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Fri 5th Aug 2022 - Friday Opinion
Subjects: The rise of the self-service kiosk, planning for tough times, playing the long game 
Authors: Glynn Davis, Ann Elliott, Sarah Travell

The rise of the self-service kiosk by Glynn Davis

Last month was the 20th anniversary of Argos trialing interactive self-service kiosks in 15 of its stores to enable shoppers to avoid the queues. They were pretty clunky, with interfaces that were far from intuitive, and they did not prove to be a breakout success for the retailer. They certainly did not suggest that hospitality operators should jump in and follow Argos’ lead by introducing such technology into restaurants.

Healthy food concept Tossed was an early adopter of the kiosk in the foodservice sector some years later when it took the form of compact tablets rather than the pre-iPhone, arcade machine-looking boxes that had been employed by Argos when the technology was very much embryonic. The expectation at Tossed was the kiosks would be removed over time as people migrated to using their smartphones to peruse the Tossed menu and place their orders of salad bowls.

This has not been the way things have played out and the kiosks remain a key feature in all of Tossed outlets and the model it employed is now being replicated across the hospitality industry as the kiosk seems to have finally come of age. Certainly my children are much more at ease using kiosks in McDonald’s for various reasons including not being pressured into making quick decisions when at the frenzied counter and the ability to scroll down the menu options (even though they seem to always choose the same things).

Roger Wade, founder of Boxpark, was recently bemoaning the introduction of kiosk technology into McDonald’s when he suggested he missed the buzz of face-to-face customer service when popping in for a burger. This is exactly what my children are happy to avoid and they are clearly not alone. As many as 23% of people enjoy kiosks because they do not have to interact with staff, according to Vita Mojo. My pair of teenagers also happily sit alongside the 52% who like kiosks for menu browsing and also the 46% who like the fact they remove the need to queue.

When factoring in these various positives, it is no surprise usage of kiosks has been on an incredible growth trajectory. In the US, BurgerFi found each of its kiosks captured on average 133 orders per day, which equated to around three out of every four transactions. It’s a similar scenario at Shake Shack where more than 75% of sales come from its kiosks, and the digital channels, where the technology is available. The company has stated its commitment to invest further in the roll-out.

As well as the customer service appeal, the key driver of kiosk adoption by restaurants is the economic benefits. For starters, the survey found 61% of people would spend more via kiosks, with this rising to 80% for Generation Z and 90% for millennials. I’ve seen it first hand with my children throwing in that impulse purchase of a McFlurry. This has also been the case at Leon – where the introduction of the devices throughout its estate has been transformational – with average order values increasing 12-15%. These figures are exceeded at other operators when cleverly deploying recommendations of side orders or drinks. 

But most telling on the financials is the ability to reduce staffing costs when implementing kiosks. At Leon, it typically had four to six people working on the tills but this has been reduced to two, which has had a dramatic impact on the running costs of each unit. It is for these economic and efficiency reasons that Itsu is currently rolling out kiosks. With the relentless focus on cost and efficiency of Itsu founder Julian Metcalfe, it is no surprise his gaze has alighted on the kiosk and the important role they can play in ensuring the future success of his business.

It might have been retailer Argos that tentatively set the kiosk ball rolling two decades back but it looks like it will be the quick service restaurant and fast casual dining brands that are going to really leverage the value from kiosks in the years ahead as they enjoy myriad benefits from the device.
Glynn Davis is a leading commentator on retail trends

Planning for tough times by Ann Elliott

If the average casual dining guest is going to be hit by an increase of £500 in their monthly utility bills in September versus, say, February of this year, then these guests are inevitably going to dramatically reduce their consumer spending.

This will include a radical reduction both in their spending on eating and drinking out occasions and in their visits to pubs and restaurants. Footfall will slump. Price increases, which in turn increase spend per head, will only worsen the situation. Like-for-like sales will no longer be driven by spend per head increases. Profitability will fall and many companies will go out of business.

This may sound like an extreme doomsday scenario but planning for this make sense – if its better, then great. If not, then action will have been taken to protect the business from going under.

So what would I do if I were a casual dining operator right now?

* Improve customer value. This doesn't mean re-introducing discounts but rather looking at deals – set price lunch for £x, set price dinner for £y, free drinks for booking ahead, set dishes for under £10 drink included etc. Customers will want to know exactly how much a meal is going to cost before they book or go. They do not want bill shock – they want to be in control of how much they spend. Pricing will have to be very nuanced. Take footfall over increased spend per head.

* Ensure every part of the customer journey is exceptional and overdelivers versus expectations – from online booking through to departure. It’s worth objectively reviewing every element of the journey personally, making sure it really works for the guest and takes hassle out for everyone.

* Value every customer. Keeping existing guests is going to be absolutely vital in the months to come – every customer needs to leave a venue feeling much more than just “satisfied”. The whole team need to be obsessed with delivering happiness for each guest – perhaps it might be useful to explore how (and where) service levels could be significantly elevated to create brilliant experiences that the customer wants and needs.

* Communicate with customers. Understanding their world and the pressures they face, and responding to them, is essential. Collecting each customer's email addresses and communicating with them every couple of weeks, and proactively in response to what's happening in the world, is just as essential. As is social. Be on their side.

