at least for those that they had surveyed.

Speaker 2: 6:44

And that's specific to dine-in restaurants right.

Speaker 1: 6:48

Well said, the future of in-restaurant dining. So let me start with talking about this particular one here. So, first of all, customer acquisition. When we look at this here now, we're seeing 77% of restaurant partners with delivery platforms acquiring new customers through that, which is a good, solid number, but it still tells us that almost one in five are not right. So, in spite of everything we've gone through, and given the fact that we're talking about those categories of restaurants, it's really interesting to me that still we're talking about one in five not using delivery platforms for their restaurant. Now, in one, in one sense, maybe restaurants prefer to choose their lane and maybe they just want to go fully down the experiential route and not deploy any level of delivery. Of course, some of them might also just have some form of pickup routine, which perhaps isn't interpreted in the answer to this question, but 87% of them do use digital platforms when it comes to telling their brand story, giving their values across to their customers, and then certainly 91% when it comes to using targeted digital marketing, which, again, I suspect a large part of that comes through the marketplaces. Yeah, as we go deeper into this here, have a look at this. So, first of all, 25% of restaurants, which is a big number, I think, have integrated proximity sensors and AI for efficient management of dining pickup and delivery logistics, about the operational workflows that are involved to be able to manage efficient table management and reduce wait times, to try and alert staff to when tables need to be serviced in some way. I think that's really encouraging. And then also this one here, which isn't something we've talked about before how many staff actually have communication devices when when working in a restaurant? It says here, about 45 percent of those spoken to are wearing those in-ear wearables. We see them, of course, in the drive-thrus and a lot of the QSRs, but what about other restaurants? Would that help having better communication technology in place to help the staff work together across the entirety of the restaurant? It also talks here about interactive digital menus and the fact that only 23% of them use those interactive digital menus. And the fact that only 23% of them use those interactive digital menus to help them with being more informed around tracking the choices and preferences of the customer for future personalization. So, as we know, when you're using technology today, you can actually use this technology to be able to follow where the customer moves. I think that's going to be able to help those that are using that type of capability to reframe and think about which category should be in front of another category on a digital menu, which items should be higher and lower, et cetera. Should that change by time of day, for example?

Speaker 1: 9:29

The other thing which, again, we haven't spoken about much and fascinated about what this is augmented reality. So, only 5%, but it's interesting that 5% of those responded are implementing augmented reality experiences where it's to teach guests about the journey of their meal. So it's more of a farm to table type of journey and education, but interesting that augmented reality is coming to the table in that sense. A few more I'd like to touch on here. Let's go down to this one, when we look at the fact that 28% of restaurants are using some sort of AI-driven forecast in sort to help with food prep, but also when it comes to things like inventory management and certainly something which is near and dear to your heart, with Empower, of course, having the KDSs linked and synchronized, importantly to both the ordering and the delivery 36%.

Speaker 2: 10:18

Wow, that's surprising to me in a dine-in setting.

Speaker 1: 10:21

I think so. Yeah, but in many ways I think this again reflects the state of maturity of where we're at, but I think in comparison to a couple of years ago, this has moved on quite a bit. And then let's go to personalization and efficiency. So 39% of restaurants are using a recommendation engine or suggesting related or preferred items based on customer history and preferences. 23% of them are using it to help with scheduling for staff. So again, that seems rather low. There's plenty of technology out there these days to ensure that you're using appropriate dynamic staff scheduling tools to help predict how many employees for your restaurant. And then the last one I'll touch on is talking about just open technology platforms, again a theme that we touched on in the second book. 66% of those respondents said it was important to be able to quickly integrate new devices and software to enhance operations, but only 41% said that they were satisfied with where they were in that particular space. So much, like you said in your answer to the first question, there more to come, I think, from technology providers to be able to support technology working together in a seamless fashion.

Speaker 1: 11:30

Okay, before our third question, meredith, I would love to remind people to give us a like, give us a follow If you are fans of the show. We'd love you to be able to give us a like, hit the bell so that you know each time a new podcast comes out and please tell your friends, your colleagues, about the show if you think it would be of interest to them. We're only on every couple of weeks, and hopefully not too much longer than 20, 25 minutes or so, to be able to give you the latest as to what's going on. So, yeah, hit that bell and certainly give us a follow if you haven't already. All right. Third bell, and certainly give us a follow if you haven't already. All right. Third question this week, meredith McDonald's, often at the forefront of innovation in many ways, are ending a test to use voice AI in the drive-thru. Tell us more.

Speaker 2: 12:08

It's quite a shocking headline. To see that McDonald's is going to end using voice AI in the drive-thru Made me click. I'll be honest Now. They have been partnering for quite a while with IBM to work on voice ad, so they had it rolled out at 100 restaurants. They are pulling it back and that sounds like maybe it doesn't work, but interestingly, in the statement which it sounds like was a statement to franchisees that Restaurant Business Online got a hold of.

