Big Restaurants Lost the Fintech Arms Race

Until recently, the world’s biggest restaurant chains outgunned smaller competitors by spending more on technology. Starbucks, Chipotle and Panera, among others, built wildly expensive mobile apps so that their customers could order ahead, earn loyalty rewards, and be experimented on by data scientists.  

Their apps, once considered out of budget for midsize and small restaurants, are becoming outdated. Smaller restaurants don’t need to create their own apps or employ hundreds of IT people the way Starbucks does. Technology for mobile order-ahead, pay at the table and loyalty programs is affordable now. And, any restaurant can take eWallets from Apple, Google and PayPal, which are set to become more popular than credit cards in North America by 2022.

The fintech arms race has changed. Your restaurant doesn’t need an app to compete. You’re in a position to offer the same mobile tech as the big guys, but better. Smaller restaurants, not multibillion-dollar brands, will shape the new norms in fast casual dining.

First-Mover Fallacy 

The earliest restaurants to adopt mobile technology spent millions of dollars on apps. The reasoning went, if we invest this much money, most competitors can’t copy us. That’s not how technology works though. While the first movers sit high on their horse, the price of technology drops. What cost Starbucks eight figures to make now costs an indie coffee shop four figures to rent. 

Whereas Starbucks requires people to download their app and then load and reload credit (a thorn in your side), new restaurant tech is more elegant. No app is needed—it all happens in a mobile browser. To order ahead, a customer can navigate to a restaurant’s website, add food to a cart, and pay with Apple Pay in a tap.   

Inside restaurants, QR codes are showing up on menus and checks. A customer who scans the QR code pulls up options in a mobile browser on her own phone: order from the menu, pay the bill, split the check, leave a tip—the whole shebang. As a result, the restaurant needs fewer staff, turns tables faster, and makes the payments more secure. Plus, guests are more likely to order another drink or food item if they don’t have to flag down a server or wait in line again.

Rethinking Loyalty

Big restaurants created loyalty programs that depend on a person’s willingness to download an app, hand over personal information and be annoyed by push notifications and emails. They have trained customers to wait for discounts on food they would order anyway. Small restaurants can do better.

Loyalty is becoming less about free food and more about contextual offers. For example, if someone scans a QR code at the table and starts building an order, the restaurant can identify the customer from the payment method. Then it can base loyalty offers on what the customer actually wants to order, not what he ordered last week.

For example, if a customer named Jim selects spicy pork tacos at Bob’s Taco Shack, the restaurant can recommend a Corona or Fresca to tame the spice. It’s a suggestion in context, not a creepy offer from data scientists that seem to whisper, “Hello, Jim…we’ve been watching you…” If Jim is a regular customer, maybe Bob’s offers that Fresca free, hoping that Jim orders it on his next 10 visits.

The point is, the first wave of loyalty programs encouraged customers to be opportunistic. Instead, smaller restaurants should encourage customers to visit first and then be surprised with offers that, ultimately, increase visitation and raise revenue per visit.

New Expectations

Starbucks, Chipotle and Panera spent insane money to make your restaurant look antiquated. They set new expectations about the ease of ordering and paying. Amazon did the same for eCommerce, and Uber did likewise in transportation. The first movers change the norm. Second movers meet the norm but do it better and at a lower cost.

Small restaurant owners are second movers. You have the advantage over big restaurants. You can offer better tech for order ahead, pay at the table and loyalty at a fraction of their costs. You can take the same eWallets and other payment methods as the bigshots. In a matter of weeks, you could erase the technological edge that global chains spent a decade developing.

Big restaurants paid a large price for mobile technology, but you don’t have to. Now’s your chance to compete with them without paying top dollar.

About the Authors

Jon Squire is CEO and founder of CardFree, and Ralph Dangelmaier is CEO of BlueSnap.