AI Technology is Getting within Reach for Small Restaurants

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Artificial intelligence is slowly penetrating the restaurant industry. McDonald’s, Domino’s, and Starbucks are showcasing innovations helping them to drive sales, streamline processes, and make informed decisions. McDonald’s amplified its digital menu boards with an AI algorithm, adjusting its menu to the weather, and generated 3% more sales. Domino’s entrusted prediction of pizza delivery time to AI and got more loyal customers. Starbucks employed AI to analyze its past store openings and started selecting more lucrative places for new stores.

National chains represent a small group of restaurant businesses that heavily invest in custom AI solutions. They have everything they need to succeed in this area: vision and strategy, data science talents, and an opportunity to test new AI tools on their own pilot projects.

Meanwhile, the majority of restaurant businesses, especially the small ones, remain slow adopters and non-adopters of AI technology. People may think that the introduction of AI in small restaurant operations is nothing more than jumping on the bandwagon. However, research on the impact of AI on the world economy by McKinsey Global Institute warns the naysayers. The research predicts that by 2030 active adopters of AI technologies could double their cash flow, while non-adopters could lose up to 20% of theirs. This is a hint for restaurant managers who plan to stay in business for the next 10-15 years that it’s time they embrace AI tools or prepare to lose a big part of their market share for good.

In fact, millions of small restaurants have already felt the impact of AI on their business. Partnering with technology-forward aggregators and marketplaces, they benefit from third-party AI solutions. For example, the restaurants on Uber Eats rely on the app’s ranking algorithms and recommendation engines to get their dishes offered straight to the customers who were looking for them. Still, it’s true that such third-party AI algorithms primarily serve the interests of the platform, not particular mom-and-pop restaurants.

What about in-house AI solutions? At this point, there is no way for small restaurants to invest in custom AI software. Instead, they can consider some existing and emerging AI technologies in their strategic planning and monitor the market. Although robotics, smart kiosks, and AI-powered chatbots are generating hype, predictive analytics proves to be the most impactful and viable AI technology. It can analyze big sets of data and forecast visitor traffic, food orders, revenues, and costs. An ideal medium for the introduction of AI algorithms in a restaurant is its point-of-sale (POS) and inventory management system because it serves a hub for various data flows.

Software vendors who offer cloud point-of-sale (POS) and inventory management solutions for restaurants are launching AI projects. For POS software vendors it’s a chance to differentiate. However, it may cost them a lot of effort to get their AI projects off the ground. They should be sure to create an AI solution that will be in demand. It’s quite a challenge because small businesses tend to choose simple software and rarely use the functionality they consider to be secondary. To gain traction, the new AI features should solve real pain points, create clear value, and be flexible enough to serve a diverse group of restaurant businesses.

For example, AI can help procurement managers to optimize sourcing. Managers can rely on predictive analytics to determine the right time and quantity of products to purchase instead of doing it by trial and error. AI won’t eliminate the situations when a restaurant is running out of stock because of a supplier’s failure. Still, removing the guesswork from the manager’s decision-making process would reduce product waste and prevent understocking.

AI can put together and analyze up-to-date data on inventory, sales, purchase prices, historical data, and current trends in customer demand. Based on this data it can predict how many of every product restaurant should source next time. Restaurant managers can hardly refuse to get a timely and accurate list of required products with quantities and deadlines for orders from their POS system as an alternative to the time-consuming process of the order planning.

AI can create a lot of shortcuts in restaurant operations. However, being biased against AI, restaurant managers won’t be able to leverage the technology to its full capacity. Launching AI projects, POS software vendors should establish communication and cooperation with restaurant managers who are enthusiastic about introducing innovations. Such dialogue can become the key success factor in the matter of finding the right use cases for AI and testing the technology. It may hasten the day when the industry will see the strong evidence of AI business value for restaurant businesses of all sizes.

Rodion Yeroshek, Co-Founder & CEO of Poster POS, a cloud Point of Sale and management console for restaurants and shops.