Jeremiah Barba: So picture this. It's Friday night and your stomach is growling. It is time to get dinner. Picking a restaurant is tricky enough, but once that's done, now you have to decide whether you want to dine in or have something delivered, or order on your phone, pick it up, and bring it home. The choices can be overwhelming. If this is how it feels now, with how fast the restaurant industry is innovating, what could it be like in a few years? On today's episode, we're talking about the state of the restaurant industry and what the future could hold. My guests are Ken Duffy, partner at Deloitte, and Eric Washer, vice president of industry product strategy at Workday. Ken and Eric, thanks for joining me.
Ken Duffy: Happy to be here.
Eric Washer: Yeah. Great to be here.
Barba: Perfect. So, first off, tell us a little bit about yourself and your background. And Ken, why don't you go first?
Duffy: Sure. Happy to. I'm a partner in Deloitte where I work with our travel and hospitality clients to really leverage technology to transform and improve their customer and employee experiences. I also spend quite a bit of time in our US restaurant and food service practice where I'm one of our national leaders. And in that role, I really spend a lot of my time partnering with our QSR and fast-casual clients to implement different digital solutions across the entire organization, everything from back-office systems to restaurant robotics to AI in the drive-thru. Before Deloitte, I spent my entire career in technology, first at IBM in the retail division, providing in-store technology for retailers and restaurants, and then later, at a tech start-up, providing digital commerce engagement systems for different global restaurant brands.
Barba: Great. Glad to have you. And Eric?
Washer: Hi. Eric Washer. I lead industry product strategy here at Workday, and what that means is I work very closely with our product and development and engineering teams, and my team in particular focuses on our key seven industries, retail/hospitality being one of our most important industries. I'd help fuel the insight and knowledge, and trends and priorities into our product teams to make sure we're building the right things, investing in the right areas, and delivering what our customers expect.
Barba: That's great. So glad to have you both on today. So Workday and Deloitte recently released a joint POV paper, and it's called The Future of Restaurant Management: A View from 2025. And we're going to be touching on a lot of those key points in that paper, in our conversation today. Stay tuned for a special link to download it a little bit later. First off, though, let's talk about, what do you think it could be like walking into a restaurant in 2025? And Ken, let's go to you first on this one.
Duffy: Well, I guess the scary thing is that 2025 isn't that far away.
Duffy: Right? I think we've seen how much can change in a span of two years. But on the surface, for a restaurant customer, I think the experience in 2025 will largely be similar to what it is today in the post-COVID world. They'll have multiple options on how to both order and receive their food, whether that's through drive-thru, ordering on a mobile app, ordering in a restaurant and taking it home. The real changes are going to be more behind the scenes or under the hood, right? There's definitely going to be a continued and probably accelerated adoption of different automation technologies both in the restaurant and then in back office and enterprise systems. We're going to see more experimentation with different restaurant formats like smaller-footprint restaurants that are focusing just on off-premises dining, like delivery or drive-thru, and we'll probably see some modifications to existing restaurants to alleviate, some of the operational strains of all these different ordering channels, like express drive-thru lanes for delivery drivers. So we're definitely seeing a lot of exciting innovation, but it is going to take time for organizations to operationalize and then scale those technologies.
Barba: That's really interesting because like you pointed out, so much happened even over the last couple years. So I think it will be very interesting to see how much it accelerates even, from now till 2025, which, as you said, is not that far away. Eric, anything you want to tack on to that?
Washer: I would go back two years to 2019. You asked us the same question. I think we would say generally the same thing, but we would say 2028, 2029, we'd start to see these real accelerants. What we've seen over the last two years is just a massive accelerant of the things that we saw in 2019. And that's what I think is really exciting about the next two years is that we don't see that slowing down because we're coming out of the pandemic. Operators are recognizing that we're not going back to the old ways. We're continuing the multi-prong approach to service customers, and that's going to continue to accelerate these changes that we're already seeing and happening in not just the leading pioneering brands but the masses.
