THE DIGITAL RESTAURANT: April 10, 2023
Tortoise robots, How Gen Z is eating and how do the delivery app algorithms work?
All these headlines and more represent our thoughts and views on the world of restaurants, technology and off premise food in our round up of last week’s hot news stories - subscribe today to The Digital Restaurant and register at www.deliveringthedigitalrestaurant.com for more bonus content.
Articles mentioned in the video:
1. Are guests starting to feel the pinch of inflation?
2. How do delivery app algorithms work?
Read more about Tortoise here: https://www.tortoise.dev/
4. Gen Z survey sees a surge for Olive Garden and McDonald's
Related Article: 45th Semi-Annual Taking Stock With Teens® Survey, Spring 2023
5. Uber cleaning up its virtual restaurant act
Carl: Tortoise Robots, Uber's virtual brand cull. And how do those delivery app algorithms really work? That's all ahead on this week's Digital Restaurant.
The digital restaurant works like this. We're gonna ask each other five questions about headlines that affect the worlds of restaurants, technology, and off-prem. That in some way link back to our book series Delivering the Digital Restaurant. Are you ready? Let's go.
And if you've yet to get a copy of our book, we have this bundle option that gets you both books for the cheapest price around available on our website, www.thedigital.restaurant. Or if you've got, uh, your phone handy and you're watching us on YouTube, on LinkedIn, you can use that QR code there, head there, and you'll be able to get both books for $30.
And if you've read the book, We would love a review, so please help out this friendly British geezer. And Meredith, who today is her birthday, and so it's fair to say Meredith, a perfect birthday gift from our listeners is, what would you say, a five star review or buying a book for a friend?
What would you say? Happy birthday!
Meredith: Mm. You know, I would pick buy the book for a friend because there are a lot of folks out there who, particularly among the independent restaurants, who still haven't read even the first book and I think they would really benefit from it. And of course the reason we wrote it in the first place is to help independent restaurants learn about all the change that we're going through and chart their course on the path to digital maturity.
Carl: . All right, well, let's kick into this week. I think you've got the first question for me.
Meredith: Oh, I sure do, Carl. So, as you know, there's been a bit of inflation and so far, you know, it seems like we've all been dealing with it. But, it might be not the case for much longer. Are guests starting to feel the pinch of inflation?
Carl: Well, as ever, I would love to bring up some information on this one, Meredith, because RMS have released a survey. So let me just show everyone here. There's a bunch of slides and, we like our data, don't we? First of all RMS are a company that help restaurants with understanding the impact of pricing, and they certainly consult for a lot of the larger chains.
But this survey was conducted in early March. About 810 people were spoken to. And you can see here a cross section of the us. But look at this, Meredith, 44% of the people spoken to. Order at least five times per week from restaurants, which I dunno about you. That's, that's even more than me. But I, I'm guessing they're probably putting the likes of Starbucks and coffee houses into, into the mix and this Oh, sure.
And also, 73% of them don't have a child under the age of 16 at the household. I was like, Hmm. Okay. Interesting. I I don't you, you are usually the one for the demographics to tell me whether you think that's representative or not.
Meredith: Oh, absolutely. Because more than half of Americans now aren't married. Of adult Americans. Remember we talked about in the first book, this is a massive sea change in how people live because the fraction of their lives that are spent in a traditional nuclear family is declining and declining as they get married later and live longer.
Carl: I knew you'd be able to give me some added insight onto this one.
Well look talkative insights. Insight number one is where they're saying the number of respondents visiting restaurants has increased in Q4 relative, sorry, Q1 relative to q4. But look at this line chart, Meredith. When you compare it to Q1 of 2022, it's actually more or less. In line. So it doesn't hugely surprise me to see it dropping off between Q4 and q1.
I mean, Q1 is always a little bit difficult, isn't it? It's, you know, the time where I think a lot of families are getting past the, this, the kind of festive period as well and the, the weather effect. And so it'll be interesting to see if this decline that's been happening since Q3 of 2022 continues on into 2023 here, but it's more or less in line with what we were seeing back in the first quarter of last.
And then they are saying that, uh, delivery usage has declined relative to, to last year. And you can see this major dropoff here from Q3 with 44% of customers that have at least one weekly visit to a restaurant actually saying that they're, they're now down from what it was in Q4, 57%. So there's a, a drop off in utilization of delivery that they're reporting and similarly looking ahead, they're seeing further decline , so they're expecting perhaps to order less, whether it be through delivery, takeout ,dine-in or drive thru. And they're saying that they believe that it's because of higher restaurant prices. So, you know, the, the thing that I think you, again, will have a particular view on this, cause we've spoken about it in the past, is this one.
