By Jean Magalhães, Hospo Product Lead at Square Australia

The past few years have been tough on cafes and restaurants with a combination of staff shortages, rising operating costs and cost of living pressures impacting consumer spending. These continue to put pressure on the bottom line of hospitality businesses all over the country.

After the collective turnover of cafes, restaurants and takeaway food services in Australia rose by 0.5 per cent ($25.5m) in February 2023, by December 2023 it had fallen by 1.1 per cent (-$60.2m). The RBA lifted interest rates 13 times between May 2022 and November 2023, which impacted everyday spending. According to February 2023 research from Finder, half of Aussies (51 per cent) cut back on eating and drinking out. Along with consumers reducing their spending, restaurants were also battling rising costs of produce.

According to ABS, the cost of milk increased by 15 per cent in 2023, while the prices
for cheese, bread, cereal and other staples also rose. Fruit and vegetables also rose by 2.5 per cent. But through those years, Aussie restaurateurs showed their resourceful best. And are now beginning to think about thriving, not just surviving – with the outlook for 2024 looking more positive.

Square’s Future of Commerce Report, for example, shows that 90 per cent of Aussie restaurateurs plan to expand their businesses and 80 per cent feel optimistic about their restaurant’s future. To succeed this year, however, restaurants must continue capitalising on key trends and responding to evolving customer demands. This includes automating areas of their operations to improve efficiency and combat understaffing – 44 per cent of Australian restauranteurs say they haven’t been fully staffed in the past 1-12 months – as well as adopting self-serve technologies that revolutionise the dining experience for customers, and being creative with revenue streams.

AI and automation in gradual increments Square’s Future of Commerce Report shows that 61 per cent of consumers globally are supportive of local restaurants using AI-based tools. 54 per cent of restaurant owners plan to increase their spending on technology and automation tools in the next 12 months, and 76 per cent of consumers want restaurants to invest in at least one area of automation when they’re not at full staffing capacity.

I believe that the vast majority of restaurants will integrate AI into their operations in gradual increments to save time and increase profit. This won’t be through flashy robots, but instead via automation in things like marketing, rostering, ordering and kitchen workflows. Automation appears to already be positively impacting the restaurant sector, with as many as 67 per cent of restaurant owners saying that automation tools have directly benefited customers, either through customer experience or better communication among staff.

Customer experience and attracting younger diners And customer experience and communication are critical, both in online and offline settings. For example, research shows that half of consumers (49 per cent) prefer contactless payment methods, 47 per cent prefer making reservations online or through a social media app, and 42 per cent prefer making reservations through the restaurant’s site or a third-party system.

Furthermore, contactless payment kiosks (15 per cent), have significantly increased in popularity. Being tech-forward is also particularly key to attracting younger diners. Millennials (63 per cent) prefer making reservations online or through a social media app – more than any other generation – while Gen Z (70 per cent) and Millennial (64 per cent) consumers lead the charge on the demographics that most prefer contactless payment methods.

More than just dining service As restaurants look to expand, being creative with revenue sources and product offerings appears to be a key component of growth. More than three in four (77 per cent) restaurateurs say they’ll experiment with non-core offerings like meal kits, subscriptions, events, and more, and right now, 19 per cent of restaurants’ revenue stems from products and services outside of their core
offerings.

What’s more, consumers appear to be receptive to restaurants thinking laterally about their services and offerings: 80 per cent of customers are interested in trying a new offering at a business known for something else, and 86 per cent of customers would participate in specific perks, activities or events offered by a business.

Mo Saad, co-owner at Canberra-based, family-owned fast-food restaurant Fricken, says turning components of customer-favourite dishes into delicious condiments that diners can take home has been invaluable.

“The Fricken Sauce and Satay Sauce are our top sellers, outselling our nearest two commercial items by over 400 per cent. By offering these items as retail products, our customers can enjoy them at home, thus strengthening our brand presence.”

Using data to improve dining experience By using technology to support their operations, restaurants are able to make better, data-led decisions that improve efficiency and the dining experience.

Abdallah El Chami, owner of Canadian middle-eastern restaurant, Superbaba, which has restaurants in Vancouver and Victoria, uses data from Square to make menu adjustments based on diner preferences.

“There are a minority of people that love pickled turnip and a majority that really hate it, and so we would remove it [from the wrap]. It got to the point where I said, ‘these are very expensive to make; they require a ton of labour, and [through analytics] Square is telling us that tons of people are asking to take it out.”

Restaurants do, however, appear to have a small way to go in this area, with 46 per cent saying they lack the ready insights to understand and improve their customer experience. I am confident, however, that 2024 will be the year that changes and restaurants adopt the technologies that help them and their customers thrive.

As Ming-Tai Huh, Square’s Global General Manager of Restaurants, aptly puts it, “A key factor in ensuring your restaurant’s success is understanding what your community and guests are looking for — and what will keep them coming back.” Recipe for success
Restaurants truly are the lifeblood of local communities, but keeping the plates spinning can be challenging, particularly in volatile economic conditions and in a world of rising customer demands and expectations.

Customers tend to lean towards establishments that are well-run, deliver an amazing service, and offer their preferred experiences. This includes everything from self-service kiosks to contactless payments, but extends to how restaurants adapt their menus and product offerings based on customer feedback.

The outlook for 2024 is looking strong for the sector, and there is a real opportunity for those who tap into innovation like AI and automation and utilise data to understand customer demands, refine operations and improve their bottom line. Getting these components right really could be the ingredients for restaurant success.

Download Square’s full Future of Commerce Report 2024 here.

See here to learn more about Square solutions for hospitality.