Barba: Now here’s a situation that nobody likes --- sitting in a corner booth waiting and waiting for your name to be called so you can head up to the counter and pick up that meal you ordered a long time ago. So, without any more delay, here it is, the URL to download the paper that I mentioned earlier: workday.com/restaurant. That’s workday.com/r-e-s-t-a-u-r-a-n-t. That’s where you can download the Workday and Deloitte joint paper, and it’s called “The Future of Restaurant Management: A View from 2025.” And with that, enjoy your meal, I mean, enjoy the rest of the episode.
Barba: Let's flip the script a little bit and see what you think about this. So many things have changed over the last few years. What hasn't, though? What is still top of mind for restaurant leaders? And we'll go back to you, Eric, for this one.
Washer: Sure. Their brand, of course, the experience that they are striving to provide to the customers. If you look across the quick-serve and fast-casual, the hotels and casino operators, they have a brand that they've been fostering, and that continues to be their focus. How they continue to optimize it and modernize it to the changing times is where they tend to be focused.
Barba: Ken, any thoughts on that?
Duffy: Yeah. I completely agree with Eric, on that brand topic. I think also, delivering that brand consistently across all of these different channels, especially as you talk about things like delivery service providers, where you don't even have a direct line or relationship to the end customer anymore, becomes even more important. The other thing I'd throw out is, labor continues to be a massive challenge across the entire industry, right? Rising wages, much greater than 100% turnover, labor shortages, that has and will continue to be a major focus for pretty much every restaurant brand across the industry.
Washer: That all just ties back to the experience to the customer--
Washer: --- the experience around the brand, whether or not that's the-- whatever the brand makeup was their environment, it's getting more challenging to deliver on that brand because of employee turnover, employee costs, shortages of food. And so the integrated operation is becoming more and more important.
Barba: Right. So the importance of keeping frontline workers engaged and empowered, isn't going away. It's still so important for the experience for the customer. So, a follow-up question. We talked about what hasn't changed. What did change over the last few years, and how did leaders find a way to survive and thrive in the last couple years? And how could that affect their future operating models? And Ken, let's go to you on this one.
Duffy: We had already seen this trend towards off-premises dining and shifts in customer behaviors, and what COVID did was it just accelerated a lot of what we had already seen in the marketplace. And the restaurant brands that were able to really thrive during COVID are the ones who had already been investing in the technology foundation to allow them to make those modifications, and the ones who had the capital and the free cash flow to make those investments during COVID. Another thing we saw was those brands that were able to make quick decisions on things like menu modifications, either reducing their menu or coming up with new menu offerings that catered to people who were eating at home with families or with other people, allowed them to really capture business and thrive during, what was a very tumultuous time.
Barba: Right. Eric, any thoughts on that?
Washer: Yeah, I think I would add, COVID was an accelerant to the change that was already on the horizon. Because it was an accelerant, the leaders that were already starting in their foundational digital capabilities connecting the front of the house to the back of the house were able to react and address the rapid change in a profitable way. The ones that weren't reacted to it in an unprofitable way. They had to pay more, incur more of a margin hit to react to the changing landscape. That began a big separation between the leaders and the followers. But as we look ahead, those followers are recognizing it's not just a front-of-the-house change. It's not just a throw employees and manually make it work based on the dynamic changes of customer behavior. There's fundamental, foundational things into the back office and the middle office to sustain that and drive it at a profitable way, and I think more and more leaders are recognizing that.
Barba: Right. So, Eric, we'll keep it with you on this next question. Multichannel is a term we often hear in retail, but it's a big deal in the restaurant business as well. So who is doing that well in this industry, and what are some of the keys to making it successful?
