The Digital Restaurant
5 Headlines, 5 Opinions on the latest news on restaurants, tech, & off-premise growth
The Digital Restaurant
Will driverless deliveries reduce prices?
Imagine your dinner zooming to your doorstep, no driver in sight - that's the future we're unpacking as Waymo and Uber blaze trails with driverless deliveries right here in Arizona. The roads to cost reduction and safety enhancements are mapped out in a captivating discussion, where we navigate through the impact on tipping culture and the potential for marketplace delivery services to thrive. Then, in a personal twist, I share a laugh-out-loud debate: when celebrating milestones, should one opt for car-shaped dumplings or the real deal?
When the screens go dark and the systems crash, how do digital restaurants keep the burger flipping and the dough rising? We're examining the lessons learned from tech outages that left giants like McDonald's and Panera in a bind. With insights from industry experts, we strategize on defending against cyber threats and maintaining customer trust amidst digital disruption. Plus, we look beyond the IT department for answers, exploring how entire teams can become cyberspace sentinels.
Joining us for a riveting exchange, Priyam Saraswat from Vooch dives into the murky waters of chargebacks and 'friendly fraud,' a growing thorn in the side of restaurant revenues. With the younger crowd's slight of hand challenging operators, we rally the community to discuss tactics for shielding businesses from these sneaky setbacks. We also ponder the potential of driverless tech in easing these financial pains. Your thoughts on these pressing matters are not just welcomed, they're essential – let's stir up the conversation and cook up some tech-savvy solutions together.
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Driverless deliveries in Arizona, how to manage tech outages for your restaurant and how exactly does friendly fraud compound the issue of chargebacks? That's all ahead on this week's Digital Restaurant. The Digital Restaurant works like this we're going to ask each other five questions about headlines that affect the worlds of restaurants, off-premise and technology, but in some way tie back to our book series Delivering the Digital Restaurant. Are you ready? Let's go? Good morning, meredith. How are you doing today? I'm good. Carl, how are you? You look very happy, and that's probably because I hope you had a very happy birthday yesterday.
Speaker 2:I did have a very happy birthday.
Speaker 1:Very good. Well, I'm glad you had a good birthday and I'm sure there'll be lots of folks that are wishing you many happy returns. But what are you up to for your birthday week? I'm hoping you're celebrating for a birthday week.
Speaker 2:Oh yeah, you know, scott and I celebrate for two weeks running because his birthday has followed immediately by mine, and so it's just been craziness and fun for two weeks straight.
Speaker 1:You got Scott a really nice birthday present and I have to commend Scott because of the fact you were thinking about getting him dumplings, you told me, but you ended up getting him a car. He preempted this by buying dumplings, but you ended up getting him a car.
Speaker 2:He preempted this by buying dumplings, right? Car dumplings, car. I mean, it's a classic conundrum, which one? But yes, he did get the dumplings for himself, and then I was forced into the car.
Speaker 1:Very good, happy birthday to the both of you, but we better get on. There's lots to discuss this week. I think you've got a question for me.
Speaker 2:I do have a question for you Driverless deliveries in Arizona. It sounds like it's finally happening. Is it real?
Speaker 1:Let me ask you this Would you get into the back seat of a driverless vehicle today and take an Uber across town? I'm not ready? You're not ready.
Speaker 2:I'm not ready.
Speaker 1:Would you allow your dinner to take that same journey?
Speaker 1:Because that's exactly what's happening in Chandler, tempe, mesa, arizona, as part of this new relationship that Waymo and Uber have together, and it's where meal deliveries are happening without a driver involved, and so a customer, as you can imagine, can go and collect it from the trunk of this autonomous vehicle and boom, it's done. And according to Waymo at least, this is from a video I saw last year their vehicles are three times less likely to be involved in any kind of crash relative to the average San Francisco driver at least, and nine times less likely to be involved in an accident where someone would get hurt. So they're trying to say well, not only you, if you were traveling with them, but also your meal is in very safe hands. So there you go. Now take that with a pinch of salt, of course, because a lot of these vehicles still aren't going on highways and are operating in thick fog or bad weather conditions. But look, I think probably the best way to demonstrate what they're doing is bringing up a video. So let me do that.
Speaker 3:Food delivered to them through Uber Eats. The services are available for people in Chandler, Tempe and Mesa for a few select restaurants, including Filiberto's and Bosa Donuts. The app will give customers a notification that an autonomous car might be delivering their food. It gives an option to deny the request if you would rather have a person hand deliver your food. I hope there's not a tip option if a robot is delivering your food, there better be no tip option.
