Checking out the restaurant sector

Checking out the restaurant sector

Mark Beresford
July 31, 2018

The restaurant sector is part of the bigger hospitality industry that covers a wide range of categories including fine dining, fast-food eateries, take-aways, quick service restaurants (QSRs), gastro pubs, self-service restaurants, cafés, coffee shops and many others.  The food and beverage trade can be a function within other businesses, such as in hotels, shopping malls, bowling alleys or cinemas, etc.  One thing is for sure, it is a service sector where technology has been used to cut the customer waiting time, digitalise menus and reduce the hassle of payment.

Cash payments in the restaurant sector have almost entirely been replaced by electronic payments.  The ability to pre-order and pay-up-front through restaurant apps or perform a mobile payment is much more common across different food and beverage businesses.

Here are a few of payment innovations that we are seeing and will expect to continue to see across the entire restaurant sector.

POS Pay-At-Table

In any country where Chip & PIN transactions (EMV card payments) are the standard, it is not uncommon to find a restaurant that uses a Pay-At-Table POS device.  It is ideal for full-service restaurants, stadiums, venues and other hospitality environments where payment is currently processed at a central location, far from the customer’s view.  Servers need to accept payment at the table and print receipts on the spot without the need to return to the point of sale (POS) station to swipe, insert or tap a card for payment.

Ingenico, a POS terminal manufacturer, analysed the payment checkout of a traditional restaurant without the Pay-At-Table option and found there were 12 distinct activities in the process from the customer ordering the bill through to the completion of the payment.  With Pay-At-Table, this process can be reduced by half the time and half the number of distinct activities.

Consumer Pay-At-Table

The internationally recognised “air signature” gesture used by diners to get the server’s attention because they want the bill and pay could soon disappear as there are a number of smartphone apps that deliver a “Pay-At-Table” option.  These remove the need for a restaurant-owned or rented POS terminal device.

There are a number of customers apps available, including Qkr!, Split, MyCheck, Orderella, Flypay and Zapper, which all allow the diner to initiate the payment of the bill from their table.  Restaurants using such apps in the UK include Five Guys, Wahaca, GBK and Pizza Express.  Flypay is one of the leading apps, who has raised $17m in funding since its launch in 2013.  At Wahaca, the Mexican restaurant chain, all the customer needs to do is to scan a QR code affixed to the table and in seconds they have their itemised bill on their smartphone with the option to leave a tip.  The bill can be paid by one person or each of the guests could each scan the code on the table and have the bill split in any which way.  To pay, the customer confirms the transaction with a unique four-digit Flypay code and the app charges the card saved within the Flypay app.  Studies show that the average waiting time to pay a restaurant bill can be as much as 10 minutes – a customer-initiated payment can reduce the entire checkout process to less than a couple of minutes.

Qkr! is a very similar concept developed by Mastercard using the Masterpass mobile wallet platform.  Like Flypay it makes ordering and paying for food and drinks faster.  Qkr! is being accepted at Carluccio's, Wagamama, Zizzi Pizza and Byron Burgers. Another example, Orderella, targets millennial customers who do not want to queue to order a round of drinks in bars, clubs, and pubs. Orderella is accepted in venues across the UK and Ireland allowing the customer to order and pay for a round of drinks from anywhere they are in the venue and for the order to be delivered to their table or collected from the bar when it is ready.  Zapper is similar but has a tighter integration with the restaurant’s existing POS equipment.  A Zapper QR Code is printed on the customer’s bill, the customer scans it with their Zapper app and confirms the amount to be paid.  The customer’s payment card details are securely stored in the app.  A few years ago, PayPal conducted a similar Pay-At-Table integration for PayPal users to use at Pizza Express, but it failed to gain any traction amongst its customers. It was partly hampered by technological difficulties.


