“A penny saved is a penny earned.” No truer words have been spoken by Benjamin Franklin and it’s a mantra that resonates deeply for businesses in the restaurant industry, many of which are in recovery mode amid the COVID-19 pandemic. With exorbitant operating costs and razor-thin profit margins (averaging 3-9%), restaurateurs are constantly looking to cut costs without degrading quality or service. It’s no surprise that many are reluctant to spend or invest in these difficult times. But what if, by investing in technological innovation, restaurants achieved both revenue and sales growth? This is possible by looking at the true return on investment.
Post-pandemic lockdowns in recovery mode
The COVID-19 pandemic has made life even more difficult for restaurateurs. Lockdowns and restrictions reduce operating hours and profits. In 2020, 90,000 restaurants and bars in the United States closed according to the National Restaurant Association. And the organization estimated that the industry as a whole lost $300 billion.
Additionally, consumers have shown interest in returning to restaurants, but progress is still slow. At the same time, restaurants are struggling with ongoing staffing issues. This puts even more pressure on restaurateurs to carefully calibrate costs and protect profit margins without sacrificing service.
IoT to the rescue
Restaurant owners have options to mitigate these challenges. A desirable option is to take advantage of Internet of Things (IoT) solutions. They can provide energy and maintenance savings, automate mundane tasks to free up employee time and increase operational efficiency. And each of these areas can reduce operational expenses that translate into tangible cost savings.
Low-power IoT solutions, in particular, offer additional benefits as they consume much less power than more expensive cellular or Wi-Fi solutions to transmit data, which means devices last longer without need replacement batteries, reducing total cost of ownership. Additionally, the solutions provide deep indoor coverage, which is critical for foodservice operators who typically require coverage for cold rooms and freezers in dense materials and in areas where signal strength is higher. weak. Finally, low-power IoT solutions require fewer access points, making deployment easier.
The ROI is here… You need to know where to look
As restaurateurs look to cut costs, energy consumption is an obvious area to exploit. Restaurants consume a lot of electricity for lighting, refrigeration, air conditioning and, of course, gas for cooking meals. A typical office building uses $2 of energy per square foot, compared to $12 per square foot for restaurants. That’s five to seven times more energy used in a restaurant than in a commercial space.
Automated IoT-based energy management systems enable homeowners to reduce utility costs. This is essential when a 20% reduction in energy costs translates into an additional 1% profit. One option is to deploy a monitoring platform that optimizes the use of cooling systems and air handling units (AHUs), which circulate and ventilate the air inside buildings. These systems integrate data from the electricity network to modulate energy consumption when tariffs are highest.
An upward adjustment of just two degrees in hot weather can significantly reduce energy consumption. Due to automation and IoT connectivity, these systems require no human intervention to make adjustments and relieve the burden of managing staff energy to focus on the customer experience.
Speaking of temperature monitoring…
IoT systems can track temperatures through sensors on fryers, for example, to maintain optimal levels of cooking efficiency and food safety. Systems can lower temperatures when they detect these fryers are not in use and quickly raise them when needed.
Temperatures in refrigeration units also need to be carefully monitored to prevent food spoilage and maintain quality. Usually, checking temperatures periodically and maintaining a manual log for safety and regulatory compliance is an employee task. Checks are frequent and time-consuming, taking staff away from their responsibilities with a greater impact on sales and the customer experience.
A more reliable and efficient approach is to equip refrigerators with IoT-connected sensors that monitor temperatures 24/7 and streamline the check-in process. If temperatures fluctuate from optimal levels, the monitoring system alerts a manager to take prompt corrective action.
By automating this process, it minimizes errors, improves food safety procedures and prevents inventory spoilage. Considering that the three-year average ROI of food waste reduction programs is 600%p, the ROI impact becomes even greater. Besides reducing food costs, saving time is another area affecting ROI. A MachineQ customer noted that by automating routine tasks such as monitoring refrigerator and freezer temperatures, the company saved up to 12% of an employee’s time. What does this time saving mean? Fewer employees are needed because restaurateurs can reuse the time saved by an employee to focus on customer service. Therefore, these savings have an impact on revenue and turnover.
Prevention of water damage
IoT solutions can also help restaurants prevent water damage caused by leaky pipes and faucets, clogged drains and faulty cooling units. Each of these issues can severely damage buildings and equipment and even temporarily shut down a restaurant. Every year, insurers pay $2.5 billion for water damage claims.
With IoT monitoring apps, sensors can monitor water, humidity, and temperature to detect leak anomalies that indicate problems like leaky pipes. If something goes wrong, the sensors use wireless connections to issue alerts and can automatically trigger a valve shutoff to minimize damage.
Data from these sensors is continuously collected to help manage water use and reduce waste. The technology is beneficial for preventing damage that can lead to downtime and reducing water consumption where possible.
Know where ROI lives?
Profit margins will always be tight in the restaurant business, but IoT solutions are helping to drive competitiveness by modernizing operations and providing a return on investment that is hard to see when it looks like an investment at first glance. Additionally, when restaurateurs take the approach of investing in one or two solutions that have the most immediate return on investment, and then seek to build on that foundation, it further increases efficiency and profits, improves customer experience and offers a lower total cost of ownership (TCO).