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R&IEditorial Archives2005September 15 — Special Report

Star Tech
Foodservice opens its doors to technological innovation.

Technologies available to foodservice sound like a bowl of alphabet soup. From POS and Wi-Fi to KDS and more, the variety and complexity of high-tech applications can be daunting. But after slowly discovering that these and other technologies do not require advanced degrees to implement and that they can improve operations and guest satisfaction, foodservice is putting innovation to work.

As the most familiar technology, point-of-sale (POS) platforms and software that complete and track transactions continue to receive the greatest attention. North American foodservice operators spent $2.9 billion on POS hardware, software and services last year, according to a study released by IHL Consulting Group, Franklin, Tenn. That was an 11% increase over 2003, and POS spending is expected to increase again this year, according to IHL.

“Foodservice operators invest in new touch-screen terminals, which are constantly upgraded because the environment in which they are used is so harsh,” says IHL President Greg Buzek. “Additionally, a manager who used to require a new PC is now able to work through a networked register or with an older PC because Web-based applications are hosted outside the store.”

Spartanburg, S.C.-based Denny’s new POS system helps monitor guest satisfaction in its 553 company-owned units. Data alert management to changes in business conditions that may require price changes or other adjustments that can be done centrally.

Buzek notes that Louisville, Ky.-based Yum! Brands—parent of Taco Bell, KFC and Pizza Hut—has consolidated POS reporting to a central system and is creating synergies within its network of franchisees. “The biggest problem for franchisors is that they are not able to dictate technology to franchisees unless the franchisor pays for it,” Buzek says.

Cashing Out
POS systems were developed as improvements on cash registers but today many operators have begun to phase out cash transactions. San Diego-based Jack in the Box, Oak Brook, Ill.-based McDonald’s and Dublin, Ohio-based Wendy’s have reported sales increases as a result of introducing credit-card-acceptance systems, according to a 2004 information technology (IT) report from Wachovia Securities, Charlotte, N.C. By the end of 2004, Wendy’s offered electronic-payment options in almost all U.S. stores and McDonald’s planned to offer the service in 58% of its U.S. locations.

    Number of McDonald’s restaurants that offer wireless Internet access, or Wi-Fi, worldwide.

Michael L. Harshfield—former director of U.S. IT deployment for McDonald’s—says the chain has focused U.S. investments on cashless payment and high-speed Wi-Fi (wireless Internet) for customers.

Further advances in cashless-payment systems are on the horizon, including contactless readers. Bailey Co., a Golden, Colo.-based operator of 66 franchised Arby’s and two Good Times locations, uses such a system. “Instead of giving a credit or debit card to an employee, the guest passes the card in front of the reader. Our counter people will never see the number,” says Bailey Co. controller Jeff Gordan.

“We’re in the process of installing the technology in the drive-thru, where there’s going to be tremendous savings,” he says. “There will be no more passing cards between cars and the drive-up window. We’re pretty excited about that.”

Columbus, Ohio-based White Castle’s drive-thru technology handles cashless payments and activates gift cards. “We don’t want our team members to handle gift cards, so the customer can activate a card in the drive-thru,” says Don Long, White Castle senior director of information services and technology.

Courting the Consumer
High-speed telephone and Internet connections open doors to innovations that benefit both operators and customers.

“Companies are addressing problems with takeout and drive-thru by processing orders at a central facility,” says Michael Allenson, principal with Technomic Inc., Chicago.

McDonald’s this spring announced that an undisclosed number of its stores were testing outsourced drive-thru order-taking. The voice repeating an order to a customer may belong to a person at a central call center in North Dakota, who then electronically relays the order to the restaurant. What’s being measured is whether off-site order-takers—who aren’t distracted by the need to make fries or count change—can reduce the number of incorrectly entered orders, McDonald’s CFO Matthew Paull told analysts in March.

Wi-Fi Internet connections are one way McDonald’s and others are bringing new technologies into dining rooms, but other applications are being looked at as well. At a new restaurant near its Oak Brook, Ill., headquarters, McDonald’s has installed kiosks where customers pay to burn music CDs or download cellphone ring tones.

Bailey Co.’s Gordan is a strong believer in the Internet’s contributions to managing a foodservice operation. “We have a networked back-office system in our restaurants and can get data in half-hour increments,” he says. “We’ve had ways of communicating before but with a network we can gather data easily.”

Gordan says using the Internet for processing payments reduces approval time from 10 seconds to two or three. Payroll also is more efficient because employee documents can be scanned and digitized. “We’re also working on an e-mail payroll system, so there is a potential for tremendous cost savings,” he says.

Personalized Communication
Loyalty programs that build an electronic database of frequent customers’ e-mail addresses are one way for operators to keep in touch with guests, test promotions and provide incentives for future visits.

Mass communication has its limits, however, according to Technomic’s Allenson. “Loyalty programs are important,” he says. “But what chain restaurants are not doing is fully using data to figure out what each individual customer wants and needs in order to personalize [communications].”

Damon’s Grill has had success with e-mail marketing and is considering a text-message program.

The spread of cellphones has spawned other marketing capabilities. Customers use their phones to make reservations directly or through call centers. Restaurants then can capture cellphone numbers and use them—with guest approval—for text-message communications such as menu specials or discount promotions.