Speaker 1:I hope there's not a tip option. If a robot is delivering, there better be no tip option, all right? Well, there is no tip option. In fact, that is one of the big things that I thought was most interesting about this. We've talked a lot about autonomous delivery, we've spoken about the wing and Walmart and DoorDash relationships, but I think the big thing that really is interesting for me on this one, meredith, is that it's addressing, I think, probably the biggest value leakage in delivery transactions today, and that is the cost of the driver. That's both in terms of what a marketplace delivery may pay to a driver, but also in terms of the tips that a customer pays out, and all of that, as I think everyone is finding, is adding up to an increasingly expensive convenience charge, and so, while a customer here is likely to save I don't know the 15% 20% from their bill in terms of a tip, there isn't anything else happening, at least in this initial trial.
Speaker 1:The marketplace delivery provider is therefore going to be getting, I think, quite a significant benefit, uber in this case. So you're going to have these capitalized vehicles that, of course, are going to come at a cost. I'm sure Waymo's vehicles right now aren't coming cheap, but their running costs are going to come at a cost. I'm sure Waymo's vehicles right now aren't coming cheap, but their running costs are going to be minimal. The capital outlay is going to be amortized out and then they can service those trips which are perhaps less lucrative for their human drivers to support them. Have more frequent trips per hour, if you will. So there's this piece around being able to use these vehicles for the types of trips that humans don't feel particularly attracted to. So I think this is a good profitability play for Uber. I feel one would love to be able to see the economics of a Waymo trip versus a traditional trip over that. They're in Tempe, arizona. What do you think about this?
Speaker 2:I think that's exactly right. You know me, I always want to see the math behind it, and I think it's great that they're not taking tips. That's different from some other autonomous forms of delivery. I do have a question Is there someone monitoring all these vehicles? So is there actually a human somewhere behind it? Maybe not every single vehicle, but maybe in ratio to the vehicles. And then, finally, that was a really nice autonomous vehicle, that was a Jaguar. Wow, that's a nicer car than I drive delivering me my food. Wow, it seems expensive, doesn't it.
Speaker 1:If you're going to do it, do it right. Jaguar are going to be seen all over America on news headlines around that.
Speaker 2:I know Worked out well for them yeah.
Speaker 1:All right, talking of very affluent and very successful folks like Jaguar. Chick-fil-a continue to set the benchmark $9 million AUVs, meredith. They continue to impress in lots of different ways. What's your take on some of the news headlines around them this week?
Speaker 2:They must have just released their latest FTD, because both Nations Restaurant News and Restaurant Business Online put out articles talking about their astonishing $9.3 million AUVs in their non-mall locations, which is among the highest even higher than Portillo's of the quick serve industry incredibly high volumes, and the articles were trying to put this into perspective how high these volumes were and how much they've grown. And one of my favorite things that Jonathan May said was that they have added in the last 10 years the equivalent of a Taco Bell system and a Raising Cane's system to their system sales. That's absolutely amazing and they still have a lot of white space and a lot of place to grow to add additional restaurants. So we expect this to see them continue to grow and continue to add store count and sales.
Speaker 2:Now, certainly, the articles talked a lot about chicken being in vogue.
Speaker 2:I will say we are moving as a nation away from beef toward chicken, which is probably a healthy thing.
Speaker 2:I don't know about fried chicken, but anyway, nevermind, it's good that we are moving in that direction, and so all of the chicken chains tend to be showing quite a bit of growth, but none of them as much as Chick-fil-A.
Speaker 2:Now they've certainly got this tailwind behind them of chicken being in vogue, but I would posit when the reason why we're talking about this on the digital restaurant Podcast is that much of their success and their ability to drive those kinds of unit volumes are around their use of technology in ordering, in managing the kitchen and in putting out the fulfillment in whatever format it's coming, whether it's customer pickup or at the counter, in store or delivery. They have put a lot of effort and resources into making their technology excellent and I think we all experience it right, whether we use the app or we go through the drive-thru and someone meets us with an iPad. Technology, I think, is the undersung hero here in talking about how Chick-fil-A reached these levels, just how it should be right, because in a way, you don't think of technology when you think of a Chick-fil-A reached these levels, just how it should be right, because, in a way, you don't think of technology.
Speaker 1:When you think of a Chick-fil-A experience and perhaps that's a great thing you think of the hospitality and the service, and if you like the food, then you like the food, but the technology is everywhere. When you experience Chick-fil-A, you see it everywhere, whether it be in the drive-thru, the kiosk, through their really awesome first-party app. What do you think about the fact that it seems that they work primarily with proprietary technology as opposed to outsourcing and having a rather convoluted tech stack.
