By Mo Chaar
It’s been a challenging summer for restaurant operators, as Canadian consumers cut back on discretionary spending. Kelly Higginson, CEO of Restaurants Canada, recently stated, it has never been more difficult to run a restaurant in this country, with the cost of nearly every aspect of running a business dramatically increasing.
In today’s highly competitive market, personalized customer engagement stands out as a crucial differentiator for businesses, particularly in the hospitality sector. With the rapid expansion of digital technologies, restaurants are inundated with data from customer transactions, social-media clicks, and loyalty programs. The challenge lies in turning this data into actionable insights, and Artificial Intelligence (AI) has emerged as a valuable asset, enabling restaurants to unlock their potential.
Leveraging data: AI’s potential
Restaurants have access to a wealth of customer data at their fingertips. However, the sheer volume and complexity of this data can be overwhelming. Using AI-enabled software, restaurant operators can process vast amounts of information quickly and accurately, revealing patterns that human analysis might miss.
Food and labour costs remain the top challenges for most restaurant owners. AI enables restaurants to identify and analyze data such as labour expenses and sales trends to inform staffing, helping restaurant managers staff appropriately during slow periods and avoid overspending on labour. By predicting busy periods, restaurants can allocate staff more effectively, ensuring that customers receive prompt and attentive service.
In Canada, more than $10 billion worth of food is lost at the consumer level, which not only impacts restaurants’ bottom lines but also comes with associated environmental impacts. Each year, food waste in Canada creates more than 56 million tonnes of carbon dioxide-equivalent emissions. Sophisticated AI tools offer a sustainable solution, crunching historical data on factors such as sales, foot traffic, weather and more to forecast demand for ingredients with greater accuracy. This information supports restaurants with inventory management, helping to reduce food waste and prevent over-ordering but also ensuring that kitchens are well-prepared to meet customer demand — a win-win for both the environment and restaurants that are ultimately saving money on food costs.
Why personalization is key
This data-driven approach extends beyond operational enhancements. With the help of AI-driven analytics, restaurants can identify trends related to customer preferences, behaviours, and expectations.
Seventy-one per cent of consumers expect personalized experiences, providing an opportunity for restaurants to provide unparalleled engagement through AI. Restaurant operators have access to customers’ order histories, which contain a treasure trove of data that helps to inform marketing strategies. For instance, restaurants can offer email discounts on a particular dish based on a customer’s preferences, enabling restaurants to target customers with highly relevant content.
In online ordering, AI can provide menu suggestions based on individual preferences, but it can also be used for menu optimization. For instance, a sushi restaurant in Japan used AI to revamp its menu following customer feedback, resulting in a 10-per-cent increase in customer satisfaction.
Some brands such as Starbucks are utilizing AI-powered rewards to incentivize visit frequency and increase customer spending. Using AI tools, Starbucks looks at what its members buy and how they shop to offer special promotions such as free coffee, food discounts, and additional rewards. This level of personalized service is becoming an expectation among consumers, and stats show that AI-driven personalized marketing can help increase customer engagement by 25 per cent.
Utilizing real-time POS data can also enhance customer engagement in other ways, such as the development of loyalty programs and upselling strategies. With AI insights, restaurant managers can empower staff to upsell based on emerging trends and operators can seamlessly integrate personalized offerings and hyper-targeted benefits into loyalty programs.
Additional AI capabilities
The integration of AI in all its forms is driving a transformation in restaurants, establishing new standards for operational efficiencies. For instance, AI-driven chatbots and virtual assistants can simplify customer interactions, handling up to 80 per cent of customer queries, processing reservations, and managing orders. Some quick-service restaurants have implemented automated kiosks for smoother ordering, while others utilize AI-powered phone systems and robots to prep food. In turn, this frees up staff to focus on more complex and high-value tasks such as customer service, while also reducing labour costs.
By integrating AI capabilities into an existing tech stack, restaurant operators gain insights into customer spending patterns and high or low-traffic periods — as a result, some quick-service restaurants have experimented with dynamic pricing, offering lower prices during slower periods of the day. Next year, Wendy’s plans to test menu boards at its U.S. locations that offer AI-prompted changes based on the weather (“a cool Frosty on a warm summer day”). The ability to rapidly adapt ensures restaurants remain competitive and responsive to market demands.
AI also allows restaurants to address potential issues before they escalate, improving the customer-service experience. For instance, in the front-of-house, AI-powered platforms can process orders efficiently and with unmatched precision, reducing the risk of human error and incorrect orders. In back-of-house operations, AI video analytics can ensure that food-safety protocols are consistently followed, and can even detect food contamination as it happens.
The future of AI
Looking ahead, the role of AI in the restaurant industry is poised to expand even further. A recent consumer survey revealed that almost half (48 per cent) of Canadians expressed comfort with the use of AI in restaurants. As comfort level increases, the integration of technologies such as virtual reality (VR) and augmented reality (AR) could revolutionize the way customers interact with restaurants. During the pandemic, QR codes replaced paper menus. Now, restaurants can use AR apps with interactive menu visuals on smartphones. AR applications could overlay interactive menu visuals, allowing customers to explore dishes in detail before making a choice.
Eighty per cent of customers say the experience a company provides is as important as its products and services, and advancements in AI suggest that immersive dining experiences may become more prevalent. Meta’s AI-powered smart glasses hint at AR/VR’s deeper integration into the foodservice industry. While not yet widespread, early adopters such as Sublimotion in Ibiza use VR headsets to elevate dining with immersive elements. Patrons wearing these glasses could receive real-time information about the meal they are consuming, including nutritional information, ingredient sourcing, and even stories behind the recipes. While such technologies remain in their infancy, the potential for AI to craft multi-sensory dining experiences could become a significant draw for customers seeking unique experiences.
It’s also essential to consider the ethical implications of AI’s expanding role in the restaurant industry. As data-privacy concerns become increasingly prominent, restaurants must strike a crucial balance between leveraging customer data for personalized service and safeguarding consumer privacy. Transparent data handling practices will be paramount in building trust with customers so that they feel secure sharing their preferences and personal information.
The importance of AI integration to stay ahead
The adoption of AI in the restaurant industry is not just a trend — it’s a necessity for staying competitive in an evolving market. By utilizing AI to tap into customer data for personalized marketing strategies, restaurants have a powerful tool at their disposal.
The future of dining is bright, and AI is set to play a pivotal role in shaping it. As technology continues to advance, the opportunities for innovation in the restaurant sector are vast. By embracing AI, restaurants can position themselves at the forefront of industry trends, delivering enhanced experiences that resonate with today’s discerning customers. It is time for industry leaders to start investing in and staying abreast of these technologies now so that they are well-equipped to meet the demands of the future.