This is the US Bureau of Labor Statistics and a representation of consumer price changes for food away from home and food at home. And I think we said on the podcast back in 2021 when these lines switched over. Do you remember when Food at home went above food away from home. Mm-hmm. While, as we're seeing now, look, these lions are starting to perhaps converge back again, where food at home may well cross underneath food away from home.
Where you can see at the moment, the former is at 10.2% and the food away from home is at 8.4%. Either way, clearly prices are on the up and they're hurting wherever folks are eating their food. But maybe food at home grocery is actually gonna get a a little easier to bear with later into 2023.
And then the last thing I'll say here is three and four, blame high prices is the reason they are spending more or, and so you'll see here the 74% representation here of those that are ordering the same meals, but prices are higher as the reason they're spending more. But also, look at this. Ordering more from restaurants is actually up in Q1 of 2023 relative to Q1 of 2022.
So people perhaps are trying to get more items purchased because they're trying to take advantage of the delivery fee and maybe are purchasing for a following occasion. And then this one I thought was a, an interesting one cause they said of, of those that are spending less in restaurants, 61% are ordering less often.
But actually when you look at the chart here, it says I order less from restaurants, which actually is a different representation. Isn't this a frequency thing or is tray value dropping? So we'll have to see what RMS can tell us about that. But either way a lot of very interesting information coming out of that survey.
And certainly I'd say consumers are seeing an impact of inflation on their spending habits.
Meredith: Yeah, I thought the most interesting thing about it when we were talking about that article earlier, was that the higher income consumers are the ones that are reporting the biggest pullback, which is a bit unexpected, right?
I think traditionally in this country we've had a tale of two cities when it comes to recessions where you know, some people are relatively insulated from recessions and others really feel the pinch. And it would appear that it is our higher end consumer that is a little bit more concerned, which is different from what's happened in the past.
And may cause a lot of trade down in the category so that folks are doing less delivery because they don't want to pay for it. Or maybe they're doing less fine dining and more QSR. So it'll be interesting to see how that one plays out. And then also interesting to see how this shows up or whether it shows up in Uber and DoorDash's earnings.
So they continue to report everything, delivery, all things. All types of delivery into one, and that makes it very hard for us to tell what's going on with restaurant delivery in particular.
Carl: Okay, so second question. This week, Meredith, is a question that I think we get a lot and that is, how on earth do these delivery app algorithms work?
How are they controlling the, the customers that see a particular restaurant? And is there anything that we can take from this good article here from Joe Guszkowski about what is going on with these algorithms? Care to share a light on this?
Meredith: Yeah. Well this is a good article and as usual from Joe it also had a little bit of humor in it.
At the very end he says, we may never know, right? And also quotes one of the GrubHub executives and says, it would appear that they don't even know much about how they work. So very funny, but also it did, it did light up a few things that we know to be true and that are important for restaurants to keep in mind, and that frankly aren't that surprising.
The first is that being close and being fast matters. A lot of consumers when they go on those apps, they're hungry and they want something to show up right away. And so if you can cook it quickly and you're not very far away, guess what? You're going to be promoted in the algorithm. They also talked about popularity and accuracy. Those things are measured by review performance. I think this is a good place to point to chapter three in the new book, Mine Data, where we talk about the e-commerce funnel and restaurants becoming e-commerce companies, and what does that mean? How many people are viewing your menu once they see your menu clicking into the menu, once they're in the menu, clicking into a product item detail or menu item as we call it in the restaurant world. Once they're doing that, are they putting it in their cart? If they're putting it in their cart, are they actually converting, going all the way through the purchase or are they abandoning that cart? And these kind of statistics as well as things like uptime on the platform.
All of these platforms can view. They have all of the data and they can see who is throttling versus who is staying on, who is winning consumers, and for whatever reason, either price point or beautiful picture, consumers are responding. They are responding and clicking into that menu and then clicking into that item and then actually putting it in their cart and converting.
And because they can see the performance all the way through that funnel on their platform, they're able to promote those restaurants that are doing well on those metrics and put them in front of consumers, right? It makes sense. Those who are more likely to result in the purchase are the ones that are most likely to be put in front of consumers to begin with.
We also talk a lot in chapter one, Be Found, in the new book about these platforms. They are where hungry people go to look for food. It's like the modern food court at the mall, right? But being on them is not enough. And so some of the tips that we talk about in that chapter include things like making sure that you always have some degree of promotional spend on, even if you're not doing a lot, that is something in the algorithms that the algorithms favor.
Joe in the article talks about h ow there's the different price tiers on all these different platforms, which are very confusing. What includes what and what do you get? So we definitely talk through those different price tiers on the different platforms and how they compare to one another. But all in all, I agree with Joe's ultimate conclusion, which is we may never know exactly how these work but we can pick up on some clues and do what we do well in order to be found.
