Michael Brown of Bowery Capital and Kelli Fontaine of Cendana Capital discuss trends and themes using Cendana Capital manager data.
We at Bowery Capital released the 2016 edition of Opportunities In Vertical Software in November, which laid out our point of view on ten specific verticals and the potential for various software solutions to dominate each of these ten verticals in the coming years. For ten weeks, we are releasing content focused around the impact of software on these ten industries. Following our Insurance Software Interview released last week we conducted a restaurant software interview with Bill Lindsey to talk through four big questions about the restaurant industry. Bill has a lifetime of experience in hospitality operations and related technologies designed to help restaurants increase control, reduce costs, and improve efficiency. As a director of food & beverage in the casino industry, Bill created and operated several unique and popular restaurants in Las Vegas. In addition to holding senior management positions with hospitality technology companies, Bill operated for many years as an independent restaurant consultant before joining Compeat in 2005 as Chief Growth Officer.
What are some of the most interesting developments in your industry over the last 10 years and how has software added value?
Software Process Augmentation and the level of sophistication around it has grown tremendously in restaurant industry software solutions. POS used to be the core focus of technology within the restaurant environment given that it managed the customer interaction and payment process. We have since started to see several software providers come into the market to target other areas of the restaurant management process. As processes beyond payments started to become automated by software, there was a big push by POS companies to build their own solutions as well as roll up solution specific providers into their portfolio. One great example was when Radiant acquired ReMACS back office, Aloha POS, and later MenuLink followed by NCR acquiring Radiant.
Customer Experience Technology has gained awareness as customer expectations have driven the need for more sophisticated software solutions. The customer experience as a whole has started to see automation. Customers are now able to make reservations and pre-order online and via mobile, removing the cumbersome approach of making a phone call and having their reservation penciled into a notebook. A client now books a reservation and the system automatically marks down their desired date/time, size of the party, and adjusts availability in restaurant seating. The method of pay has also seen reform with customers being able to make payments for delivery and pick up securely online versus reading out credit card information over the phone. For customers dining in, several restaurants have adopted solutions that make dividing up a bill and payments much easier.
People Management Technology has increased in adoption. Early software solutions in the restaurant space were very P&L centric. Adoption of technology started with POS systems to manage the receipt of payments and then moved towards cost management processes such as inventory tracking and replenishment along with comparisons to theoretical usage and costs. Over the past years there has been an increased focus on the people element of restaurant operations. Restaurants have started to realize the service level and profitability impact of high staff turnover and have looked to adopt technologies that streamline the hiring process, manage scheduling, and provide upward mobility to staff in their organization.
What are some of the challenges / hurdles that still exist?
There is a lot of fragmentation in software solutions aiming to streamline restaurant processes. The volume of providers that solve a single solution through a best of breed platform are plentiful but lack the ability for seamless interaction with other systems a restaurant may have deployed. This leaves restaurateurs with several robust systems all operating in silos with limited connectivity and transfer of information. This prompts for a transition to a single source provider that offers all the major software applications that a restaurant may be looking for or has the ability to integrate easily with other best of breeds.
Restaurateurs are concerned that too much tech interference will ruin the authenticity of their diner experience; any solution presented needs to have a clear path to ROI and a proven ability to improve their diner experience. With several new startups looking to enable restaurants to outsource certain functions that are traditionally managed in-house, restaurateurs are faced with the dilemma of whether outsourcing customer facing functions such as delivery will diminish from the brand image of their organization.
When looking to enable a process with software what are the most important points for a buyer to think through?
Given the high touch atmosphere of the restaurant industry, restaurateurs should always seek software providers that can provide references to their capabilities. The cost of implementing a solution and training staff requires a tremendous amount of time and capital investment and so the assurance that they are moving forward with a well-regarded provider is crucial. Aside from the ability to provide references, a restaurateur should be seeking solution providers that invest heavily in future product development. The best part of a software solution is that updates should be easily pushed through on a regular basis with no disruption. To attain that benefit, software purchased should be through a provider that continuously invests in their platform. Finally, the ability to integrate with a broader set of software solutions is crucial. As restaurants scale and open multiple locations they will require inter-connectivity across platforms and locations to aggregate data into one central location.
What is your vision for the industry in 5-10 years?
Restaurant specific software adoption will rise as restaurants realize that cookie cutter financial and operational management software solutions do not scale to the needs of a growing restaurant business. Established players are more focused on certain sub-markets including point-of-sales system, payment processing, and online ordering. More established players will realize the opportunity to add value in the “behind the counter” and “above store” processes leveraging tech solutions.
Given the niche characteristics of staffing, day to day operations, and financials of a restaurant, more fragmentation across the restaurant software ecosystem will potentially begin to fade as adoption of end to end solutions begins to rise. Restaurateurs will begin to realize the value of seamless data flow that will enable faster processes across the operation and provide valuable insights.
People management processes will become more and more automated to combat high turnover rates and provide faster day to day operational improvements across scheduling, tip allocation, table assignments, etc.
Thank you for reading this Restaurant software interview with Bill. Make sure to check out the 2016 edition of Opportunities In Vertical Software for the full report and we will be back tomorrow with our final post on the Restaurant software industry and the software that powers it.
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