Would you like Wi-Fi with that burger?

Technology invades the restaurant industry

McDonald's best-kept secret may be that it offers free Wi-Fi with every meal. More than 8,000 of its restaurants provide high-speed wireless service to customers. The fast food giant has yet to fully promote the perk, but it has already attracted one group: Gamers using Nintendo DS systems currently account for 25 percent of the Wi-Fi traffic in its restaurants.

Although Wi-Fi attracts customers, that's not why McDonald's put it in. "It gives us a platform to use wireless applications within the restaurant," says David Grooms, vice president of IT at McDonald's USA.

For example, handheld devices are used for order-taking and inventory management. But since McDonald's has opened up access to draw in more customers, "getting the word out that we are a secured wireless haven is really big for us this year," Grooms says.

Wi-Fi is just one of several technologies that are beginning to transform the restaurant business. Others include tools for automating operations, contactless payment systems, kiosks, digital menu boards, and Web and mobile ordering and payment technologies. Such innovations are a big leap for an industry that only recently began accepting debit and credit cards, and change is still coming slowly.

"Most operators don't even know what's out there," says Aaron Allen, founder and CEO of Quantified

Marketing Group in Orlando.

"Restaurants are the industry that technology forgot," says Steve Bigari, CEO of I3 Consulting and Management Service in Colorado Springs and a former McDonald's franchise operator. But he sees disruptive technologies shaking up the business in the next five years. "Restaurants that lead are going to put a lot of people out of business," he predicts.

Arm's length IT

Of the one in three restaurant operators using more technology than they were three years ago, half say that they've increased productivity, according to a survey conducted by the National Restaurant Association. As for the other two-thirds, tight margins and fear of alienating customers have been factors in their reluctance.

"The industry has kept a lot of technologies at arm's length because of the feeling that it takes away part of the romance" of dining out, Allen says. Even so, 50 percent of fast food operators polled plan to allocate a larger proportion of their budgets to technology this year.

Strong growth is fueling the move toward automation. The restaurant industry will hit $537 billion in sales this year, according to the National Restaurant Association. Much of that growth comes from changing consumer habits. In 1995, 25 percent of all food dollars was spent in restaurants. Today, it's 48 percent. Technology is also appealing because food service is notoriously labor-intensive, employing 12.8 million people. "When you apply any technology, the gains can be quite substantial," says Hudson Riehl, senior vice president of research at the association.

"For any of our clients that don't have these systems, the competitive disadvantage is scary," says Allen.

Turbo drive-through

Drive-through orders can account for up to 75 percent of restaurant sales, according to Greg Buzek, president of IHL Consulting Group Inc. in Franklin, Tenn. But ordering is a significant bottleneck. That's why Miami Management Inc., which owns 16 Wendy's franchises, is using voice-over-IP (VoIP) and call center technology to speed ordering at drive-throughs at three stores. It plans to have its remaining stores online by June.

Brian Fields, director of operations at the Lexington, Ky., Wendy's franchisee, says an integrated point-of-sale (POS) system from Andover, Mass.-based Exit41 Inc. places two order stations in front of the drive-through lane. The system also uses broadband and VoIP technology to relay customer orders to a call center run by Miami Management in Lexington. Completed orders are immediately relayed to the store's kitchen order screens and POS station.

From the order stations, traffic merges into a single lane where customers pay and pick up their orders. A digital camera associates an image of the customer and vehicle with each order so that customers are billed correctly and receive the right food. The system has increased peak lunch-hour traffic from 112 cars per hour to 137, says Fields.

The system also improves order accuracy because of the clarity of the VoIP connection and because the call center staff focuses only on taking orders. Voids from incorrect orders have dropped by half. Fields says that the system will pay for itself in less than three years.

Next, Fields wants to let customers swipe a card at the order station and skip a stop at the payment window. That capability, says Exit41 CEO Joe Gagnon, could speed transactions in more ways than one. Since more than 50 percent of customers place the same order every time, Exit41's systems may soon associate the credit, debit or gift card with the customer's order history, present his regular order and ask him to simply confirm it.

