Mapping the Restaurant Technology Landscape Midwest Foodservice Expo March 13, 2017 | Milwaukee, WI Annika Stensson Director, Research Communications National Restaurant Association astensson@restaurant.org @WeRRestaurants /RestaurantDotOrg Restaurant.org/Research /NationalRestaurantAssociation

Technology trends - Consumers Technology trends - Operators Agenda Restaurant industry 2017 Technology trends - Consumers Technology trends - Operators

RESTAURANT INDUSTRY 2017

DEFINITION: “Restaurant Industry” “Food Away from Home” All meals/snacks prepared away from home, including all takeout meals and beverages.

$799 billion 14.7 million 1+ million Restaurant Industry 2017 Sales: Employees: Locations: $799 billion 14.7 million 1+ million Source: National Restaurant Association

An Economic Powerhouse Annual sales are larger than 90% of the world’s economies. Sales projected to advance by $33 billion in 2017 – roughly double Hollywood’s annual domestic box office sales.

Where Do Consumers Spend? SPENDING CATEGORY PERCENT OF TOTAL Housing 33% Transportation 17% Food 13% Insurance/pensions 11% Health care 8% Entertainment 5% Contributions 3% Clothing Other 7% Total 100% Source: Bureau of Labor Statistics, 2015 Consumer Expenditure Survey; National Restaurant Association

Restaurant Industry’s Share of the Food Dollar 1955 Present 1955: 25% Now: 48% Source: National Restaurant Association

Top Challenges Facing Operators JANUARY 2016 Recruiting Employees 27% Labor Costs 22% Sales Volume 12% The Economy 10% Government 9% JANUARY 2014 Food Costs 25% Government 21% Sales Volume 12% Labor Costs 10% Recruiting Employees 9% JANUARY 2015 Government 20% The Economy 19% Recruiting Employees 18% Labor Costs 15% Sales Volume 11% Source: National Restaurant Association, Restaurant Industry Tracking Survey

Restaurants are Extremely Labor Intensive Average sales per employee, 2015 Eating & Drinking Places $56,000 Grocery Stores $226,000 Gasoline Service Stations $478,000 Auto Dealers $769,000 Source: National Restaurant Association, based on Bureau of Labor Statistics and US Census Bureau data

Average Annual Percent Change in Output per Labor Hour: 2005 to 2015 Labor Productivity in Restaurants Remained Flat in Recent Years Average Annual Percent Change in Output per Labor Hour: 2005 to 2015 Source: Bureau of Labor Statistics

TECHNOLOGY TRENDS - CONSUMERS

Tech Influences Consumers who say availability of technology makes them choose one restaurant over another. Source: National Restaurant Association, 2016

1/5 Want to Go Human-Free Consumers who prefer to use technology rather than interact with restaurant staff Source: National Restaurant Association, 2016

Human Service Still Important Consumers’ primary reason for not using technology options when dining out, or ordering takeout or delivery Source: National Restaurant Association, 2016

In-Store Tech Usage Have used Willing to use Free Wi-Fi 55% 69% Consumers who have used these options in the last year; consumers who would be willing to use these options in the future when available Have used Willing to use Free Wi-Fi 55% 69% Tableside payment 43% 64% Electronic ordering station (tableservice) 33% 54% Touch-screen ordering kiosk (QSR) 32% 59% None 29% 18% Source: National Restaurant Association, 2016

Smartphone/Tablet Usage Consumers who own or regularly use a smartphone or tablet All adults 77% 18-34 96% 35-44 91% 45-54 80% 55-64 62% 65+ 47% Source: National Restaurant Association, 2016

Restaurant Smartphone Tech Consumers who use smartphones or tablets for these activities occasionally Percent of adults Look up restaurant locations, directions and hours 88% Look at menus 72% Order takeout or delivery 63% Read online reviews 58% Use loyalty programs and rewards 56% Make reservations 46% Look up restaurant nutrition information 44% Pay for meals 34% Source: National Restaurant Association, 2016 – Base own/use smartphone/tablet

Mobile Payment Acceptance In Mixed Consumers who would pay restaurant or bar tabs via smartphone app if offered Source: National Restaurant Association, 2014, 2015, 2016 – Base own/use smartphone/tablet

Future Acceptance? Consumers who say they like the idea of these technologies in restaurants Source: National Restaurant Association, 2016

Technology Is Growing 66% of consumers say tech options increase convenience 61% say tech options speed up service 56% say tech options increase order accuracy 37% of consumers report technology makes restaurant visits and ordering more complicated Source: National Restaurant Association, 2016