Speaker 2: 12:39

But as we move forward, our work with IBM has given us the confidence that voice ordering solution for the drive-thru will be part of our restaurant's future. We see tremendous opportunity in advancing our restaurant technology and will continue to evaluate long-term scalable solutions that will help us make an informed decision on future voice ordering solution by the end of the year. Hmm, it sounds like they're considering something else, which is very interesting. You know, I think their partnership with IBM was pretty early in the voice AI days and I'm guessing that they were building a lot of it together in partnership with IBM, and maybe now it's happening that there are emerging companies that are able to leap ahead in that task model by leveraging learning how to run orders across different restaurant types. That's what I'm guessing. I don't know. They don't say so.

Speaker 2: 13:30

Although it was a little clickbaity, jonathan Mays, I definitely fell for it. Mcdonald's will still be using voice AI in the future. They're just going to change it Now. Like eight different voice AI companies out there now, it's really gotten to be quite a competitive space. I think everyone believes that this will be a thing and, as you see, so much competition going after it that remains to be seen yet exactly how it will work, how consumers will respond to it.

Speaker 2: 13:59

I had an awesome experience in the Taco Bell drive-thru the other day. I will post a video of that shortly and I think the voice I order in can be really good. I felt like it understood me quite well. I could certainly understand it better than I can usually understand a team member on a head, but the order confirmation board made me feel confident that it heard and understood me. An employee was able to jump right in and take over when I got to a confusing portion that the technology couldn't understand.

Speaker 2: 14:28

And probably best of all, it consistently uphold me, which is a thing that is very difficult to get hourly employees to do. Now, will it take labor out of the restaurant? Maybe only in the highest volume restaurants at peak times, right, it's very rare that a drive-thru restaurant will have a person solely dedicated to taking orders and that's all they're doing. Usually they're also doing drinks and taking payment, maybe expo.

Speaker 1: 14:52

They've got a lot of things going on in that job, so it is unlikely that it will remove a full labor except this high volume situation, but I think it can improve the experience you know, I do wonder, with this mcdonald's news, how much they're also trying to push more order ahead, and the last month or so I've probably gone to their drive-through twice.

Speaker 1: 15:12

I'm using that and typically I'm ordering ahead through the app, right? So even before I've gone into the drive-through lane and and so then when I show up I obviously give the four-digit code and I go through from there. And there's something particularly satisfying about getting ahead of the guy that is in front of the voice box who's still trying to repeat his order. So in a sense I wonder whether the voice AI component actually would be better for me to have in the app itself, right? So instead of me actually very much slowly crawling up to the drive-thru lane, as I rather, you know, rapidly try and put my order in to get my four digit code, imagine if I could be sat in the car and say I'd like a cheeseburger and a banana milkshake and it's already going through, and then suddenly that four digit code, because of some form of geotag, is then actually going through to the system so that it's confirmed at the point of the first window.

Speaker 2: 16:00

It seems very likely as phones become capable of having on-device LLM it's already doing a bunch of NLP on-device. It seems very likely that that will end up right. Okay, carl music, I saw your post last week of you playing the piano. You are extremely multi-challenged.

Speaker 1: 16:19

That's very nice uh, my romantic softy, that's what I am turns out, music doesn't just help your relationship, it helps restaurant.

Speaker 2: 16:26

Yeah, tell us about that.

Speaker 1: 16:27

I thought it was appropriate that we talked about this one, given that that post. Okay, I think it's no surprise that there is certainly an impact in many raffin types when it comes to music and they indeed, I think, influence both customer behavior and perceptions. And this study that we're referring to in this article in qsr magazine, which said 88 of the respondents believe that music enhances their overall dining experience and that the type of music played can affect customers perceptions of wait times and even influence their spending. I think one of the examples in the article said that upbeat music can make environments feel busier and more energetic, leading to quicker table turnovers, whereas slower tempos can encourage patrons to perhaps linger a bit longer and spend some more. So it quotes the likes of McDonald's again and Starbucks leveraging music to reinforce their brand identities. So oftentimes you will get McDonald's going for upbeat, high energy tracks and Starbucks is probably going to more likely have relaxed indie music with a bit of a laid-back coffeehouse kind of vibe.

Speaker 1: 17:29

And I think, if anything, this should remind certainly those of us that are listening from an independent standpoint about thinking about the strategic use of music right, reinforcing brand identity for what your restaurant is, but also thinking about how it impacts that customer experience for what your restaurant is, but also thinking about how it impacts that customer experience and I'm really trying to think how does music in that sense make it more of a memorable and enjoyable experience? They quoted in the article a study from HUI Research that said a brand can increase sales by up to 9.1% compared to playing no music at all. So if you have music playing in your restaurant, there's potentially 9% of sound right there that can address those numbers that Meredith touched on at the start of the show.

Speaker 2: 18:09

That would totally make up for the 1.5 drop that Tech of Mac is now calling for. That's right.