Washer: Multichannel is just a fancy way of saying a lot of different ways to service your customer. By servicing your customer in different ways, it has a different burden on how do you operate. Your employee investment needs to be different. Your supply chain process and planning needs to be different. It needs to be nimble. It needs to be able to react to the changing dynamics that happen. I like to say that, if you plan and plan often, just plan on being wrong. So by being wrong, you need to be able to react to the reality of what's right in front of you so that you can service in the most profitable way to the level of service that your customers need and require based on your brand. And that requires an integrated front office, back office, and then middle office, And that becomes the recipe for the future for these organizations is to be able to have that integrated digital backbone connected with the front of the house and the changing needs so that they can continue to thrive in a profitable way.
Barba: Ken, any follow-up or anything you want to add on to that?
Duffy: It's the integration piece, right? As a category, pizza obviously has always been very good at digital and accommodating off-premises dining. If you look at brands like Domino's, they were really early to adopt all of these new ordering channels like Slack and Facebook Messenger and Alexa, but it was the integrated experience, adding the tracking capability, adding their quality guarantee, and then, in how they hire and staff their restaurants to make sure that they've got the personnel to deliver those experiences. It's the entire integration of all of those things together that really allow brands to succeed. Chipotle is just the most recent example, during the pandemic, who were able to incorporate in-restaurant operations, digital ordering channels, and then the back-office and middle-office systems to make sure that they had the right employees, the right staffing to make it all happen.
Washer: It gets more complicated, right, Ken, when you started going up the chain into fast casual, into even more of the blurring lines of fine dining where they have to service multiple channels. And they don't know which channel they're going to get the demand from. And so the balance becomes really difficult. So the insight into data, the insight into trends, being able to predict it so that they can manage that whole chain - employees, food, service, assets, overhead - it becomes a real challenge for those next level up from the quick-serve restaurants.
Duffy: Yeah. You're absolutely correct.
Barba: Those are great examples. And to me, it all plays into the end result for the consumer, right? We have so many choices, and in the end, I'm going to go back to the place that was the easiest to order and kept me updated and I knew what I was going to get and delivered on time, that type of thing. So there's so many options, and that's a common thread in this industry. So many choices, right? But we as a consumer usually don't understand all the behind-the-scenes things that are happening to make that successful. But it makes such a huge difference.
Duffy: You bring up a really good point. Just because a restaurant brand adds new ordering channels doesn't mean they're going to see a linear increase in revenue with each of those ordering channels. So it becomes, how do you accommodate all of these different options and preferences from a customer perspective in a profitable way?
Barba: So the office of the CFO definitely plays an important role in restaurant success. Let's talk about what you're hearing from industry CFOs and what are they thinking about as they look to the future. And Ken, let's start off with you on this one.
Duffy: Profitability, obviously, is a major concern. So that is and will continue to be top of mind for CFOs. Another area is really around how they fund the investments that are necessary with franchisees. That's always been an area of tension. And so figuring out ways to work with franchisees to come up with creative funding models so that they continue to innovate, is obviously a major priority. The last area is really around visibility. A lot of CFOs we talk to really struggle to get real visibility down into the restaurant, especially around things like loss, waste, theft. So being able to capture the right data, use that data to make informed decisions is a major area of focus as well.
Washer: I'd add two more things, since we're on this topic. Number one, just double-click on your last one, visibility. What we're seeing more and more of is the visibility of the rich operational data that's going on in each individual restaurant down to the product level, down to the customer level, and having that more tightly combined with their core accounting structure so that they can make those strategic decisions around how to maximize cost, how to maximize profitability, maximize the customer experience. Today, that data is all over the place in different silos and it's not trusted. It's not aligned to a single accounting structure, and so CFOs are leaning in to really take more ownership of that. The second thing I'd comment on, I'm surprised, Ken you didn't bring this up, CFOs traditionally hadn't worried too much about the skill level of the employees, the attrition rates, hiring and recruiting rates, the lack of the right skills in the right place. But now it's so tightly coupled to cost, margin, profitability that they have to, and that partnership with HR is a big transition that's happening in the market right now.
