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Restaurants are spending more on technology in 2014 to keep up with constantly-evolving consumer demands for innovation and convenience.

IT spending is increasing

Hospitality Technology’s 2014 Restaurant Technology Study that studied restaurant spending found that owners and managers across all restaurant types, including quick service, casual table service and fine dining, plan to raise their IT budgets this year. And not only that, but they expect to continue to increase their IT budgets through 2016.

A small portion of the businesses studied were heavy IT investors spending 10 percent of their revenue or more on restaurant technology – and the report believes this group is growing.

These numbers might not mean what you think. Though restaurants would like to spend more on technology, some are finding it challenging.

Despite the increase in restaurant technology spending, restaurants still reported that the top challenge facing their industry was that budgets are insufficient to meet growing demands for technology. Specifically, they are having a hard time allocating their budget for research and development (R&D) and innovation needs.

And despite industry innovation, research shows that much of restaurant’s technology budget is spent on point of sale (POS) and back-office solutions – a reported 33 percent of the group’s overall IT budgets.

So where is their money going?

The 2014 study shows that the majority (63%) of IT spending is used for operational expenditures such as licensing, storage, hardware maintenance, subscription fees for software-as-a-service (SaaS) and cloud computing.

Right now, many restaurants are forced to focus more on steep overhead costs than innovation. The study compared the respondent’s current budget distributions to their ideal and found that, in general, restaurants would like to spend less on maintaining their current systems – which currently accounts for more than half of their current budgets – and more on funding new technology.

Respondents indicated that their ideal budget allocation would be half maintaining existing systems, and the other half split between new roll-outs and R&D.

Restaurant technology spending is still reactionary

In general, restaurants are still implementing technology as a response to their business goals, specifically to improve their operations. However, this is subject to change as restaurant budgets increase and consumer-centric technology (such as mobile devices, self-service kiosks, apps and QR codes, for example) becomes more widespread.

This trend was observed by the study. Of the study’s responses, the most common drivers for implementing restaurant technology were business efficiency (68%), employee productivity (59%) and customer engagement/loyalty (47%). These numbers also support the aforementioned idea that restaurants are more concerned with POS and back-office solutions rather than customer engagement tools. As the study put it: “Results confirm that restaurant operators are still more comfortable being business innovators than technology innovators.”

The importance of customer engagement

A shift in POS technology spending – focusing more toward customer engagement tools – could provide value to customers and business benefits to restaurants. Research from Parature shows that, in the last year, poor customer service caused businesses to lose an estimated $83 million and 62 percent of consumers switch brands.

A recent study from Technomic also shows that customers want to see new technology integrated into their dining experiences, especially if it will expedite their meal delivery or payment transaction. This includes technology that not only helps restaurant operators to improve internal processes but also bolster customer convenience – tools like online ordering, self-service kiosks, digital signage, mobile apps and customer loyalty accounts, for example. Restaurants that don’t provide their customers with engaging experiences could lose business to others that do.

Perhaps the takeaway is that to be as profitable as possible, restaurants must allocate their budgets to find a healthy balance between self-serving technology and customer engagement tools.

How will your restaurant accomplish this in 2015?