Why Is It Complicated? Consumers who say the following are reasons technology complicates restaurant visits and ordering Source: National Restaurant Association, 2016 – Base = consumers who say technology makes restaurant interaction more complicated

What’s In It for Restaurateurs? 35% of consumers say tech options make dining out more fun 30% say tech options make them dine out or order takeout/delivery more often 26% say tech options make them choose one restaurant over another Source: National Restaurant Association, 2016

Tech Fatigue? Consumers who agree with the following statements about technology in restaurants Source: National Restaurant Association, 2014, 2015, 2016

TECHNOLOGY TRENDS - OPERATORS

Current Tech Adoption Industry Segment Total Tableservice Limited-service POS or electronic cash register system 81% 78% 83% Website 79% Wi-Fi for guests 68% 71% 64% Touch-screen ordering kiosks or stations 42% N/A Online ordering for takeout or delivery 37% 25% 49% Smartphone app 34% 18% 50% Mobile payment 32% 15% Online reservations Electronic or digital menu boards 21% Tabletop ordering, or payment device or station 20% Source: National Restaurant Association, Restaurant Technology Survey 2016

Current Tech Adoption Ownership Category Total Independent Franchisee/ Chain POS or electronic cash register system 81% 69% 94% Website 73% 89% Wi-Fi for guests 68% Touch-screen ordering kiosks or stations 42% 30% 47% Online ordering for takeout or delivery 37% 20% 54% Smartphone app 34% 14% 55% Mobile payment 32% 17% Online reservations 25% 21% Electronic or digital menu boards 15% Tabletop ordering, or payment device or station 28% Source: National Restaurant Association, Restaurant Technology Survey 2016

Features of POS Systems Source: National Restaurant Association, Restaurant Technology Survey 2016 – Base use POS system

Proprietary System vs. Service 2 in 3 tableservice restaurants offering online reservations use a service; 1 in 3 use a proprietary system. Half of tableservice restaurants offering online ordering use a proprietary system; 2 in 5 use a service. 3 in 5 limited-service restaurants offering online ordering use a proprietary system; a quarter use a service. Source: National Restaurant Association, Restaurant Technology Survey 2016

Mobile Payment Type More than half of tableservice restaurants accepting mobile payment use NFC or Bluetooth; a quarter use in-app/frictionless. 3 in 5 limited-service restaurants accepting mobile payment use NFC or Bluetooth; 1 in 10 use in-app/frictionless. Source: National Restaurant Association, Restaurant Technology Survey 2016

Smartphone App Features Source: National Restaurant Association, Restaurant Technology Survey 2016 – Base has smartphone app

Reason for Developing Smartphone App Source: National Restaurant Association, Restaurant Technology Survey 2016 – Base has smartphone app

Reason for Developing Smartphone App Industry Segment Ownership Category Source: National Restaurant Association, Restaurant Technology Survey 2016 – Base has smartphone app

Top Benefit to Using Customer-Facing Technology Source: National Restaurant Association, Restaurant Technology Survey 2016

BOH Technology Use Industry Segment Ownership Category Source: National Restaurant Association, Restaurant Technology Survey 2016

Devoting More Resources to Tech 42% of restaurant operators say they’ll devote more resources to technology in 2016 than in 2015. Source: National Restaurant Association, Restaurant Technology Survey 2016

Lagging vs. Leading Edge in Tech Use Source: National Restaurant Association, Restaurant Technology Survey 2016

Lagging vs. Leading Edge in Tech Use Industry Segment Ownership Category Source: National Restaurant Association, Restaurant Technology Survey 2016

Most Important Area of Tech Development in Next 5 Years Source: National Restaurant Association, Restaurant Technology Survey 2016

if they were available to them today Future Adoption? Restaurant operators who say they would consider adding the following technologies if they were available to them today Source: National Restaurant Association, Restaurant Technology Survey 2016

The Future Is Not Quite Now Restaurant operators’ sentiments about the following technologies Source: National Restaurant Association, 2016

Barriers to Adding More Tech Source: National Restaurant Association, Restaurant Technology Survey 2016

Restaurant Operators’ Agreement with Statements on Technology 83% 83% 83% 81% 72% 47% Source: National Restaurant Association, Restaurant Technology Survey 2016

Summary Interest is growing among consumers, but there’s some hesitation around cutting-edge tech. Adoption is growing among restaurants. Cost remains a barrier. Operators and consumers largely on board with technology, but some still believe it complicates interaction.

Mapping the Restaurant Technology Landscape Restaurant Innovation Summit September 15, 2016 | Austin, TX Annika Stensson Director, Research Communications National Restaurant Association astensson@restaurant.org @WeRRestaurants /RestaurantDotOrg Restaurant.org/Research /NationalRestaurantAssociation