Restaurants utilize big data to stay competitive

Succeeding in the restaurant industry is no easy task.

According to the Washington, D.C.-based National Restaurant Association, a leading trade group, pre-tax profit margins range between three and five percent.

The high cost of rent, licensing and personnel are daunting. But restaurants face another obstacle: critics, not only professional journalists but amateurs who offer their opinions on social media. A bad review on Google or Yelp can undercut even the best-planned ventures.

The importance of quality is why a number of restaurants are using big data to develop a better understanding of consumer preferences and to improve their food and service. In some cases, these businesses have already achieved revenue gains as a result of their efforts.

Using external data to improve a menu

Some restaurants are using outside software providers to gauge which dishes are likely to succeed and reduce the uncertainty of making menu changes. Food Genius aggregates data from restaurant menus around the country to better understand pricing, food and marketing trends.

For example, a restaurateur can see what types of food-related keywords and phrases are trending online, the average price of a certain dish, and which menu items are growing or shrinking in popularity.

“The food industry for far too long has made decisions based on its gut,” says Justin Massa, CEO and founder of Food Genius. The Chicago-based company tracks menu items at more than 350,000 locations and has partnerships with food delivery services Seamless and Grub Hub.

Massa said that the data can help restaurants seize opportunities in their niches. “The data is going to tell you something and give you important context but the thing it comes down to is the identity of your brand. That’s going to tell you how you’re going to explore that data.”

Increasing customer satisfaction with internal data

Some technology companies are helping restaurants improve operational efficiency.

Avero, a restaurant software company, tracks purchases and voided items at point of sales. Restaurants use the data to improve server performance, develop tactics to increase sales and even identify thieving employees, says Sandhya Rao, vice president of marketing and products. Rao says that restaurants may target promotions to certain days or times of the month.

According to a company case study among the 30-plus upscale casual restaurants that Avero works with, the average sales increase was five percent, or $250,000 each, over the course of a year.

Punchh creates mobile apps that allow customers to leave reviews, sign up for loyalty programs, take surveys, and order food through their devices. “Operators can know customers better and customers can enjoy better experiences, which is an encouraging environment to keep them coming back and bringing their friends,” said Jitendra Gupta, CEO.

Another company, TapSavvy, is also using customer insights to assist restaurants. After customers eat at one of the restaurants that TapSavvy serves, they receive a tablet to fill out a survey and express criticisms or compliments.

By letting customers give feedback while they’re still in the restaurant, they’re less likely to take out their aggression online, says TapSavvy co-founder Yaniv Tal. “If a customer leaves unhappy, word spreads very quickly,” Tal says. “Every restaurant knows the most important thing they can do with their business is make sure guests leave happy. This is a direct way to ensure that this is the case.”

To be sure, many restaurants are still not using big data. Yet Massa says that they are missing a potential opportunity to improve performance. He suggests that these businesses might begin by collecting information themselves. “Restaurants can and should hoard their data,” Massa says. “If they can’t right now, one day they will want to analyze it, and you can’t go back in time and reconstruct it.”

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