Selling points

Call center technology hasn't been limited to drive-throughs. Pizza Hut Inc. automates delivery orders with a service from Jacent Technologies Inc. in Santa Clara, Calif., that combines a hosted call center with an option to use an automated attendant with natural-language speech-recognition capabilities. Orders are distributed to the appropriate store's kitchen and then to the POS system for payment. "We have plug-ins for different systems," says Trevor Stout, Jacent's CEO.

That's important because in many chains, franchisees use various POS systems, making technology initiatives more complex, says Buzek. "The next big trend is replacement of the POS and moving to more open systems," Stout says.

Self-serve kiosks, which have languished for years, may finally be ready to take off. Buzek says the average price of an order taken at kiosks is 20 percent to 25 percent higher, and the kiosk "always asks you if you want to upsize."

The latest IBM POS registers have displays that face the customer and enough processing power to drive full-motion video, says Jerry Leeman, worldwide segment manager for food service and hospitality at IBM. Unstaffed order stations can be configured as self-service kiosks, complete with swipe-card readers. These have been popular at a deli chain that's doing a pilot because customers can customize orders and ensure they're right, Leeman says.

Digital signage

Signage is the biggest obstacle to the timely rollout of new products in fast food restaurants, Leeman says, and digital menu boards could help resolve that.

Digital menus are typically LCD or plasma displays that combine video images with live menus that can be updated from a central location. Likewise, digital paper -- electronically updatable displays that retain the image even after power is turned off -- could allow for rapid wireless updates of window signage. The problem, Leeman says, is that digital displays are still a major capital expense, although prices are continuing to drop.

As the technology becomes more economical, it will be possible to use digital signage not just to keep all stores up to date but also to respond quickly to changes in the marketplace. For example, integrated systems in the store could vary pricing after the lunchtime rush hour based on how many salads are left over.

Domino's Pizza Inc. in Ann Arbor, Mich., is experimenting with digital displays that present order status to customers who come in to pick up their food. CIO Chris McGlouthlin is also investigating the use of GPS technology for the delivery staff. But for now, he says, stores will continue to rely on paper maps printed using Microsoft Corp.'s MapPoint software.

The mobile Web has perhaps the greatest potential to disrupt traditional fast food restaurant business models. While Domino's and some restaurants already offer Web-based ordering with local pickup, the mobile Web takes that a step further. "Whatever you have on your hip, you'll be using it to order and pay for your food," says I3 Consulting's Bigari.

In the future, it may be possible to order and pay with your wireless handheld or Web-enabled cell phone, and restaurants may use location-based services to estimate your travel time and make sure your food is hot when you arrive, says Bigari.

Technology innovations may have another impact as well. With automated payment and ordering systems inside the restaurant, at the drive-through and over the Web, "you could literally bury a kitchen" in orders, he says. The fundamental design of restaurants will need to change. But that, says Bigari, is a good problem to have.

Sidebar: Keeping tabs on diners

Fatz Café, a chain of 35 restaurants based in Taylors, S.C., has tested wireless technology from ESP Systems Inc. in an effort to improve customer service and turn tables over faster.

The system includes a wireless hub at each table that monitors table status (available, occupied, ready for busing, etc.) and alerts staffers. It also lets customers call their server at any time -- "before they get frustrated," says CEO Steve Bruce.

But the system is designed to help ensure that diners never need to press the call button. It communicates with a base unit at the host station as well as with servers and staffers, who wear small wireless devices about the size of a watch. Servers are notified when a customer has been seated and when food or drinks are ready to serve. Bruce says that tables turn over 10 percent faster in the two pilot restaurants and that customer experience has improved.

Bruce also experimented with a wireless payment system from VeriFone Inc. that responds to customer fears of identity theft. It allows customers to swipe credit or debit cards and pay their bills at the table without letting the cards out of their sight. The device also saves the server two trips to the table, Bruce says.

Copyright © 2007 IDG Communications, Inc.

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