David Blacher

Written by: David Blacher & Ryan Broomfield

David Blacher

Partner, Head of Media and Technology

Can tech save us? The investors' view

  • June 2019
  • 6 minutes

There are an abundance of issues in the UK’s traditional eating and drinking out market, from inefficiencies in business models to an unhealthy attachment to legacy systems…if there are any systems at all! This has led to a stalemate with venues fighting for customers and consumers left with very little choice in offering between the main operators.  2018 saw the number of restaurants in the UK had fallen for the first time in eight years as sales stagnated and costs rose, and the high street scene seems to only be getting smaller with a few chains and independent restaurants closing their doors.

Is technology the answer for an industry that needs revival? Who better to pose that question to than those in charge of the purse strings. Are investors looking for technology when seeking out opportunities in the eating and drinking out sector?

Technology – the investors' choice 

Technology in and of itself is not the holy grail. It is, however, a way of enhancing experience but that requires the business has good fundamentals to begin with i.e. product and brand. Technology is a great core competency, but businesses need to know what to do with it to get the best out of it. Adopting something that isn’t fit for purpose could be as detrimental as having nothing at all. 

Tech-based solutions should act as an enabler and an enhancer: monetising data, food prep and waste solutions - technology should allow the business to properly utilise the information and resource it has to improve the bottom line.  

Businesses need to invest in solutions 

The way in which businesses adopt technology is key - it should not simply be a bolt on.  When choosing a technology to implement, businesses need to consider what their challenge(s) is, what does success look like and how does this tool bridge that gap. In this context, technology will be an integral part of the service delivery model and a means of improving business processes. 

An issue as old as time itself in the restaurant sector is the time it takes to settle the bill. Wetherspoon’s ‘order and pay’ app is being heralded as the future, not just for pubs but the wider industry, combining innovation and ease for customers. 

Who are the winners…and losers? 

USA

US consumers, businesses and government entities spent an estimated $1.62 trillion on food and beverages in stores and on away-from-home items in 2017. Annual spending on food far surpassed other essentials like health care and personal insurance for the average American that year (Bureau of Labor Statistics).

Venture capitalists have taken note of the huge opportunity, as venture funding for US-based food tech companies has grown from about $60 million in 2008, to over $1 billion in 2015. (Pitchbook).

The USA has long been the poster child for consumerism, so it should be of no surprise that the mega country with a huge population should be top of the leader board when it comes to food consumption and subsequently innovation. But whilst investors have a vested interest in making a profit, we are seeing a rise in the compassionate fund, with entrepreneurs and their investors motivated by a need to create sustainable food options. 

UK

The UK (and Europe generally) is seriously lagging the USA and Asia in the implementation of food tech. Adoption of technology in the UK has been poor and most companies don’t even seem to be trying. 

Where we have seen success is with the likes of Five Guys, a premium burger chain imported from the USA.  The fast food franchise is using a data platform company to increase operational efficiency and drive improved sustainability across the business. 

The platform has opened access to data across its business from sales, operations and business planning to warehouse management, speeding up access to insights and informed decision-making.  As a result, the process has been reduced from a manual input exercise taking days to a digital process taking hours. 

If the UK doesn’t evolve soon, foreign ownership will be the lay of the land. 

An open playing field

The use of apps is expected to continue and increase rapidly, as consumers engage with their favourite eateries digitally. The ability to click and collect as well as have food delivered is a big draw for consumers and is a means for restaurants to offset a fall in eat-in diners. 

In May 2019, Deliveroo raised $575 million in its largest fundraiser ever, boosting the total amount of capital received to upward of $1.5 billion. The proceeds of the round, which was led by Amazon will reportedly be used to expand the British food delivery service's product offerings and geographical footprint. 

Whilst technology may appear a remedy to the ills of the dining sector, we have and will continue to see that the businesses reaping rewards are those that centre staff and customers at the heart of their business with a focus on customer and employee experience. 

If you would like more information or to discuss this further, please contact Ryan Broomfield.

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