Barba: Great perspectives especially on the partnership between finance and HR and how important that is. So I've seen restaurants where robots make burgers. I think I've tried one robot-made coffee, and it was not fantastic. Let's talk a little bit about the future of automation in restaurant management. What role could that play as restaurants continue to find new ways to bring customers in? And Eric, why don't you kick us off on this one?
Washer: Well, here's going to be the understatement of the podcast --- there's a labor shortage out there. And there's not only just a labor shortage. There's extreme cost increases with the labor that you do have. So operators have to be looking at ways to minimize that cost and minimize that risk, and doing it at a very targeted way because, going back to the beginning of our conversation, the brand drives the strategies and the customer experience expectations. In some brands, you can have more digital experiences. In other brands, you can have less. So being very focused on the experiences that are digital become really important so that your brand doesn't get eroded and doing it in a well thoughtful way to increase the customer experience and satisfaction in the brand. So when operators are finding that balance they are looking to do it in a way that is well thought out to their brand but also - this is where the CFO's mind comes into play - making sure they do it with a clear strategy to drive to the profitability gains that they're looking for and the revenue gains that they're looking for. And that becomes a tricky balance, but it's a mandatory thing to be prioritizing because of the labor shortages and increasing costs of that labor. I recently went out to a beer garden with my wife and I was amazed, this is a mom-and-pop beer garden. They have two or three beer gardens here in the Bay Area. Not a big organization, but the experience was phenomenal. QR-code menu, quick ordering, we timed it --- within a minute and a half, we got our beer, with no interaction with anybody but then still a more well thoughtful connection with the people and the environment, walked away with a great experience of the brand. So that's a great example of the environment that you're trying to host, doing it in a way where you've got very few employees, but still maximizing the experience that you want to curate. And of course that formula is going to be different for different brands.
Barba: Interesting example. I've had some of those experiences as well where it was a great experience. You got your food quickly but you also had that interaction with humans. But if it isn't done well, kind of turns you off too. Like, "Oh, I lost this PDF of the menu. I got to go back to it." But I think that restaurants are evolving to strike that balance and make it an enjoyable experience but still, hey, I can pay my check in 15 seconds. Like, that's pretty fantastic. Ken, what do you think about that, and have you tried any robot coffee or robot burgers? That's my question.
Duffy: I have tried a robot burger and it probably was better than your coffee was. Eric's absolutely right. I did a quick search on the internet, and in a 10-mile radius of my house right now, there are almost 4,000 restaurant jobs that are seeking people to fill them. So this labor thing it's not so much a matter of if there's going to be automation. It's really when and when it becomes both financially viable as well as scalable. I kind of look at automation-- not to oversimplify, but I look at automation in two different buckets, right? One is automating tasks, like automating flipping a burger, automating dropping fries into a vat of oil. But then there's also automation around decision-making, and that is where I think a lot of investment is going to be made over the next couple of years, both in the restaurant, when should you go get more fries out of the freezer, taking that out of the hands of the employee and making those decisions based on data, based on real-time information - how many people are coming in into your drive-thru, how many people are in the parking lot, what's the weather like, but also in staffing, hiring, labor decisions. All of that, we're starting to see investments in automation, and I think that's where we're going to see quite a bit of innovation here over the next couple of years.
Washer: Well said, and we always tend to, when we're talking about restaurants, the examples are much more clear when you're talking about front-of-the-house examples that we all experience ourselves. But that ---
Washer: ---point that Ken just made is absolutely the case, maybe even more so, it's going to happen faster in the back of the house when you're deciding upon, strategic decisions around where you're gonna ship certain food based on demand trends that the data is illustrating to you, or your scheduling of your people based on, again, the omnichannel experience opportunities you have. You have more data to understand, well, what's the right balance going to be this Tuesday versus last Tuesday based on different trends that we've seen? And that continues to cascade in then how the finance team operates, and how the HR team operates.