* Take out unnecessary cost. If footfall decreases then labour hours need to decrease in proportion. Not every hour of trading will be profitable – remove those that aren't. Do not automatically accept supplier increases – push back. Simplify dishes and kitchen processes. Take out unnecessary costs – like putting candles on tables when it's 35 degrees outside. Demand more efficiencies from tech providers. Challenge every expense – if it doesn't add value to the guest, or improve the lives of those that work for you then take it out.

* Bake in today's costs for items that are likely to increase price in the near future – utilities being the main one.

* Keep cash. Many operators retained cash during covid (with the decrease of VAT) and are holding on to it. Now is not the time to spend even though it might be the right time to buy – unless of course, a purchase is profit and cash flow enhancing, immediately.

* Focus on food. Keep quality high and presentation exceptional. Deliver with panache and be proud of what's served to guests. They will be having a tough time – make sure if they do come out to eat, their food is better than they remember and higher than their expectations.

Life is about to become much more difficult for our guests in about four weeks' time. We have to be prepared.
Ann Elliott is a hospitality consultant

Playing the long game by Sarah Travell

Talking to an operator earlier this week, he put forward the quite reasonable question that with everything that is impacting the UK’s hospitality industry at the moment, and with more headwinds on the horizon, why would anyone look to launch anything new in this sector or even enter it? Looking over recent headlines in regards to the cost-of-living, inflationary pressures and supply chain issues, you can see where he was coming from. But, and it is a big but, despite all of those, the hospitality sector remains a huge draw for entrepreneurs, new businesses and new ideas. Thankfully, that insatiable appetite to try new things remains, throwing up a plethora of new concepts and variations on long-established formats, all with an eye on being part of the industry for years to come. 

A fine example of this is the Propel Premium database of multi-site companies, which has now grown to include 2,572 companies, which operate 66,223 sites. An additional 43 companies, which operate 217 sites between them, were added during July 2022, all with a point to prove and all keen to push the sector forward in their own way. And some did so in the eye of the covid storm. Elsewhere, the south London coffee roaster concept founded by Jack Howells, opened its first cafe, in Herne Hill, in 2021. The business has now expanded its offering with a second cafe, at 361 Brockley Road, in Deptford. Others launched just before the pandemic hit but have not been discouraged. Indian street food concept My Delhi, which is owned by Shah and Elahi Amin, opened its first outlet in Newcastle’s Clayton Street in May 2019, and has recently opened a second site, adjacent to the Winter Gardens, in Sunderland. The concept serves authentic Indian street food inspired by the streets and markets of Delhi. Berkshire brewer and retailer A Hoppy Place, which was founded in 2019 by husband-and-wife team Naomi and Dave Hayward, operates as a craft beer micropub and bottle shop in Windsor. The business opened a second site in June, which is in a 1,511 square-foot unit in Maidenhead offering space for 42 seated and 40 standing inside and 24 seated outside.

Despite central London finding it harder to recover than most other areas, it continues to draw in new operators. The Salad Project, the all-day dining concept that launched in the capital last year, in The Fruit & Wool Exchange in Spitalfields, was founded by friends Florian de Chezelles and James Dare. The company is set to open its second site in the capital, at 1 Old Broad Street, at the end of this summer. The Salad Project features a central salad bar featuring more than 50 ingredients. It has plans to open further sites in the capital. Great British Menu winner James Cochran, who co-owns Islington restaurant 12:51, has opened a new sports bar concept called Valderrama’s at 163 Upper Street in the capital. In addition, he has also opened a permanent home for his lockdown fried chicken project, Around the Cluck, out of the same location. Incognito Bars, which is a cocktail bar operator founded by Nick Robinson in 2018, opened its debut site in Winchester’s St Johns House, The Broadway, and followed that up last year with an opening in Kingston’s grade II-listed Griffin Centre building. The business has now secured a third site, in London’s Duke Street, which will open this summer.

New investors also continue to go against the narrative that now is not the time to enter the sector, which is certainly something we are seeing across our client network at Virgate. Last month, FB Taverns, a new pub vehicle backed by high-net-worth individual Alexander Embiricos, the co-founder of the US-based virtual office provider Remotion, launched with the acquisition of a seven-strong package of pubs from Admiral Taverns. The new vehicle acquired six freehold pubs and one long leasehold site spread across England, in a mix of town and village locations. It is thought to be looking at other opportunities in the sector and the pubs were understood to have generated significant interest both as a group and as individual sites, highlighting the continued appetite in the marketplace.

The same could be said for the franchise space. Over the past month, the Magic Bean Co, a Starbucks franchisee, which currently operates 24 sites in the UK, has announced plans to increase its portfolio to 200 over the next five years. The business plans to create more than 4,000 jobs as part of a major expansion following a new £10m funding package from HSBC. K&Z Holdings, the family-run, multi-unit franchise business, led by managing director Shahaz Nanji, took on its first four Pret A Manger sites as part of its franchise agreement with the JAB Holdings-led brand in Basingstoke, Bournemouth, Guildford, in May 2022. The company also operates KFC franchised sites. Despite the battering the sector continues to take, the above examples prove operators and investors alike remain optimistic about its long-term health, and its ability to ride out the ongoing storm clouds that circle it. 
Sarah Travell is the founder and chief executive of Virgate, sponsor of the Propel Multi-Site Database. The database is one of the benefits Premium subscribers receive. The go-to database provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. Companies can have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription

 
 
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