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R&IEditorial Archives2002 — May 1 — Special Report

Generation Next
Chief information officers are bringing foodservice technology use into the 21st century

John Wooley admits he doesn’t understand how most computer technology works and adds he isn’t interested in learning. What the chairman and CEO of the Austin, Texas-based Schlotzsky’s Deli chain says he wants is computer-based information technology (IT) that’s as easy to use as television.

“Television is an amazing technology. I can sit on my couch and watch the Olympics from anywhere in the world,” he says. “And when the thing doesn’t work, I throw it away and buy another. What we need is for our computers to be like our television sets.”

If it only were so simple. The need to understand IT and procure the right systems for his 675-unit chain used to worry him, but no longer. Now when Wooley sees a magazine article or advertisement for new technology applications, he just tears it out and tapes it to the window of Robin Hanna’s office. The chain’s chief information officer (CIO), brought in a year ago from a major computer company, Hanna handles the IT decisions with Wooley’s trust and confidence.

“A [technology] salesman will sell you a tire for a bicycle and an engine for a car and a wing off an airplane and an oar from a boat and you think it all will fit together and work. And it doesn’t,” Wooley says. “With Robin’s background, it has been fun for me to say, ‘Here’s my laundry list of things I’ve been wanting to do.’ She can take the pieces, organize them and put it together.”

More players
Because of past piecemeal approaches to technology, many chains now find themselves sorting through a legacy of outdated and incompatible IT systems.

By and large, foodservice has been a late adapter of information technology. During the late ’90s restaurant boom, management attention and resources were devoted more to unit growth than to operational efficiencies. The most common technology upgrade was in point-of-sale (POS) systems, many of which may never have worked satisfactorily or since have become outmoded. And some chains that tried to add technology on the cheap saw their hardware or software providers vaporize in the dot-com collapse.

The Y2K scare caused many chains to upgrade hardware and software applications. Now that the economy is tighter, these chains are bringing in tech-smart executives—most from outside foodservice—to assess just what technology they have, what they can do with it and what they will need to add to build their business as efficiently as possible.

“Four or five years ago, the saying in the industry was: ‘Yesterday’s technology tomorrow,’” says Howard Jenkins, CIO of Englewood, Colo.-based Red Robin. “Many restaurant companies then were struggling with [antiquated] POS systems, they had no communication [between corporate and the field] and no database management. That’s changing, and I think our shop has been among the leaders in deploying new technologies.”

Red Robin has junked what Jenkins calls a “hard-to-use, cumbersome and expensive” POS system (replacing it with one with a touch-screen interface), overhauled the back-office system that monitors food and labor costs and profit-and-loss (P&L) calculations, and put in place a “world-class data warehouse” that collects data on sales, sales mix, labor, human resources (such as information on new hires) and invoices from the stores.

That’s good, but information still is sent to the corporate center by slow dial-up connections. Red Robin’s next step, Jenkins says, is to create a wide-area network (WAN) that will result in an always-on connection between stores and headquarters. Data will flow from the stores; analysis of that data can flow back to managers.

“We believe that reducing some of the labor in the back office allows managers to improve sales by being out front with the guests more often and they just become more productive,” Jenkins says, echoing a goal shared by all multiunit operations.

Accomplishing that task may be easier now than it would have been several years ago because both the technology and management’s willingness to invest in it have improved. “Some of the hardware and software companies have started to realize that [foodservice] is a huge business,” Jenkins says. “There are now more [technology] players starting to gear things to the restaurant business.”

Wake-up call
One signal that the foodservice industry is committed to investing in IT has been the rising number of CIOs or directors of information technology who report directly to top management.

“I think you get the leadership you pay for,” says Teri Robinson, CIO for Dallas-based Metromedia Restaurant Group, parent of the Bennigan’s, Steak and Ale, Ponderosa and Bonanza chains. “If you don’t have IT at a level reporting to the CEO, you tend to get back-room, cost-oriented solutions, not the sorts of technologies that are going to be focused on moving your business forward. I do see restaurant companies, especially the larger chains, waking up to that.”

When Robinson joined as CIO 18 months ago, Metromedia, too, had an electronic warehouse collecting sales and guest-count data, but she says the company “wasn’t taking that information and making it powerful for operators. At the end of the day it’s nice to have data in the support center, but what really makes a difference is when we can make it into intelligence for the operators.”

Robinson and Metromedia developed “Dashboard,” which daily analyzes sales and traffic data for all company-owned stores for each concept. “It looks at business from yesterday, our trends and what we plan to do, then tells us where we’re going to land if current trends continue,” Robinson says. “So it’s much more than just saying, OK, this is what you did yesterday. It gives [corporate and unit management] a sense of where trends are taking the company, which is something the POS system doesn’t tell you. It’s easy to get lost in the day-to-day of ‘How did I do yesterday?’”

