Restaurants have undergone tremendous change in the last two years, from shutting down entirely to quickly developing digital technology to enable delivery and pickup services. Now, restaurants are trying to combine the best of both worlds: They are offering the convenient delivery and curbside services customers came to expect during the pandemic, but also reopening their dine-in services, and must ensure that the processes and technologies support all of their operations.

On top of that, restaurants have been facing a significant labor shortage. Employment for eating and drinking establishments is still 6.4% below pre-pandemic levels, and is not expected to fully recover this year. Also, as customers increasingly return to restaurants, they are not happy with the long waits for tables and slow service due to lack of staff. What’s more, with increasing expectations of an economic downturn, restaurants may face yet another bump in the road. 

During the pandemic, at least 80,000 restaurants closed. Those that survived did so by pivoting, using digital technology to alter their business models. But even those restaurants that succeeded at the time face new challenges now. The restaurant industry has always had ups and downs, and the speed of change compounds the effect of that volatility like never before. That’s why it is critical for restaurants to be agile — so they can adjust, regardless of how the environment shifts. 

What’s the next challenge for restaurants?

What will the future of the restaurant industry look like over the coming year? In many ways, the industry’s challenges will remain a continuation of what we’ve already seen. Yet the speed at which restaurants need to respond to changing business conditions is ever increasing. 

Restaurants are doubling down on digital, explained Jean Chick, principal in strategy consulting at Deloitte. “Those who invested in digital technologies before the pandemic tended to do well. They had increased guest counts and sales and managed delivery better.” 

However, those businesses still need to build on their previous investments. Even restaurants that invested early on in customer-facing digital technology such as apps and online ordering will need additional digital capabilities. Chick said, “Restaurant leaders need to ask how they can automate the back of house to relieve labor pressures and increase safety.”

Eric Washer, vice president of industry product strategy at Workday, agreed. “There’s a changing world of work for people in service channels. Different talents are needed, along with different schedules and abilities to be more agile. Leaders will need to determine what channels are driving the most business.” In addition to attracting and retaining staff, restaurant leaders must also navigate escalating employee and customer expectations, supply-chain instability and ongoing environmental and social issues.

Growth beyond the front of house will require additional technology

At the center of all these changes is the consumer, Washer explained. Increased consumer expectations are driving innovation that provides a convenient and frictionless experience, both on and off the premises. “This puts demands beyond serving channels, cascading into the middle and back office functions.” Middle office functions like planning, forecasting, HR and supply and back office functions like accounting also need to be frictionless.

Guests’ expectations cascade throughout the business, impacting employee expectations, Washer added. Just as guests anticipate seamless experiences when they dine, so do employees when it comes to the tools they use at work. Employees look for mobile functionality, the ability to look for scheduling preferences and set their availability and ease in picking up shifts.

Some restaurants are slow to respond while others move forward

Even though restaurant leaders recognize the need for agility, many remain slow to respond, said Chick. Their speed in adopting new technology depends on how they fared during the pandemic and the resulting cash flow. “Those without as much cash flow have to prioritize where to invest, weighing the costs of adding new tools and technologies alongside their return on investment. Can they save one full-time head-count equivalent or two? Or is another in-house technology platform at end of life that needs to be replaced? If so, how long will it take to recoup the investment if they purchase new technology?”

According to Washer, restaurant leaders are focused on updating back office technologies, such as investing in modern finance and HR systems that “enable the next level of business agility for the entire operation, making finance and HR more automated.” Doing so allows them to focus on more strategic aspects of the business, making data-driven decisions faster. 

For many restaurant leaders, the tipping point for investing in middle and back office transformation is ongoing frustration with a lack of clear visibility across the business. Restaurant organizations need a “single digital backbone,” Washer said, that can provide this oversight while handling the inherent complexity that comes from interconnected activities in different functions. 

Digital transformation will be an ongoing journey, not a destination. In that vein, implementing new technology solutions will not be a one-time thing, Chick advised. “Technology enhancements and consumer expectations are ever changing. How does your restaurant organization evolve alongside them? You have to stay abreast of all of these changes.” 

Restaurant leaders recognize that they need the right mindset and technologies to keep pace with the velocity of change. “During the pandemic, restaurants had to act fast to serve customers across different channels, often pivoting to new business models,” Washer said. “But now, businesses realize they can’t return to the way it used to be.” Instead, restaurants will need to adapt to the new reality that brings both the excitement and challenge of constantly preparing for the next course.