Speaker 2:Do you think that's part of it? Well, I don't know. I'm not sure that's true. They certainly have a proprietary tech stack in that they have knitted everything together themselves and they do not talk publicly about what's in it. But I don't think we know that. They don't use any outside partners and they have a bunch of engineers back at headquarters creating a completely custom thing. I'm not sure that they've ever come out and said that. Certainly, for any of these big chains that are digitally advanced whether it is Wingstop, Chick-fil-A, Starbucks, Chipotle, Sweetgreen all the ones we talk about all the time there's a range there of how much of it is custom that they're doing in-house to how much of it is pulling off the shelf parts and knitting them together. Okay, we had some big outages in the last couple of weeks, and so this article is positing that tech outages may become a digital restaurant's biggest risk to sales. Can you talk a little bit about that?
Speaker 1:We've had two big chains McDonald's, in terms of their international, uk, australia and Hong Kong markets, as well as Panera, have some quite considerable outages. When it comes to McDonald's, they suffered an issue on mobile ordering kiosks and they were down for a day, I think. Panera, this happened on the last week of March, I think they were down for a day, I think. Panera, this happened on the last week of March, I think they were down for a little longer and affected online ordering, their POS, their kiosks, and while we don't necessarily know why it happened, mcdonald's have said it wasn't a cyber security threat, and so I guess what made me think about this one, meredith, was that, because we've got majority of transactions heading towards becoming more digital, this risk, I think, becomes increasingly pertinent, and some folks might. Of transactions heading towards becoming more digital, this risk, I think, becomes increasingly pertinent and some folks might go well, this is the reason we shouldn't do it. We should go back to the old days, right, but we should think back to some of the old days and those systems which perhaps weren't on a cloud system. They were on a closed system. Oftentimes, when you have a location break down in some way, that would require IT maintenance. It would require an IT team. It would take still a lot of time to sometimes get those kind of things fixed, and oftentimes they still need to be connected via things like emails or web access to be able to report them, and that is actually a risk as well, especially when it comes to cyber right, so that also adds a lot of costs and expense. So when I think about the world that we live in today, which seems to have systems more on a cloud-based system, you've got that webbed infrastructure, so in that sense, that wider web is at risk, but part of this is about having a distributed server setup so you can wash that risk across a variety of stores and have a stronger protection in place with processes and appropriate safeguards. That's why, in McDonald's example, it seems it's only affected a few markets as opposed to the entire system.
Speaker 1:One of the things that didn't come up in the actual article but was referenced in the first bite recording was Carissa DeSantis, who's the CTO of Bricks Holdings, and she was coming up with some suggestions for how restaurants need to think about this particular problem, and I wanted to share those with you because I think they're appropriate for everyone. The first one she said was any tech vendor that you're working with. Be sure to ask them for the SLAs in terms of the ways in which they're going to respond in the event of a service interruption. What's their commitment to you as to how quickly they're going to address these issues if these issues show up? That's a really important one. The other piece she mentioned was around having backup servers in place so that you've got an ability to turn your system over to a backup system and to be able to make sure that you're asking your providers about the risk prevention they have in that regard as well. They also talked about having testing procedures in place, and it made me think back to one of the biggest risks back in my days when I was at AMP and we'd obviously have food safety as a key area of concern and we were channeling all the way down the system from vendor to every unit that we'd have in the network, where we would assess the speed and the efficacy of how we'd deal with a potential food safety outbreak. And I think the same thing needs to happen with tech outage risks. Right, we need to have the plans, the processes, the training in place to help our restaurant teams know what to do when, potentially, 40 to 50% have that level of transaction mix at risk. I mean, that's the level of challenge we're talking about as we become increasingly digitized. The other item that Carissa mentioned was about understanding load constraints. I think the best way to think about load constraints is asking ourselves when we get to 50, 60, 70, 80% digital, how will our systems be able to carry that level of load? How are we going to actually manage the level of data flows that are going down to our restaurants and back again from our server farms? Savneet, the CEO over at Par Technology.
Speaker 1:He also pointed out the importance of strong cybersecurity and saying that it's really very much the responsibility of leaders outside of the IT department as well. The way I look at this is that cybercrime typically happens because they look for chinks in the restaurant or tech providers, infrastructure, and one of the easiest ways to find a chink in a restaurant armor is where it opens itself up to the external world, and that means emails, and we all know about the phishing emails where someone tries to tempt you into clicking, or where you have an internet browser or a social media post that potentially tempts you in to clicking on a link, and that is something which an unsuspecting general manager could fall foul for. And so having the appropriate controls in place really protects you, and I think a lot of the bigger chains are clearly going to have those security parameters in place, but that does represent a risk to the smaller chains, the independents out there. So being mindful of what you click, I think is absolutely important, and, of course, the risk here isn't just about lost sales. It's customer frustration and also the customer data risk, and one of the things that Joanna says is that if you don't have the appropriate protections in place, you can be held legally liable, and so I think that is why I think this is one of those biggest risks out there that any digital restaurant leader needs to take really seriously.