Starbucks, Five Guys, Taco Bell, Domino’s, Papa John's, Subway and McDonald's have popularized online ordering to allow customers to skip the queue to pick up their take-away or eat-in order. In addition to cutting the customer’s waiting time and making it convenient for them to quickly pick up their orders, mobile order-ahead can attract new customers and gain loyalty from existing customers.  Leading QSRs, such as Taco Bell in the US, have seen a 30% higher than average order value on mobile compared to in-store orders.  Starbucks was one of the first food and beverage businesses to use Order & Pay-ahead; it now represents 10% to 20% of total transactions at high-volume stores.  According to Business Insider, sales from order-ahead platforms is expected to reach $38 billion by 2020 in the USA. Based on some recent work, EDC found that consumers spending on eating out in 2017 was around $800 billion in the USA and close to $900 billion in Europe. It would not be unreasonable that order-ahead solutions could grow to represent 10% to 20% of total consumer spending.  The USA and Europe have been quick to adopt the order-ahead concept and by 2020, we expect this would represent between $90 billion to $120 billion in sales.

Order-ahead smartphone app platforms have been proven to strengthen customer loyalty, increase purchase frequency and increase average order sizes as a result of personalisation, order customisation and easier payment checkout options. The big chain QSRs have realised that order-ahead is not a simple substitution for in-store purchasing, but a channel that has enhanced the lifetime relationship with its loyal customers.  Smaller, independent restaurant businesses are also starting to use generic order-ahead aggregation solutions, such as Grubhub, Tapingo and Ritual (which just closed a $70 million Series C round of funding led by Georgian Partners).

Burger King is piloting an order-ahead tool via Facebook’s Messenger chatbot. This service allows customers to place meal orders, select a pickup location and pay for purchases.  Other sales channels are expected to be piloted or already in pilot, including the Amazon Echo voice order-ahead facility, WhatsApp messenger order-ahead, Smart TV order-ahead and connected cars.  I have even heard some industry insiders refer to MOA – “Mobile Order-Ahead”.  The mobile smartphone is probably the one order-ahead sales channel that EDC believes customers are most likely to adopt and repeatedly use.  Therefore, the MOA three-letter acronym could be here to stay.

Self-Service Kiosks

Self-service restaurants are not new. However, technology for restaurants has meant that customers of quick-service restaurants have higher expectations than ever before. They want to be served quickly, but also receive a high standard of customer service.  Self-service technologies (SSTs), yet another three-letter acronym, help restaurants meet the needs by allowing customers to order their own food at their seat or prior to taking a seat.  A high-profile example is McDonald’s who are rolling out touch-screen technology to speed up the meal ordering process, giving customers more control by allowing them to customise their meal order (for example, no tomatoes for my Big Mac) and reduce the opportunities for human error.  Self-service kiosks, unlike human employees, never forget to upsell.  When presented with a range of optional extras, many customers will choose to buy more than they would have otherwise.  Some McDonald’s stores have reported that customers who used the self-service kiosks spent on average 30% more per order compared with orders taken by a human server.

Self-service kiosks can be an expensive technology but big businesses such as McDonald’s can afford this type of investment. However, they are perceived to be unaffordable for small and medium-sized businesses.  On the other hand, the iPad/tablet has changed all that.  There are cost savings associated with switching out conventional cash registers for tablet and iPad POS systems.  Today, it is not uncommon to find a tablet waiting for you at your table.  Being deployed at franchise chains, sports bars and even upscale, family-friendly restaurants, customers are encouraged to interact and engage with these digital touch points throughout the entirety of their meal.  I recently was handed an iPad in a small family-owned restaurant to select the best wine based on my food order.

There are a number of providers using tablet technology for at-the-table ordering and menu management.  TouchBistro, Light Speed, Revel Systems, UpServe, SalesVU, and Elo are a few leading examples.  There are as many as one hundred different companies developing tablet ordering and menu systems for restaurants.  These tablets are typically available per table and handed to the guest to place their order and adjust during the dining experience.  Some set-ups have the tablet mounted to the dining table, as seen in busy, high turnover, bar-come-diner eateries.  Some providers will include payment at the table via the same device or a card reader add-on.

The challenge that many restaurants will have with self-service solutions, where the customer is making the menu selections without any guidance by a human server, is customer alienation.  As profit hinges on the customer experience and purchasing decisions, we believe that a customer-centric approach to design the user experience is required when it comes to deploying SSTs.  The server should be a brand advocate and enhance the customer experience with or without SSTs.  The server should not be seen as merely a delivery person.

