How Restaurants Are Racing to Consolidate Their Tech Stacks

After years of cobbling together disparate systems, restaurants are rethinking their technology and learning that multiple vendors may not be a good thing.

Restaurants began jumping into the digital revolution feet first about a decade ago. When the Covid 19 pandemic hit, that pace accelerated as restaurants scrambled to open new customer channels, such as curbside pickup, delivery, and ordering kiosks.

Tech vendors, many of them startups, were only too eager to oblige. They began offering an array of applications and hardware that could transform restaurants from a single-channel operation, in which customers ordered and paid for their meal at the table or the counter, to businesses that engage with customers in multiple ways.

Now restaurants are finding that, in their rush to build out their tech stacks, they have created a disparate collection of customer-facing, kitchen, and back-office systems that are loosely connected at best. They can’t always communicate or share data with one another.

The result is what has been described as a “lot of walled gardens” that make it difficult to connect systems, says Noah Glass, chief executive and founder of Olo, a New York-based restaurant-technology provider. Now, restaurants are looking to consolidate their tech stacks to unify the flow of data across all channels and simplify tech maintenance and upgrades.

A recent study by restaurant-technology platform provider Qu Inc. found that 64% of restaurants surveyed cited technology and systems consolidation as a priority, followed by 58% saying they were targeting better online-ordering strategies, and 55% wanting improved data orchestration and analytics.

“Digitalization with restaurants increased fast during the pandemic, but now is starting to level off, which is prompting restaurants to take the time to understand what a unified tech stack means to their business,” says Qu chief executive Amir Hudda.

Watch That Tech Stack

As restaurants rethink their technology strategy, an opportunity is arising for technology providers to integrate the hodge-podge of systems already in place or replace them with single platforms.

“Multiple vendors means multiple contracts with multiple sets of terms, which can lead to friction when it comes to managing the tech stack,” says Oliver Ostertag, general manager, operator cloud for PAR Technology Corp. “When businesses have multiple technology vendors, they can’t always move quickly internally. Plus, they can get better terms and economics from working with a single vendor.”

For restaurant technology vendors, capitalizing on the opportunities to deepen existing customer relationships and attract new ones by consolidating the tech stack starts with understanding what restaurants want and need in their technology.

While restaurants have always been fast-paced, low-margin businesses with relatively high employee turnover, they are increasingly feeling pressure to improve operating efficiencies in today’s economic climate. The higher cost of goods, supply-chain issues, a shortage of labor, and consumers’ evolving expectations for dining out are all factors putting more pressure on restaurants to control costs and do more with less.

“Restaurant owners and operators recognize that juggling disconnected systems creates complexity that costs them time and money,” says a spokesperson for Toast Inc. “Many restaurants feel the pressure of low margins and high competition. A consolidated solution offers [restaurant] operators more ways to quickly reach new customers, build brand loyalty, and help generate revenue growth outside of traditional dine-in sales.”

With a consolidated tech stack, restaurants can make more informed decisions about how to run their business. For example, through an inventory-management application, managers can track best-selling items on the menu and see the cost to prepare those items based on the cost of ingredients, then determine whether the item is being appropriately priced.

‘Smart Data’

Such capabilities are just scratching the surface with respect to how tech consolidation can improve margins, sources say.

Lightspeed Commerce Inc., for example, is developing a pricing index for restaurants that will compare the cost of a menu item to the cost for the same item at a competing restaurant, using aggregate data. This information can help restaurants determine on which items they can raise prices to increase profits, such as cocktails, without turning away customers.

“Technology should help drive profits,” says Adoniram Sides, senior vice president of hospitality for Lightspeed. “By understanding how the cost of ingredients affects pricing, restaurants can see the price-cost relationship for an item and how their pricing compares relative to competitors. We see pricing apps as an exciting space.”

Lightspeed’s pricing app builds on similar capabilities within its platform that enable restaurants to compare their performance to that of local competitors using aggregate data. Comparisons are made based on the type of restaurant, such as fine dining, casual or quick service, and the type of cuisine each restaurant serves.

“In most cases, restaurants get this data anecdotally,” Sides says. “It is not possible to get this kind of data without tech consolidation.”