Speaker 1:Hi, carl, here Just to interrupt the show briefly to remind you that if you have yet to get your copy of either of the Delivering the Digital Restaurant books, now is the time to get one. If you head to thedigitalrestaurant, you're going to be able to get the best price available. You can also listen to both books with yours truly talking about them on Audible. You can get a copy of Amazon if you'd prefer to order through them, but if you haven't got the books yet, get them. They really are going to transform the way in which you look at the restaurant industry and the way in which technology is disrupting it. Okay, fourth question this week Bojangles and Bicky have come together and Bicky have got Bojangles working with them on the latest CDP efforts. They've obviously got a number of chains they're working with, but we haven't talked about CDPs in a while. What are they and how are they going to help Bojangles in this example?
Speaker 2:I thought this was interesting news because we did talk to Abhinav Kapoor in our second book, Delivering the Digital Restaurant the Path to Digital Maturity, and we did an extended comparison. What even is a CDP and why do you need one instead of a loyalty program? And how does it compare to a CRM? And I think, for anyone who is confused by all of those letters, please see the book. We'll get you a detailed, deep dive in there.
Speaker 2:Now a CDP, or customer data platform. What it does is it stitches together customer data from various sources and puts it all into one place. So in a restaurant's case, that might be something like the delivery channel or multiple delivery channels. It might be something like the POS, might be something like the loyalty program, the online reservation system. There might be a bunch of different places where data is coming from. The loyalty program at best maybe it's going to cover 40% of your consumers and 80% of your sales. At best, You've got to bribe people to get that data. Meanwhile, you might be getting other data in through third-party channels. Or maybe you're collecting a lot of data on your first party online ordering system without even having a loyalty program, and it's very hard to do anything with that information unless you can understand it holistically across all the different channels and really know every single consumer and what they're doing. Otherwise you'll draw wrong conclusions based on, say, heavily skewed data of your loyal consumer who comes much more often and spends a lot more money. So that is in a nutshell what a CDP is.
Speaker 2:I think what surprised me here is that a QSR is interested in a CDP. I naturally think, oh, it would be, for maybe a dine-in business that's really got lots of different sources of data, like some coming from OpenTable and some coming from delivery and some coming from loyalty they would really need a CDP. And here we have a QSR saying that they need a CDP. Now they're probably going to have a loyalty program. Maybe they're starting to have kiosks inside the restaurant and that's giving them some data. Maybe they're getting past third-party data from the big marketplaces. So there might be different sources of information.
Speaker 2:But it did surprise me that it turns out every restaurant apparently needs this. Now, of course, you know me, Carl. I think that if you had a holistic system that just combined everything to begin with, you wouldn't need a CDP because it would just be part of what you're doing thing to begin with, you wouldn't need a CDP because it would just be part of what you're doing. But that's not where restaurants are today. Restaurants have a host of complex, different pieces of everything trying to help them accomplish what they're setting out to do, and someone's got to stitch all that together on the back end.
Speaker 1:Do you think that it helps by having digital-only channels, so that you don't have to bring all those multiple channels together? Because of that, because part of the challenge is is that we've got this evolution over time of all these additional channels coming together, and they probably all come together through different features and functions and different providers. Yeah, totally.
Speaker 2:Each channel as it digitizes digitizes down a separate path, right like reservations used to be via phone, right, and now they come via online and maybe you get some OpenTable and some from Resi and some from Talk and you've got to combine those together. Meanwhile, the transactions in restaurant are digitizing and you're starting to get mobile order ahead in kiosks, but those two are totally different, unrelated digitization journeys, and so a lot of this is absolutely as you're describing. We're going through this evolution as an industry and each type or source of customer is going through its own separate evolution, and that creates a bit of a mess on the backend. Last question, kind of a bummer question chargebacks. I don't know, is this really how we want to end? I hope you have some good news in this for us. There's a lot of chargebacks, a lot of fraud going on, particularly on third-party marketplaces. Tell us about what's happening and what restaurants can do about it.
Speaker 1:Yeah, probably the reason we left it till last.