Speaker 1: 18:15

So they've got a company called Soundtrack your Brand that was referenced, that specializes in curating the background music solution for businesses and it talks about how it can obviously help with the perceived value of the product and trying to make sure that that kind of matching in place. But it also advises, if you're in a QSR to avoid random or generic playlists. Right, I remember when I was in a multi-unit environment in my college days and I kid you not how bad it was to hear the same track going over and over again. It was the thing that I probably disliked the most about that role was just the repetitive nature.

Speaker 2: 18:46

Every single word to every single Dave Matthews song is because they played it constantly.

Speaker 1: 18:51

And I think this is the thing right. We did this together when we've been working together in the past, where you actually change the vibe of the music based on the time of the day right, when you actually think about what in the morning, you've got a different type of clientele. So if you're a coffee house with a bunch of folks coming to you on the way to work, there's a slightly different vibe versus that kind of mid-afternoon moment when you're wanting to perhaps meet up with someone, or it's a little quieter and a little bit slower paced. So I think the point is music is important. You should think about beyond just having music in your restaurants and ultimately think about how it can help pursue what your brand represents, but also how it can improve the customer experience too.

Speaker 2: 19:28

And this is certainly a place where technology has fundamentally leveled the playing field between the big guys and the little guys. Right Back in the old day, the reason you and I and our chain multi-unit experience heard the same songs over and over again is because the big companies could afford to custom playlists through music and have they literally had a specialized piece of equipment in that unit that played their playlist. And all of the little independents were stuck with guess what? Radio with commercials on it. And how far we've come that now everyone can stream a customized playlist and it's so easy to do commercial free. The world has changed. That's amazing. If you're not doing it, you should be.

Speaker 1: 20:11

Hi Carl here Just to interrupt the show briefly to remind you that if you have yet to get your copy of either of the Delivering the Digital Restaurant books, now is the time to get one. If you head to thedigitalrestaurant, you're going to be able to get the best price available. You can also listen to both books with yours truly talking about them, on Audible. You can get a copy of Amazon if you'd prefer to order through them, but if you haven't got the books yet, get them. They really are going to transform the way in which you look at the restaurant industry and the way in which technology is disrupting it. Okay, last up this week, microsoft has started to partner with a TikTok foodok food critic. What is microsoft up to? Are we gonna have a microsoft restaurant soon?

Speaker 2: 20:49

did not see this coming. On many dimensions. Microsoft has partnered with keith lee, who has the reheat on tiktok. He specializes in doing reviews of and getting shout outs to af-American owned restaurant and has had actually a material impact in many cases on their success. So a pretty neat influencer who's out there. And of course, this is just a big PR play for Microsoft, trying to call attention to the fact that they have AI too. Guys, we have it too Cool. Oh, pilot, have you heard of it? So certainly they're just trying to get that news out there. But what I thought was really neat about it is they did a variety of little online classes that you could take to learn how to use AI in your business. As an example, they have one called Copilot Creativity 101, which I thought was very cool. I know my husband for sure uses ChatGPT as like a brainstorming partner. I know you and I have both used it as we think about what to write.

Speaker 1: 21:52

We did not use ChatGPT for either of the delivering the digital rationale.

Speaker 2: 21:55

Well, that is true, we don't use it to actually write anything, but in terms of like brainstorming, right, we absolutely do, and we use it for the podcast in certain ways, in the process throughout.

Speaker 2: 22:07

And so then they had another one to that point about using Copilot to enhance your efficiency as a small business owner. There's so many things you're doing as a small business owner where you don't have a department who's responsible for HR, finance, legal, whatever random thing, right, you are doing all of it. And there are all these virtual assistants made possible by AI that now can help do certain functions for you and make you much more efficient. So I thought that was very interesting that they were sharing these things through the voice of Keith Lee and his platform. So, anyway, we'll put the link in the notes and everyone can check out learning how to use AI for their independent restaurant. There are lots of things that you can do with it. It is probably not going to make you be able to hang out at the beach while your restaurant runs itself on AI, but it will make you more efficient.

Speaker 1: 23:09

Well, I'm sure in 10 years time you won't want to be doing this podcast, but if we are still here in 10 years time, meredith, and we have got to a point with technology where folks can be on the beach and run their restaurant, then I will fire this video and bring it back up with the day when you said it couldn't happen?

Speaker 2: 23:20

Well, it really can't happen now. Maybe someday a girl can dream.

Speaker 1: 23:25

There you go. All right, look, that is it for this week's Digital Restaurant. What are your thoughts about the music playing in your restaurant? Do you think voice AI is a step on the journey? Maybe it's going to turn up in people's minds more than drive-thru boxes. And are you fearful about your sales in 2024? Do you think technology's got it right with this latest forecast? Please put your comments below. As ever, reach out to us if you have articles or thoughts that you'd like to share in relation to future digital restaurants. But until next time, thank you for listening. The Digital Restaurant Podcast is available for you to follow and subscribe. Wherever you listen to your podcasts, Watch us, rate us and subscribe to the Digital Restaurant on YouTube, and follow along on all our social media digital restaurant channels. Thanks for listening.