Battle for Digital Dominance
Millions of people invested days, weeks, and even years of streaming time to see who would come out on on top in HBO’s television series Game of Thrones, but perhaps even more exciting is who will win in the Game of Restaurant Technology. While not as bloody, it could require a few maps to follow the mergers, acquisitions and alliances that are propelling brands and solution providers to the top of the digital leaderboard. If only there was a way to get a few spoilers…
The push for digitization and personalization of the guest experience is blurring the lines even further between restaurants and technology companies. Restaurants are becoming increasingly bullish on acquiring or investing in solutions and, in some cases, making them available to the industry at large. Meanwhile, vendors are harnessing M&A to expand the reach of their solutions from a functionality standpoint. Here are several of the potentially game-changing alliances that formed in 2019.
Do you Want AI with That?
McDonald’s said a big “yes” in 2019 when it acquired Dynamic Yield, a provider of personalization and artificial intelligence solutions, for $300 million. In a written statement, McDonald’s Corp. then-CEO Steve Easterbrook said the acquisition addresses a key trend in the marketplace: an increased need to leverage personalization to boost customer counts and the frequency of visits to restaurants, as well as to maximize service efficiencies as never before.
Rolled out to all U.S. and Australian outdoor menu boards last year, Dynamic Yield’s technology allows McDonald’s drive-thru displays to enhance drive-thru efficiencies by showing food options based on time of day, weather, current restaurant traffic, and trending menu items, as well as to up the personalization ante by presenting suggestions for add-on items based on customers’ current selections. McDonald’s also plans to integrate the technology with its other digital touchpoints, including its kiosks and global mobile app.
The acquisition sets McDonald’s apart from the competition by making it among the first operations — restaurant or retail — to implement artificial intelligence at the point of sale. To level the playing field, competitors will need to take similar steps aimed at bolstering service efficiencies and creating personal connections with guests.
“Personalization is everywhere,” says Daniel Levine, Director of The Avant-Guide Institute, a global trends consultancy. “We’re witnessing a broad-based change in consumer behavior that is likely to be permanent. This is not a flash-in-the-pan fad; it’s a sea-change trend that will be with restaurateurs for the long term.”
From another page in McDonald’s digital transformation playbook, the QSR giant invested $3.6 million in Plexure, a provider of mobile engagement software. Plexure then introduced Analytics Studio, an analytics and visualization tool that is embedded into its existing platform and uses artificial intelligence to alert users to critical changes in business metrics and consumer interaction as they occur.
While Dynamic Yield will continue to offer its solution to other restaurant players, the Plexure deal gives McDonald’s exclusive access to Plexure’s tools and services in the quick-service space and a sharper competitive edge on the digital front, according to both entities. Sri Raju, CEO of technology consulting firm Smartbridge, says this edge should spark heightened demand for real-time, artificial intelligence-based solutions throughout and perhaps beyond the quick-service segment.
Double Shot of Digitization with Starbucks as End-to-End Platform
Starbucks Coffee Company and Brightloom reached a licensing agreement in mid-2019. Brightloom, formerly eatsa, is combining key components of Starbucks’ digital flywheel technology, including its mobile and loyalty technology, into its existing platform. Brightloom provides an end-to-end, cloud-based software-as-a-service (SaaS) digital ordering, customer engagement, and customer loyalty platform. The final product will be an end-to-end, cloud-based SaaS platform available to all operators, including Starbucks’ competitors. The platform is designed to allow end-users to offer mobile and omni-channel digital ordering options to their guests, as well as to execute mobile engagement strategies. In exchange for the license, Starbucks now holds an equity stake in Brightloom and a seat on its Board of Directors.
Additionally, as part of the agreement, Brightloom is working with global Starbucks licensing partners to deploy the platform around the world. A $30 million funding round led by global Starbucks licensees along with Tao Capital Partners and Valor Equity Partners will help to support the technology development and integration.
Raju predicts that restaurant operators’ investment in and acquisition of technology will continue as brands strive harder to differentiate themselves from the pack and deliver on the promise of “an exceptional customer experience, particularly through digital transformation.” He believes the scope of such activity will expand as operators look to harness digital technology to increase efficiencies in a wide range of areas, including supply chain, workforce and operations.
One Solution to Rule Them All
Strategic mergers in 2019 took aim to provide operators with end-to-end solutions. The July 2019 merger of HotSchedules and Fourth yielding the newly branded HotSchedules Now Powered by Fourth, offers customers a complete SaaS solution suite for hospitality management including: scheduling, time & attendance, applicant tracking, training, inventory management/procurement, HR/benefits and payroll services.
In December 2019, PAR Technology Corp. continued its buying spree with the $42 million acquisition of AccSys LLC, parent company of Restaurant Magic.
Restaurant Magic opted into the deal in large part to improve level-one support for its growing base of larger customers. Many of these customers were demanding such support, but it was difficult to provide without the scale afforded by the acquisition, according to the company. PAR, meanwhile, saw the deal as a means of tapping into the trend toward platform convergence.
Levine predicts that M&A activity like PAR’s acquisition of Restaurant Magic is a harbinger of a significant game change to come. “Restaurant brands will continue to differentiate themselves with technology to get ahead of their competition, but more and more, they will be looking for that technology to come from beneath a single company umbrella in order to deliver on the front and back ends alike.”
Payments Merge as Solution Providers Jockey for Digital Lead
According to Hospitality Technology’s 2020 POS Software Trends Report, “the point of sale for restaurants is becoming a fluid concept.” This is reflected in the findings, as top POS software upgrades in 2020 will be driven by enabling new payment options (55%). Restaurants have been lagging in widespread mobile payment offerings as HT’s Customer Engagement Technology Study reveals that 48% of diners want mobile payment options, but only 38% of restaurants currently offer it.
Consulting firm McKinsey predicts that the global payment market will hit $3 trillion a year in revenue by 2023 as this shift in preference to digital payments continues. As mobile and alternative payment options continue to gain in customer acceptance — and preference — restaurants are looking for payment partners that offer or will support those capabilities.
Over the last 12 months, several payments providers made power plays to position themselves as flexible and robust solutions in this dynamic marketplace as competition heats up from both startups like Adyen as well as banks dabbling in digital payment options.
A few examples:
• Shift4 buys Merchant Link. In a statement, the company contends that Merchant Link merchants will need to upgrade systems to migrate to the Shift4 Payments platform to reap new benefits in addition to a more secure, robust and reliable system of processing including: EMV, PCI-validated P2PE, advanced tokenization, free pay-at-the-table terminals and more.
• Global Payments buys competitor, Total System Services Inc. for a reported $21.5 billion in stock.
• Elavon acquires Sage Pay, reportedly to “help its business customers grow as the global economy becomes more digital and businesses look to streamline their operations with software that includes payments capabilities.”
• PayFacto acquired all of Posera’s issued and outstanding common shares for $14.5 million CDN. The transaction is expected to close in January 2020.