Barba: So even with the role of automation, obviously, it's still so important that the frontline workers are engaged, empowered, and well-trained. So let's talk about what are restaurant managers and restaurant leaders doing to keep those folks engaged because they are so important, they’re that first impression. And Ken, let's go to you first.
Duffy: Like, with everything else, there's kind of this spectrum, right? There are really capital-intensive investments that some brands are making in trying to improve the onboarding process with, in some cases, augmented and virtual reality. Some are rethinking their restaurant layouts to minimize unnecessary movement for the employees to make their experience better. But there are other simpler ways, even just providing mobile applications so that they can communicate with other employees easier so that they can request time off, so they can access their employee information and schedules in an easy way, providing learning opportunities. In some cases, automation isn't replacing the labor. It's working in tandem with the labor to make their jobs easier. An employee, if they don't have to make all of these decisions during their day, their ability to focus on the task that they have to perform, and to service the customer improves. Another way that we don't really think about a whole lot is the menu simplification process. We've heard from a couple of brands where employees are getting really frustrated because new menu items require a lot of time and complexity to create. So when a customer orders it, that creates this downstream effect of delaying subsequent orders, and they start having to deal now with unhappy customers. And so brands are also looking at how they can optimize their menu, not just for the customer but also for the employee experience who are on the front line working with these customers.
Washer: Let me just go back to my understatement of the year, right? The worker is getting more and more power in this relationship. And to win the hearts and minds of these employees and sustain them at your operation, you need to be investing in them more. And it's not just paying them more. Paying them fairly, of course, is, is a requirement, but, touching on some of the things that Ken said, giving them more control, not just more control of their schedule, that's certainly important, and being very flexible in scheduling so that it doesn't disrupt the resources you need at the time that you need them, but you're giving a more mobile and modern experience for the employees to pick their schedules to assure you're getting full staff, and then giving them the opportunity to create their own journey for how they want to learn and grow and give them the opportunity to upskill in a more modern way, not just, through the historical ways of getting to know the bartender and buddying up with him or her and spending time there and then proving that you can actually make drinks, but actually giving them a more modern skilled learning process if they want to go down that path. And that's all curated and delivered to them in a self-service manner.
Barba: Those are great examples. Let's head into this last question. If you had to give one piece of advice to an industry leader as they look to the next six months or so, what would it be? And Eric, let's go to you first.
Washer: Back to normal's not going to happen. We're not going to see 2019 again. It's in the past. And that has created an enormous amount of stress and changes to all industries, but certainly the hospitality industry, restaurant industry. So embrace that and prioritize the organizational changes that Ken and I have been talking about, based on your brand and your culture, because the way that you operated in 2019, is not going to be profitable anymore, looking ahead.
Barba: Right. That makes sense. Ken, what about you?
Duffy: I would say, focus on the data. So everything that we've talked about today, whether it's automation, improved efficiency, better operations, robotics, all of it is going to be based on, in large part, the ability of these brands to capture vast amounts of data, use that data, and then make better decisions or power these different systems with that data. And it's surprising how many, in some cases, very large restaurant brands, are still struggling to mature their data management approach. So my advice would be, focus on the data because that will underpin everything else that you do over the next several years.
Barba: Thank you, again, to both of you for joining me today. It's been a great conversation.
Duffy: My pleasure.
Washer: Thanks for having us.
Barba: We’ve been talking about the future of restaurant management with Ken Duffy from Deloitte and Eric Washer from Workday. And before we go, here’s that URL one more time for the joint POV paper — workday.com/restaurant. Again, workday.com/restaurant. If you enjoyed what you heard today, be sure to follow us wherever you listen to your favorite podcasts. And remember you can find our entire catalog at workday.com/podcasts. I’m your host, Jeremiah Barba, and I hope you have a great workday.