Home Delivery Services

Restaurants are using two models for home delivery services: (1) integrated ordering and delivery – serving mid to up-scale premium meals and (2) unbundled ordering and delivery – serving fast food and budget meals.  Both home delivery models are serving different consumer needs and delivering in different ways, but both are using in-app payment solutions.  What is common in both models is that a third party handles the customer order and takes the payment.  However, in the first model, the delivery is fulfilled by the same third party, whereas in the second model the restaurant handles the delivery.  Both models have seen and taken advantage of a techno-savvy demographic.  Millennials, or digital natives, are considerably more open to relationships that are focused on origination and sales, such as, Airbnb,, Netflix, Uber.  These organisations offer a personalised, simple to use, frictionless payment interface with an emphasis on the seamless or on-demand access to a rich customer experience that is separate from the underlying provision of the service or product.  This is fundamental to the extraordinary change and growth in food delivery services in the last 5 to 10 years.

The leading player using the integrated ordering and delivery model is Deliveroo.  Founded in 2012, Deliveroo is a London-headquartered on-demand delivery service that brings high-quality cuisine of premium local restaurants to your doorstep – the restaurant cooks and Deliveroo processes the order, takes the payment and delivers to the consumer’s home.  All orders go through a Deliveroo app which presents the menus and processes the customer’s menu selection and payment.  Deliveroo’s total equity funding is now at $859m across nine rounds of funding.  The most recent funding was $385m Series F in September 2017.  The reported valuation is around $1.5bn with 3.6m active visitors per month.  It now operates in 150 cities across 12 countries and has about 30,000 riders, targeting restaurants that do not have their own delivery capability.

Just Eat and Hungry House, also UK-based online home delivery marketplaces, are disrupting the food and beverage sector by handling the order for the customer, like Deliveroo, however, the restaurant handles the delivery to the customer’s home using its existing home delivery arrangements.  Just Eat and Germany’s Delivery Hero, which raised $2.8bn from eight lead investors have targeted the less expensive end of the takeaway market.  Just Eat appeared on the London Stock Exchange in 2014 and now has a market capitalisation of around $7.3bn (July 2017) and does not own any restaurants.  Just to put this into some perspective, the market capitalisation of Burger King is just over $12.5bn (July 2017).

Uber, the ride-hailing app that has already caused upheaval in the taxi industry, launched UberEats in 2015 with the aim of creating a similar disruption in the food home delivery market.  Interestingly, UberEats is meant to be the only profitable part of Uber.  The number of trips taken by UberEats drivers grew by more than 24 times between March 2016 and March 2017.

There are a number of different factors as to why these players have been so agile in capturing a growing meal delivery market.  Firstly, smart mobile phones enable a new payment paradigm as well as fully personalised customer service.  In addition, there has been a massive increase in the availability of widely accessible data, such as Global System for Mobile (GSM) communications and satellite positioning systems, coupled with a significant decrease in the cost of computing power.  To gain the necessary processing power that can be quickly scaled, a start-up can launch and operate entirely within the cloud.

Optimising payments

We have already seen ‘Contextual Payments’ at Uber, when the ride is over, you get out of the car and the payment is already processed – this is the ultimate frictionless payment experience.  Voice, images and messenger apps are expected to allow for more forms of frictionless payments, effectively blurring the lines between the customer experience and the payment checkout.  Apple, Amazon, Google, and others are all unlocking opportunities for merchants to seamlessly implement “one-click” payment for the web/mobile web.  Image-heavy social media sites like Instagram, Pinterest, Snapchat, and Twitter have all integrating payment using standardised open APIs.  Similarly, WhatsApp, Line, WeChat are all accepting and processing payments via their messenger platforms.

e-commerce delivery services and other restaurants app-based order-and-pay solutions are expanding and have a very low capital investment in their payment processing infrastructure which is typically via a SaaS-based solution for both payment acceptance, payment processing and fraud prevention.  As these businesses have expanded internationally, the need for alternative (and local) payment options becomes critical for their success. The customer’s different payment choices and the different payment channels that support different customer experiences seem to be unlimited. This requires robust back-office payments support from carefully chosen and integrated payment service providers.  Something that EDC has many years of experience in evaluating and selecting the right payment partners to achieve payment optimisation.

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