Columbus, Ohio-based Damon’s Grill has had success with its e-mail marketing program, according to Jeff Miller, senior field marketing manager. “We’re building a nationwide database of guests who have opted into the program,” he says. “We’re also looking at text messaging but we haven’t found a company that will match our concept’s goals on a national basis.”

Labor-intensive Solutions
Labor efficiency is an area where restaurants may not be capitalizing fully on technology, says Andy Sonntag, chief operating officer at a Louisville, Ky.-based technology provider.

“Restaurants measure themselves against labor and food costs. If you take a look at labor efficiency as a metric of how a restaurant is performing, that’s not the whole story,” he says. For example, employees may be performing well but if the kitchen struggles to keep up and customers are turned away, that’s false efficiency. If the two systems work in tandem, operations can be adjusted to create a more functional work experience, Sonntag explains.

In the back of the house, kitchen-display systems (KDS) are becoming a choice of full-service chains. In addition to tracking unit-level performance, productivity is monitored at prep stations. The data help managers determine staffing levels, discover deficiencies in production and handle food-preparation scheduling.

    Percent of operators in 2002 who said the primary use for computers in their restaurant was to calculate profit-and-loss data.
    (National Restaurant Association, “Technology Trends in Restaurant Operations,” 2002)

T.G.I. Friday’s is a KDS veteran. The Carrollton, Texas-based casual-dining chain first used such systems in 1994. Today, its 528 locations operate not only paperless kitchens but also rely on a proprietary back-of-the-house system for inventory and labor. Similar technology is in use at Applebee’s, Long John Silver’s and Chili’s Grill & Bar.

According to analysis by Wachovia, the installation of KDS capabilities throughout Overland Park, Kan.-based Applebee’s 1,700 units during the past two years cost the company approximately $7,000 per store. Last year management indicated that guest-ticket times were reduced 13%, according to the report. Overall, the company realized a 4% increase in franchisee income primarily due to investment in IT.

Last August, Yum! Brands’ KFC and Long John Silver’s chains began using KDS software to watch each kitchen station, keeping track of orders and monitoring service speed and recoverability.

Dallas-based Brinker International has incorporated kitchen-management technology that allows its restaurants to customize ticket flow and provides access to production information to evaluate cook station and food timing in more than 1,000 Chili’s Grill & Bar locations and in company-owned Corner Bakery Cafe restaurants. Brinker’s On The Border Mexican Grill & Cantina’s 131 restaurants will implement the kitchen solution this fall.

Sonntag says successful operators must understand that the power of technology lies in the way restaurants choose to connect POS, kitchen-management, table-management, reservations and other inventory systems that currently operate independently.

Something New on the Menu
From order technology to training, companies use digital and voice solutions to speed operations.

Implementing digital menu boards and merchandising at McDonald’s approximately five years ago was an involved process of “evaluating digital drive-thru menu boards, internal screens with advertising/ news/sports/weather information, and projection systems instead of static clings on the windows,” says Michael L. Harshfield, former director of U.S. IT deployment for Oak Brook, Ill.-based McDonald’s Corp. “The internal digital menu board installation took on the largest portion of the project; plasma screens replaced traditional menu boards at more than 300 locations.”

Automated boards offered several advantages. Units no longer had to manually change the menus and moving images of menu options boosted sales, says Harshfield.

“Ultimately, though, McDonald’s decided that the current menu board, which is comprised of plastic and fluorescent lighting, was the better option for the chain,” he says.

Today, the plasma screens remain only in the Smithsonian Air & Space Museum, and at units on 42nd Street in New York City and in Newark Airport.

In addition to ordering technology, McDonald’s is taking training one step further by using Web-based e-learning to teach employees about serving food.

Voice synthesis technology also can be used to help workers learn English. “Voice recognition and voice synthesis messages transferred into the headset can teach employees English when they’re not performing core job functions,” says Daren Haas, director of marketing at a Poway, Calif.-based technology provider.

McDonald’s also is expanding the use of voice synthesis to send orders to kitchen workers. Haas says that eliminating monitors in the kitchen helps employees assemble orders more quickly and more accurately.

Down the line, voice synthesized audible prompts also will be available to remind workers to wash their hands or perform other daily tasks.

Weather or Not
Bad weather can mean lost sales. But while technologies to control weather don’t exist—at least not yet— innovations that predict or harness nature are finding uses in the industry.

San Francisco-based Jamba Juice, for example, uses technology that analyzes weather forecasts to “optimize product procurement, promotional-campaign timing, labor allocation and speed of service,” says Michael Andrews, director of strategy and financial planning.

Following the same weather vein, Vancouver, Wash.-based The Holland Inc., parent of the 39-store Burgerville U.S.A. and two-unit Noodlin’ chains—is throwing caution to the wind, literally. Last month it announced a commitment to use wind-generated electricity to power the two chains and its headquarters.

The company’s investment in wind power comes at a 10% to 20% premium over traditional electricity costs, says Mick Shutt, spokesman for a wind-power provider. However, it shows The Holland’s commitment to use renewable energy and sets an example for other companies, he says.

“When we first met with them I was impressed by how committed they are,” he says. “They believe they will set an example others will follow.”

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