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Technology in restaurants: Fast-casual sector represents growing market

Fast-casual and fast-food restaurants need an increasingly broad array of technologies from VARs selling into this vertical.

The restaurant vertical once followed a fairly predictable path: VARs made a living deploying point-of-sale (POS) terminals and other technology in restaurants.

Much has changed, however, as the restaurant sector pursues new directions in IT. Technology in restaurants now includes sophisticated POS devices, mobile applications, thin clients and cloud computing. For VARs, it's a little more involved than selling a glorified cash register. As a consequence, channel partners must offer more than basic POS automation. Resellers are responding with a wider range of technology systems, as well as consulting and professional services.

Margins are still tight and competition is so fierce that restaurants are finally starting to embrace technology as a must-have rather than a nice-to-have.

Howard McCarthy,
CEO, Dumac Business Systems Inc.

Channel companies looking to ring up sales around technology in restaurants have a handful of submarkets to explore. The fast-casual space, which occupies a niche between fast food and the more formal table-service restaurants, is considered the fastest-growing. The NPD Group, a market research firm, reported that for the 12-month period that ended in May, "visits to fast casual restaurants increased by 9% while total industry traffic was flat."

Fast casual restaurant chains may operate a few or hundreds of stores, so represent a potential wave of business for VARs. The numbers are growing. NPD, which conducts a census of restaurants each spring, found a 7% year-over-year increase in the number of fast-casual chain units in its May 2013 count.

Fast-food establishments, also known as quick-service restaurants (QSRs), also provide reseller opportunities as they gear up to compete with the fast casual chains. And table-service restaurants, often independent, solo operations, offer work for the channel as well. Those businesses aim to stand out from the crowd and look to search engine optimization (SEO) and mobile app technology as mechanisms for doing so.

Broader technology in restaurants

Resellers in the restaurant space have evolved over the years to provide an increasingly broad array of technologies. Dumac Business Systems Inc., based in Syracuse, N.Y., provides a case in point. The company was founded in 1952 as a cash register dealer. Eventually, the company transitioned to POS devices, wireless headsets, closed-circuit TV systems and order confirmation displays. Now, a solution could extend beyond those core components to include elements such as Wi-Fi, kitchen video systems, real-time inventory reporting and digital menu boards, noted Howard McCarthy, CEO of Dumac.

McCarthy said the company's business is up 25% this year compared with 2012. The company's primary concentration is on the QSR segment, but it also sells systems to fine-dining restaurants and grocery stores. The company's QSR clients include Arby's, KFC, Popeyes and Wendy's. He said restaurants' heightened interest in wider-reaching solutions is a matter of business necessity.

"Margins are still tight and competition is so fierce that restaurants are finally starting to embrace technology as a must-have rather than a nice-to-have," McCarthy said.

Providing a wider scope of technology also helps the reseller in a market featuring tight margins. The additional products help drive up the average sales volume per deal. Services also bolster Dumac's projects. McCarthy said the company provides installation and training services.

Vendors, meanwhile, are rolling out more products for the restaurant VAR channel. Xpient Solutions Inc., a developer of POS and back-office software for restaurants, recently began offering its channel-only Xpient Xpress software for the QSR and fast-casual segments.

John Tata, executive vice president of business development and marketing at Xpient, said the product is designed to be easy for channel partners to configure and support. He said Xpient Xpress, although new to the channel, isn't a new product: The software had been in use at the franchise locations of national brands. The company decided to re-release the product to the channel to open an opportunity for resellers, Tata noted.

Tata said multiple store locations and multiple-POS-terminal stores typify the fast-casual and QSR space. That footprint provides a reseller advantage, since selling to a multistore client requires about the same level of effort as selling to an individual bar/restaurant, Tata explained. The financial impact, however, is potentially much bigger since the reseller can configure and install a cookie-cutter solution for five, 10 or hundreds of stores, he noted.

"It is a high-profit opportunity for the reseller," Tata said.

Cloud offerings

Resellers can also provide cloud solutions to restaurant customers.

Xpient Xpress, for example, includes a cloud-based data management and reporting component. The cloud element lets restaurant managers run reports from multiple stores. The feature also lets managers -- or the channel partner in a service provider role -- centrally change pricing and menu items and then distribute the updates to all the stores, Tata said.

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David Hoff, senior vice president of technology at Cloud Sherpas, an Atlanta-based cloud services brokerage, said the company's restaurant customers are deploying Google Apps for messaging and collaboration. Store managers use Google Apps for internal communications and creating discussion groups with other managers, Hoff noted. A franchise manager may use Google+ to post photos of how certain store displays are working, for the benefit of the corporate office.

Some restaurants have taken to Chromebooks. Managers at Jason's Deli, a fast-casual chain, use the Chrome OS-based notebooks instead of desktops.

Managers spend much of their time traveling store to store, so managing desktops proved difficult.

"They never had a home base to come in and have software installed," Hoff said.

Web optimization and mobile apps

Table-service restaurants, however, may lack the nationwide brand recognition of a large fast-casual or QSR chain. Independent restaurants need to distinguish themselves when customers search for dining options on the Web. Fred Poulet, founder of Optimize Chr 2.0, a consulting company based in Neuilly-Plaisance, France, said that simply being found is the main issue for his restaurant customers.

Poulet said most restaurant consumers search via generic tools such as Google or other search engines.

"Therefore, we have first to work on SEO so that they are found among their competitors," Poulet said.

The next step, he added, is to implement redirection links between restaurants' "classical websites" and mobile tools such as mobile websites, apps and social networks.

As for mobile apps, the ability to provide daily news updates is an important factor. Poulet said apps must contain social media news feeds or timelines and a news/events calendar among other items. He emphasized the need for restaurants to create events -- parties, for example -- to create buzz and provide reasons for customers to come back. Those events, of course, can be promoted and shared via social media.

Other mobile app components can include loyalty cards, reservation forms and maps.

"The main question we have to think about is what sort of stuff ... would I like to find as a customer in my favorite restaurant or bar," Poulet said.

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