Another benefit of tech consolidation is uniformity of data across all applications. For example, items may be referenced one way in the app that manages orders flowing into the kitchen and differently in the inventory-management app. Items may also be referenced differently across ordering systems for different channels, such as curbside pickup, delivery, and in-restaurant orders.

“Tech consolidation can make sure that items are referenced the same way across all apps and channels, which reduces the noise in the data between systems,” Hudda says.

One benefit for vendors from tech consolidation is the opportunity to use that data to make recommendations. Par Technology’s PAR OPS platform, for example, provides restaurants with operational insights, such as sending a notification when the inventory is low or certain food items are nearing their expiration date.

“Data is like oil, the value is not in the product itself, but how it is used,” says Ostertag. “To us, smart data is what drive profits, not just data itself.”

Integrated Payments

Another feature tech providers are seizing upon lies in improving customer-loyalty programs. Toast’s platform can automatically track loyalty points earned by consumers enrolled in a restaurant’s loyalty program using customers’ payment information.

Every time a customer enrolled in a loyalty program makes a purchase, Toast records the payment option used so she earns her loyalty points, even if she doesn’t use the same payment method for each purchase. “That streamlined experience is made possible by integrated payments,” the Toast spokesperson says.

Another way restaurants can enhance customer loyalty is to use customer-specific data linked to items purchased to develop individualized offers based on a customers’ dining preferences. For example, restaurants can use check-level data to develop offers for customers who repeatedly order a specific wine or cocktail, says Pablo Rivero, chief executive for Resy and senior vice president of American Express Global Dining.

AmEx acquired reservations platform Resy in 2019 and uses it to provide AmEx Platinum cardholders exclusive reservations at some of the most popular restaurants. Resy also informs the restaurant the cardholder is a member of AmEx’s Global Dining Access program.

Last year, AmEx built on its Resy foundation with the acquisition of Tock, a restaurant-reservation application, from Squarespace Inc. for $400 million. Tock provides reservation, table-management, and event-ticketing capabilities to 7,000 restaurants, wineries, and other bookable venues.

“Resy and Tock’s integration with Toast and other POS systems helps restaurants streamline operations in multiple different ways, such as automatic table statuses to help them turn tables faster, insights on sales and guest behavior for smarter menu planning decisions, and check-level data for each guest to help them deliver more personalized experiences and communications to those guests,” says Rivero.

Integrating those tools with one another allows restaurants to create more meaningful connections with guests, “which is what brings them back again and again – ultimately driving more revenue to the business,” Rivero adds.

Along with its acquisition of Resy, AmEx enhanced its restaurant-tech offering by acquiring Rooam, a contactless-payment platform for restaurants, bars, music venues, and arenas, for an undisclosed sum.

“We acquired Rooam to enhance Resy’s ability to connect to a variety of platforms commonly used by restaurants, like POS systems and CRM tools, helping restaurants streamline operations,” says Rivero.

‘A Flight to Safety’

More effective labor management and training is another benefit of consolidated tech stacks. “A unified system makes it easier for restaurants to see who is working and when, which helps with sales to labor ratios,” says Qu’s Hudda. “It also makes it easier to train staff, since they are learning to work on one platform, which is key, given the churn some restaurants have in staff.”

For all the benefits a restaurant can reap on the operations side from tech consolidation, the trend can be viewed as a “flight to safety” for restaurants as consolidation among restaurant-tech providers has begun to winnow the field of players, according to Olo’s Glass. “Restaurants want a tech vendor they know will be there long-term,” he adds.

Dealing with a single vendor also eliminates the gray areas that can occur when it comes troubleshooting issues on multiple platforms from multiple vendors. “When there are too many tech partners, it can be hard to tell where the issue originates,” Glass adds. “Consolidation solves that problem.”

If nothing else, consolidating the tech stack can provide restaurants with a true 360-degree view of their business through a single platform. Restaurants are finding that to be a huge plus because many lack the internal resources to properly manage their technology.

“Managing disparate systems can be a tall order for restaurants because most don’t have the personnel to do it,” says Thad Peterson, a strategic advisor for Datos Insights. “Every minute a restaurant spends on managing its technology is time away from managing their business and the customer experience. Consolidation gives restaurants control over their tech ecosystem.”