SMB Report: Big Data is the Biggest Disruptor in the Restaurant Industry

The restaurant industry has a higher failure rate than just about any other line of business. According to most surveys, approximately four out of five restaurants file for bankruptcy within five years. Smart restauranteurs invest in cutting edge technology to stand ahead of the competition. A recent report from the SMB Group shows that big data is the biggest game changer in the saturated industry.

Big Data Gives Small Restaurants a Voice in a Crowded Marketplace

The SMB Group recently conducted a survey that shows 18% of small businesses and 57% of medium-sized businesses are investing in big data. Their report found that restaurants are investing more heavily in big data than brands in other industries.

“ The trend is especially gaining momentum in the restaurant industry, with companies like Marketing Vitals leading the charge in helping restaurant owners and franchise executives pinpoint what works and what doesn’t,” writes ShamaHyder, in her recent article.

Hudson Riehle, SVP of Research for the National Restaurant Association, states that big data helps restaurants in numerous ways. The biggest advantage it provides is in marketing and developing a restaurant POS system.

Riehle said that marketing outreach has always been one of the biggest challenges restaurants faced. Digital platforms have made it easier for them to reach customers. However, many brands have failed to use these platforms effectively. Their biggest problem has been understanding the perception and needs of their audience.

Big data has proven to be especially useful in competitive, tourist economies where the restaurant industry is highly saturated. OpenTable, a firm that handles reservations for 40,000 restaurants in the Los Angeles area, states that big data has been very beneficial for its clients. Fast Company reports that the repeat diner rate in Los Angeles has risen to three times the national average after L.A. restaurants began incorporating big data into their marketing strategies.

“Interestingly, diners in Los Angeles tend to be repeat patrons at restaurants they book through OpenTable much more than in other cities. The repeat dining rate in Los Angeles is approximately 13%; OpenTable’s average rate across markets is approximately 5%.”

Restaurants in other major cities should be inspired by these findings if they haven’t already began using big data in their marketing models or using it to analyze their inventory.

Big data has helped restaurant marketers dispel misconceptions that have held them back for years. It also helps brands avoid drawing erroneous conclusions from a single data set.

The biggest example has been the overreliance on metrics such as “average guest spend.” Restaurants often track this metric to see whether they are monetizing their foot traffic as much as possible. They often expect that a higher spend per guest means they are doing a better job selling higher ticket items to customers, such as desserts and drinks.

However, a higher average guest spend isn’t necessarily a good thing. It could be an indicator that restaurants are losing less loyal, lower paying customers. It can be difficult to tell with all the noise of other variables, such as fluctuating sales between seasons.

Big data makes it much easier for restaurants to gauge long-term trends and estimate key financial ratios. It has helped them build a stronger foundation for their business models.

Big Data is the Key to Success in the Restaurant Industry

Contrary to popular belief, the restaurant industry has always been extremely data-centric. In the past, restaurant marketers needed to make judgment calls with the limited amount of data that was available to them. Today, big data has transformed the way they do business.

Sean is a freelance writer and big data expert. He loves to write on big data, analytics and predictive analytics.