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VAR Sales Guide: The Restaurant Industry's Appetite for Big Data

March 29, 2017

VAR Sales Guide: The Restaurant Industry's Appetite for Big Data

Big data can be invaluable in any industry, and the restaurant industry is no exception. Like businesses in many industries, restaurants are gathering ongoing data about their operations, including food sales, customer preferences, average meal cost, average tips left, profit and loss, and staffing costs. All that data is being gathered, but restaurants have been slow to apply that data in any meaningful way in order to direct their operations.

That’s changing. More of the larger restaurant chains are applying big data methodologies with some amazing results, and other restaurants are following their example, which is creating new sales opportunities for resellers.

Serving Up Customer Satisfaction

Consider how McDonald’s is leveraging big data in order to improve efficiency. Combining metrics using trend analytics allows McDonald’s to optimize drive-through service. Using information gathered from customers and people waiting in line, the company was able to change drive-through design for greater efficiency (e.g. a packed van with a complex order can negatively affect a customer waiting for a cup of coffee). Big data also reveals patterns such as times of peak demand, most popular items that take longer to prepare, and other factors that affect customer experience. Using the findings from big data analytics, McDonald’s was able to make improvements across its network of restaurants, resulting in millions of additional dollars in sales and happier customers.

Pizza Hut is using big data in order to test new menu and service ideas. The company recently announced that it was giving its London restaurants a makeover with new menu items and even adding a cocktail bar based on findings from customer research. The company keeps close track of its menu and factors that can impact customer loyalty, including a new service that tracks eye movement on an interactive menu in order to place a pizza order, hands-free, in 2.5 seconds.

However, your restaurant customers don’t have to operate a global food chain in order to take advantage of big data analytics. Here are some common applications for big data in the restaurant industry. 

Creating an Operational Baseline

Big data is ideal for test marketing and performing “what if” scenarios. This can apply to all aspects of the restaurant business, such as choosing the right location, restaurant design and menu development. Tony Pace, former CMO of Subway, explained how he kept the sandwich chain ahead of the market curve using a “testing and learning” approach. Testing new hypotheses and then applying what you have learned in another context is a good way to apply big data analytics.

For example, if you test a new restaurant program in one location, you can test the same program in another location and look for variables. You can assess differences in the customers, the restaurant and the menu and determine what variables affect sales. This provides a roadmap that can tell you a number of things, such as how much you can increase menu prices without negatively affecting sales.

Using a “testing and learning” approach provides a baseline of operational understanding that can evolve with the business. It makes it easier to improve operations and increase profits while minimizing risk.

What’s on the Menu?

The restaurant menu is an ideal place to apply big data techniques. You can test everything from the menu items to the menu format, right down to the typeface.

For example, a Cornell University study found that what matters most in a menu is what you see and how you imagine it will taste. Highlighted menu items or items in color tend to be ordered more frequently and often are the least healthy items on the menu. Also describing items will help them sell better, because they lead you to believe they taste better.

Menu analytics can have a huge impact on restaurant revenue and can be applied in different ways. You can test food pairings or offer discounts for specific combinations. Even specific ingredients have been tested in order to boost sales. Bacon, for example, has been found to be the magic ingredient that increases sales of everything from sandwiches to cocktails. Testing menu response also can tell you the items that can be listed for bigger profits or identify non-performers to take off the menu.

Promoting Happy Customers

Understanding customer segmentation and buying patterns also can help drive profits. Big data can show you who is buying specific menu items at specific times of the day. You can use analytics in order to determine which types of customers visit at different times of the day and align menu items in order to increase sales. Using demographic data and even the type of credit cards used makes it easier to create high-profit special offers.

Social media also has a huge impact on restaurants. A bad review on Google or Yelp has been shown to drive down sales to the point where restaurant owners are suing for bad reviews. Social media analysis can be invaluable in staying ahead of the Yelp trolls and maintaining a positive online persona.

And, of course, there are operational considerations. Big data analytics can help assess suppliers in order to determine the impact on profits if you go with one supplier or delivery service as opposed to another. Staffing can be analyzed in order to make sure the restaurant has the right team in place for optimal efficiency. Every aspect of restaurant operations can be improved if you can extract the right insight using big data.

Most restaurants operate on narrow and volatile profit margins, so any insight that has a positive impact on revenue is invaluable, which means any insights you can help deliver from analytics and big data techniques are worth the invesment. If you can deliver the big data expertise in order to show restaurateurs how to unlock hidden sources of revenue, then you can carve out your own big data profits serving the restaurant business.