This February, inflation in the United States reached a new 40-year high, with consumer prices jumping 7.9% from a year ago — rising at a pace not seen in four decades. For restaurants, inflation has hit especially hard, with Technomic reporting that food and beverage costs have risen 13% over the last two years, and paper and packaging are up 11%.
To adapt, restaurants are altering menu items and increasing menu prices, passing on their macroeconomic cost pressures to their consumers to offset higher costs for food and labor. And surprisingly, it seems that inflation is disproportionately affecting value menus and price-sensitive promotions, where margins are the tightest.
In practice, this means that restaurants such as Starbucks, Wendys, and Chipotle are either downsizing or raising the prices of their value meals. Datassential found that U.S. restaurant chains were promoting less than half the number of combo and value meals last year compared to 2016, and Technomic found that most categories of value-meals had increased in price over the past year. "You spend a lot more time thinking about bundled offers and different ways to still deliver value to the customer," McDonald's CEO Chris Kempczinski told the Wall Street Journal, "but also make sure that you're able to pass on the pricing."
However, passing on prices and changing value items can negatively impact the consumer experience. The Yelp Economic Index showed in January that customer reviews mentioning price increases grew 29% from Q4 2020 to Q4 2021, and Technomic reported that 45% of consumers say they usually pick restaurants with lower prices. For restaurants already struggling to retain consumers amidst the labor shortage and covid restrictions, altering value items could devastate their bottom line.
Nevertheless, with the cost of food and labor skyrocketing, many restaurants are turning to a mix of strategies, including the implementation of self-ordering technology, to adapt to rising inflation while preserving consumer sentiment. Self-ordering technology directly addresses the effects of inflation by adding value back into the hands of restaurant operators, and the benefits are threefold.
First, it increases revenue. For example, the Samsung Kiosk powered by GRUBBRR uses innovative upsell technology to increase average ticket size by up to 40%. This means that consumers are presented with an option to add an item to their order that corresponds with what they are currently ordering for every transaction.
For example, if a customer is ordering a burger, they may be prompted to add a side of fries or add avocado for a surcharge. If a customer is ordering a salad, they may be prompted to add a fruit cup or healthy beverage to complement their meal. In this way, self-ordering technology directly addresses the effects of inflation by prompting consumers to spend more with each ticket without the need for drastically increasing menu prices.
Second, self-ordering technology saves on labor costs. Research from Deloitte shows that 70% of consumers prefer to order using self-ordering technology rather than ordering from a cashier. In addition, replacing your cashiers with the Samsung Kiosk powered by GRUBBRR can move that staffer to the production line or other areas, increasing throughput and driving more revenue.
In addition, the one-time cost of a kiosk is a fraction of the price of carrying an employee. On average, a cashier at a quick-service restaurant open 15 hours per day will cost more than $6,000 per month (with all associated carrying costs). In contrast, the Samsung Kiosk powered by GRUBBRR is $2,500 upfront and $200/month for SaaS. Kiosks always show up, don't call in sick, and are ready to work 24/7/365, meaning your restaurant can more adequately service consumer demand while saving on labor inflation.
Finally, self-ordering technology improves the customer experience. The Samsung Kiosk powered by GRUBBRR minimizes human contact, eliminates ordering errors, and allows businesses to implement integrations, such as loyalty programs and discount codes, that reward consumers. GRUBBRR's loyalty integrations enable businesses to capture data intelligence about consumer history, including most recent orders, to execute suggestive selling and communicate more efficiently with the consumer. Using GRUBBRR technology, restaurant operators add value back into their experience and encourage repeat visits.
As chains such as Starbucks and Chipotle continue to increase menu prices to offset inflation (much to the dismay of consumers), self-ordering technology directly addresses the effects of inflation by adding value back into the hands of restaurant operators. Through custom upselling technology, restaurant operators can increase their average ticket size while saving on labor and improving the customer experience. In this way, self-ordering technology helps restaurant operators avoid passing inflation prices onto consumers. For many restaurant chains, inflation is hurting not only consumer sentiment, but also their bottom line. In an industry with razor thin profit margins, every dollar counts, and self-ordering technology ensures your restaurant is best prepared to combat inflation.