Speaker 1:I think it's fair to say I'm not sure I've got great news, but I haven't heard this term friendly fraud before, so we'll get into that. I think Joe Koskowski, for Restaurant Business, has written one of the best articles out there around this subject that I've seen for quite a while, and he was highlighting the struggles, quite honestly, that restaurants are having when it comes to delivery chargebacks and the contentious issue that's really biting into restaurants' already slim margins. And I thought it'd be worth sharing some of the quotes from the article, and one of them was referencing a restaurant owner for Dollar Cafe in Morrow, georgia, a guy called Corey Lau, and he basically says he's facing hundreds of dollars in charges every single month from DoorDash, uber, eats, grubhub for undelivered orders that he does not attribute to his team but actually to fraudulent actions from delivery drivers. And I think it really underscores a broader industry concern here, because at least in the article it was suggested that somewhere between 2.5% to 3% of operators' total revenue is being ensnared in these disputes with delivery providers, which translates to Wait.
Speaker 2:stop 2.5% to 3% of total revenue, which means if you're like a 30% delivery business, we're talking about like 9% to 10% of your revenue, right?
Speaker 1:That's right and that's why for him he's saying, this translates roughly to about a 20% dent in delivery profits right, so it's a significant impact. And he references how Lau looks at his books every Monday and puts aside a number of hours to contest with the delivery providers. In fact, he actually even looked into developing software that can automate the dispute process and he learned that the delivery apps aren't sharing the APIs for their refund data and actually it would cost him something like $18,000 to hire someone to reverse engineer a solution. Now, last time we spoke about some of the providers out there that are trying to help restaurants in that space. Priyam Saraswat, the CEO of Vooch, was quoted in the article because he was saying you know, the onus ultimately is on the operator to make sure that they're filing their dispute in the proper way. Because the process to file is so complicated, so time consuming, most of the restaurant brands just end up not filing it.
Speaker 2:That sounds like a very guilty until proven innocent situation. Oh, we're withholding your money, you let us know.
Speaker 1:There's actually this thing called friendly fraud as well. He quotes in the article a survey result published in the last week by fraud protection company SIFT that 42% of Gen Zers and 22% of millennials have admitted to requesting a refund for an online purchase even though they received the item. Hence the phrase friendly fraud. So we've always positioned this as well. It's either the restaurant not correctly fulfilling the order. It's either the delivery driver not correctly checking the order or taking the wrong order. We've never really spoken about it in terms of the customer playing a game with this as well.
Speaker 1:And when you then look further into the survey and we find at least relative to the first quarter of 2023, chargeback rates on food and delivery orders have increased by 31%, we've got a serious issue on our hands, right, and of course, I'm sure the legal friends out there are looking as to how they can challenge the liability aspects to this, and I'm not sure how many restaurants are truly going to invest in that space.
Speaker 1:But this is a cumbersome process and it's going to become an increasing problem, I think, given the fact that we're seeing margins become even thinner given the inflationary environments we've talked about. So I don't really have any rays of light on this one, meredith. We have heard stories of some folks taking photos of every order, but you'd need to have some form of automated system so that you don't create a real problem for your delivery channel in terms of the speed and efficacy of it. But there does seem to be some opportunity here to really try and stem this one in the bud before it becomes an issue, because ultimately these costs are only going to increase the cost of delivery for consumers, and that is going to be a bad thing for everyone.
Speaker 2:Yeah, it's like they're shrinking the restaurant industry. Now, right, we used to be worried about theft and inventory and we were constantly counting things in the back to make sure that no one was walking off with the meat. But now I feel like that process has been nailed. We all know how to count inventory. There's a lot of automation around that, there's a lot of software to help support it, and the problem is on the consumer end. You know, this hasn't really been a thing that we've experienced in restaurants to date. Right, maybe, like when everything was very cash, maybe you had some employees who would make fraudulent entries under the POS to take the cash out, but the consumer doing it, that's new, and certainly a third party doing it is totally new.
Speaker 1:Absolutely. I think we should leave it there for this week, meredith, but I would love to hear from the restaurant operators that listen in to us for their best practices. How are they handling this issue? What are they doing that they are finding is working? And also, what are technology providers doing to try and improve this? We spoke of Boosh, we spoke about Loop AI last time. What ways do you think we need to do better in this space? And, similarly, if you are in Arizona, are you going to get a driverless delivery sometime soon? Maybe that's the answer, right. Maybe that removes one part of the problem the delivery driver. It's on the operator to make sure they put the right item in the trunk of the car. Who knows? Please put your questions, your ideas for future articles in the comments below and, as always, thanks for listening. The Digital Restaurant Podcast is available for you to follow and subscribe. Wherever you listen to your podcasts, watch us, rate us and subscribe to the Digital Restaurant on YouTube and follow along on all our social media digital restaurant channels. Thanks for listening.
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