Franchisees have asked for access to similar data and Metromedia is working to make that possible.

As technology support functions become more complex, some chains have opted to outsource some tech functions to third-party providers. Metromedia has taken that to the extreme, completely outsourcing not only IT but its financial, payroll, receivables and inventory functions as well.

“Everything but strategy” has been outsourced, Robinson says, claiming the approach “gives us a chance to focus on the business of running restaurants and not on the behind-the-scenes [support systems] necessary to operate restaurants.

“I don’t have to worry about whether everyone showed up to work on the IT help desk. Now I can focus on where we want the company to go. I think [outsourcing] is where things are headed. It doesn’t make sense to staff this all yourself.”

The ROI challenge
Champps Entertainment had 95% of its tech systems outsourced to a single application service provider when Jeff Gengler joined the Englewood, Colo.-based casual-dining chain as director of information technology in December. He left those functions outsourced but spread them among several providers to ensure the company gets the best service for each function (e-mail, Internet and network access, financial, etc.), and he standardized all computerized systems on the same platform.

“When I came in, there were a few different variations of the way things were set up. It was an IT challenge that was killing the tech support crew and taking their time,” Gengler says. “Now we’ve standardized PCs, servers, the network and all setups for applications in all stores.”

Standardization and the installation of a frame-relay network (which facilitates high-speed Internet communication) at the computer system’s center will make additional operations improvements possible. “For example, we’re doing credit-card transactions manually [in stores] through dial-up,” Gengler says. Processing those transactions through Champps’ own network not only is faster, it saves 8.5 cents per transaction. “Right there you’re recovering what you paid for the network.”

Demonstrating tangible returns on technology investments can be CIOs’ toughest challenge. “It’s always going to be hard to find the hidden savings, but I’m trying to do that,” says Gengler. “I’m saying: ‘Hey, we’re going to spend X amount of money but we’re going to make it up in X months or years. But I’m lucky, because this organization is pretty tech savvy at the top.’”

Metromedia is preparing to add a second PC to each of its corporate Bennigan’s units so that a single computer won’t have to handle POS data and back-office financial applications. “The ROI on that is kind of tough,” says Robinson. “The return is not going to be immediate. I’m not going to [trim] a point in food cost or get a point in labor, but the company understands that we’re laying the foundation for many things that will provide great returns.”

One such plan is to sell gift cards at Bennigan’s, a project about to go into test.

Red Robin’s early technology decisions were “intuitive” rather than ROI-driven, Jenkins says. “But now, as we start to catch up with the technology that’s out there, the company is paying more attention to what kind of returns to expect as we deploy new features and functions.”

Cool perks
The CIO’s central duty goes beyond grasping technology to understanding what restaurants need to succeed, says Schlotzsky’s Hanna. She, too, first standardized the hardware and software platforms for the chain’s POS system, then worked a deal with a supplier that gave each unit a free PC, often the operation’s first one. With that came the need to explain to managers and operators why changes were being made.

“Many [back-office] processes are still manual and take a lot of hours out of a unit manager’s day—when they need to be spending time with customers or making sandwiches,” Hanna says. “Our job is to teach operators that technology is their friend, that they don’t have to be afraid of it and that these changes will help them in the long run.”

Without a PC, the reports each unit needs to run can require as many as 50 hours a week, Wooley says. “You can safely assume that no unit manager was doing that. Having a POS system and a computer in the store enables fundamental calculations to be performed. Operators then spend only a few hours interpreting data and acting on them instead of becoming green-eye-shade accountants.”

With a basic computerized platform in place, Hanna is leading Schlotzsky’s to adopt other new technologies. Order-confirmation boards that increase speed and efficiency have been installed in drive-thrus at its Austin stores. Self-serve kiosks for automated in-store ordering also are in test.

An even bigger step is putting additional PCs with high-speed broadband Internet connections in stores, allowing customers to read online newspapers, search the Web or play games. These “Cool Deli Stations” (named for the chain’s Web site) are in selected Austin stores. Internet access is free.

“It’s well worth the investment,” Wooley says, noting that afternoon business has increased in the cyber-delis. “Computers don’t cost that much any more.”

By year-end, Schlotzksy’s training and operations manuals as well as all nutrition information will be available through its network. “We won’t ship them any more paper,” Wooley says.

A substantial side benefit, he adds, is that in-store technology attracts better workers. “In filling cashier positions, we’ve discovered that it’s difficult to find the sharp young person you want who has good verbal skills and personality,” Wooley says. “But if you have cutting-edge technology that they can get their hands on in the store, they’re more interested in working here.

“It’s not unusual to see an employee after work playing on the Cool Deli Station. It’s a perk from their point of view.”

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