Carl: Love it. Yeah, it's, it's one of those things where it just has so much complexity probably involved in it that it's often difficult to explain. But similarly, I think the important thing here is just for restaurants to realize it's more than just being on them if you truly want to be found, you've got to do more.
Meredith: Okay. Next question is for you, Carl. Again, I don't even know what this is. Your question says tortoise robots? It's not all about speed. I don't know, like, what is a tortoise robot, please explain yourself.
Carl: I, I love getting these kind of ones because you, you always kind of go what on earth have you found this week?
Well, Ottomate, have kindly put this article out about tortoise robots, and you'll see one here on screen. This is a tortoise robot. It's got a nice little smiley face on it. And you'll see it's advertising a product from Aldi there on top of it. So, this was quite a, a lengthy article that I'll, I'll try to unpack.
Robots. Branded by the brand of the product they're holding, driving along the streets of places like San Diego during Comic-Con, where on those certain occasions can generate perhaps $3,000 in sales a day. So Sounds interesting, right? Dmitry Shevelenko, the co-founder of Tortoise, was highlighted in this article where his concept spins things around a bit on the idea of delivering something to a customer, to then being in a place where the customers actually are and having robots sell stuff to them.
Movable vending machines I guess Meredith is another way of putting from this, right? They have a tap to pay NFC reader. They're well suited therefore to things like malls, you could say sports venues, conference centers like Comic-Con. And the folks at Curbivore, if you were at that conference last year, may actually encountered one of these as well.
The company's business model is, they take a percentage of the sale. And as you saw from that last picture there, they've been partnering with the likes of Aldi, Safeway, and the Mini Donut Company to demonstrate their product. And the point of this is that there's no tortoise branding, right? So in this sense, they're, they're almost like moveable billboards as well.
And that's really what got my juices going on this Meredith, because, could there be a mechanism here for restaurants, especially new ones to demonstrate their products, maybe a sample products of some kind to guests that aren't in the immediate vicinity of the restaurant to sample some of their fairs.
Maybe provide a coupon to invite the guests in at a, at a future time and drive awareness in those more populous places than perhaps where the actual restaurant is itself. Could it be,
Meredith: You know, where my mind goes, is delivery. Like, why not put a QR code at a festival and place an order for delivery from that little robot roaming around? And then have someone else, or maybe a different tortoise bring you the order. There's a lot that could happen here. And for those who couldn't see the picture, oh my gosh, they're so cute. They don't look anything like turtles. That kind of surprised me. That looks more like more like a train to me.
Carl: Are turtles the same thing as tortoises?
Is? I think we gotta, we're gonna have to ask,
Meredith: Turtles and tortoises are different. That is true.
Carl: Yeah. So, you know, for me, I, I think this could be a way for the digitally native restaurants, again, what we talk about in the new book to, for perhaps drive stronger awareness outside of digital interfaces because people that are drawn to these things are gonna be, they're gonna go up to, and they're gonna want to engage.
And it's interesting Shevelenko himself said, if he had started this company again from now, he'd package the product less as the main benefit of actual the sales piece of it, but more as a marketing lever. And I think that's the thing that should get restaurants interested as well.
Meredith: Hmm. Interesting.
Carl: Okay, fourth question.
We've got another survey this time that has been done on Gen Z and some interesting insights about the way in which their share of spend looks particularly good news for the likes of McDonald's and Olive Garden. Gen Z's pretty important in the digital economy. So, uh, tell us what you saw here.
Meredith: Well, I have a lot to say before we even get to McDonald's and Olive Garden, which are very interesting. There's a huge share of wallet going towards technology and video game spend, which I thought was fascinating. And as we think about our modern consumer and the phrase we have in the first book, "Renting Rich" these are folks who spend a lot of money on experiences- experiences broadly defined. Could be going out to a restaurant, could be having food delivered to them so that they can play their video games, could be buying video games, going on vacation. And they tend to spend on these types of things because they are renting rich and therefore they have, more disposable income.
Their, their money's not tied up in savings and debt payments to a house. The way that when we were little, our parents would say, oh, we're house poor, right? So, that was the first interesting thing, just to see how big their expenditure on video games truly is. Note to self and all other parents out there.
And then the second thing, of course, was this Olive Garden, McDonald's thing. Both Olive Garden and McDonald's shot up in terms of the share of wallet spend. Both are now in the top five restaurant share of wallet for this age group. The article didn't say, and it wasn't, clearly spelled out in the survey data, but I would like to point out a correlation here, which is that McDonald's, remember last year, this time we were talking about how they came out of nowhere, invested in digital, did their app, got all these loyalty people?
And now here we are a year later, and that's kind of paid off with these young people, r