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Has the Time for Self-Service Come?

When Michael Gibbons, chairman of the National Restaurant Association, delivered a speech to future hotel and restaurant professionals at the University of Delaware's March 2010 hospitality career fair, he noted that the average bottom-line for restaurants is three to four percent of revenue; a figure that was seven to ten percent about five years ago. With the recession, average consumer spending has decreased and margins have become even smaller, leaving restaurant operators with little room for mistakes.
One of the main causes of restaurant failure is lack of cost control. By the time operators realize the actual costs of doing business, or the source(s) of their loss, it may be too late to recover. What's the solution? When my students ask me this question, I tell them that technology may come to the rescue in two ways: to optimize operational efficiency, and to help restaurants be better marketers.

On the efficiency side, the applications for technology are far-reaching: controlling inventory and cost, exception-based reporting, remote management, reverse bidding for best purchase price, labor management (labor alone is the largest expense at an average of 40 percent of revenue) and, given its tie-in to controlling labor costs, self-service technologies.

Self-Service tech rising?

Over the last decade, there have been an increasing number of self-service solutions aimed at hotel and restaurant environments. Until recently, however, the widely accepted position was that self-service technology and hospitality environments operate in conflict with each other. We try to be hospitable and offer guests a personal touch, and yet we push our customers to serve themselves?

Recent studies have shown, however, that consumers appreciate having the option to use self-service in the right environment, including certain hospitality environments (Hospitality Technology's annual Self Service Technology Study, for one, has tracked this trend for the past five years). Leading-edge operators who have been willing to experiment with self-service technologies overwhelmingly report success, though there are certainly cases of failure as with any new technology rollout. Despite the benefits and reported successes, adoption levels have yet to reach even one quarter of the hospitality operators.

By many accounts, however, the hospitality industry is becoming increasingly willing to embrace self-service and mainstream adoption may only be a few years off. Hospitality Technology's 12th Annual Restaurant Technology Study asked more than 130 operators to weigh-in on what they expect will be the hottest technologies over the next two years. Almost 75 percent cited self-service as the number one technology that will impact the restaurant industry.

The debate continues
On the tails of an economic recession, self-service technologies are both valued and criticized for their ability to replace jobs. Kiosks can service customers in ten languages, 24 hours-per-day, without a single break. If QSR restaurants were to overwhelmingly turn to these devices certainly there could be significantly fewer front-line employees needed in QSR environments. It begs the question, however: just because QSRs have historically needed a certain number of employees to staff the POS counter, does that mean that it is the best approach for those restaurants? For some operators, using self-service could have an enormous impact on the bottom line via labor savings, increased up-selling, reduced errors, and faster ordering taking.

Even full service and family/casual restaurants can take advantage of some self-service technologies. For example, electronic menus in full service restaurants can give customers multimedia information about menu items (i.e. a short clip of the chef discussing a cut of meat, or information about a wine direct from the wine-maker). These e-menus can also allow the consumer to customize his or her selection. If a customer is allergic to peanuts, for example, all menu items that contain peanuts might gray-out on the menu, alerting the consumer to avoid those choices. Similarly, a diabetic person can know which menu items are not recommended. In the future, we may even see restaurants offer a seating map online during the reservation-making process (and possibly charge more for premium seats, i.e. on the patio or lake view).

When coupled with the Internet and social networking tools, self-service can offer exciting opportunities for hospitality organizations to improve their marketing, brand awareness, and customer loyalty. Online ordering, for one, has been a great success story for many restaurants. As consumers continue to purchase smart phones with Internet capabilities, self-service applications will only grow.

For many restaurant environments, now is the right time to begin examining self-service options. It's not right for all restaurant types, but for those with the right business model to support self-service, you may find that self-service will ultimately support you.
For more insights from Cihan, click here.
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