In the mid-1970s a pair of fast-growing restaurant chains took the first steps toward efficiently tracking customer behavior with the introduction of what would become the industry’s initial POS systems. Kicking off a technological revolution that today is accelerating at a dizzying pace, both recognized the competitive advantage that recording and analyzing customer transaction data could have.
McDonald’s partnered with IBM to develop the first electronic cash register, which sent orders to the kitchen and provided customers with a clean receipt that included price, taxes and what was ordered.
Around the same time, Red Lobster reached out to AMF Bowling Co. to develop a customized system to bring its sophisticated electronic scoring technology into the restaurant environment to essentially do the same thing. As former longtime Red Lobster CEO Joe Lee, who served as the GM of the iconic brand’s first restaurant once recalled in an Orlando Business Journal interview, “When mini-computers came out, I had the notion that `wouldn’t it be great to have a computer in every restaurant collecting all this information,’ and it would help us understand which seafood was selling and not selling.”
At the time of these innovations, relatively simple by today’s standards, most restaurants did not accept credit cards through the POS, they had to process via phone, which was a relatively time-consuming process that slowed the system down. In addition to helping with inventory and supply planning by providing sales data, these initial systems helped restaurant owners determine how much cash should remain on hand in the register vs. being deposited in the bank.
Throughout the next four decades, POS systems proliferated, became increasingly sophisticated, and essentially dominated the restaurant technology landscape. Any innovation in back-of-house management systems or customer facing technology was subject to its ability to interface with existing POS infrastructures. POS vendors at first controlled their territory with an iron fist, each limiting integration to a few select ‘partners’ while continuing to lock down their often-pricey per-restaurant service models. While some of the largest players, including pioneers such as McDonald’s and Red Lobster, were able to develop their own proprietary tech infrastructures and write their own terms of engagement with the POS giants, most industry companies found themselves with limited choices between a few large vendors.
The rise of cloud-based technology finally began to challenge the legacy POS-dominated norms over the past 15 years or so, but POS owners doubled down on their efforts to maintain the status quo, making it difficult and expensive for most operators to break free. In the past few years, this has finally changed, and dramatically. Digital, cloud-based solutions are changing how owners operate their restaurants, capture the analytics needed to make sound business decisions, and perhaps most importantly, how they communicate and connect with customers in real time.
The seismic shifts the digital revolution brought to the restaurant business were well underway when the global COVID 19 pandemic hit in 2020. The pandemic accelerated these changes as restaurants of all stripes were forced into implementing delivery and takeout technology as a matter of survival. Even operators who had no interest in offering third-party delivery or refiguring their operations to accommodate takeout were left with no choice. Forced closures and pandemic-related restrictions triggered a mad scramble for restaurants across all segments to adapt to the changing realities.
Many operators learned that their existing IT systems were incompatible with off- premise software platforms, leading to complicated in-restaurant ordering setups. Rather than enter takeout, online or 3rd party delivery orders through the existing POS system, a separate tablet was required for different partners and order channels, leading to a condition commonly referred to as “tablet hell.” Frustrated restaurant teams, short-staffed, now masked and under more pressure than ever, often ignored certain devices or shut them off during busy periods. While the amount of lost sales will never be known, it amounted to a stark example of how important tech stack integration is in today’s ever-changing environment.
Restaurant operators that have embraced the information technology paradigm shift now understand that technology is not just a cost center, but a necessity to building sales. Without proper integration and future planning, the lost revenue opportunities are enormous. Technology today is a sales enabler, from mining customer decision making to delivering efficient, quality meals. The smart operators understand this and are recovering much faster, some exceeding pre-COVID sales levels. The operators reluctant to invest in technology and that cling to old models of doing business are likely to become road kill along the superhighway of change.