How To Play The Digital Revolution In The Restaurant Business

A new report by KeyBanc Capital Markets and Pacific Crest focuses on the digital revolution currently happening in the restaurant business. According to the report, the convergence of technology and food service is reaching a “tipping point,” and it is creating both opportunities and challenges for the restaurant business.

Importance of technology
Restaurant analysts Chris O’Cull and David Carlson name several ways in which technology is important for modern restaurant operators. If utilized effectively, technology can serve both to increase customer spending and lower service costs. In addition, technology (or lack thereof) can serve to both attract customers or drive them to the competition.

The numbers
Although the world still has a long way to go in the marriage between restaurants and technology, the report included some staggering statistics that illustrate just how much of a role technology already plays in the industry:

• Domino’s Pizza Inc DPZ already has 10 million downloads of its mobile app.
• More than 50 percent of Papa John’s International Inc PZZA’s domestic sales are digital.
• About 83 percent of smartphone owners now use their devices to make dining decisions while traveling.
• Ziosk tablets already aid in the service of about 25 million monthly restaurant customers.
• McDonald’s Corp MCD now has more than 57 million Facebook Inc FB “likes.”
   

Stock plays
The report highlights four potential areas of investment when it comes to the integration of technology and restaurants and names stock plays in each area.

In the pizza business, analysts see both Dominos and Papa Johns making the right moves when it comes to tech initiatives.

In the bar and grill space, analysts like the tech-related brand renewal effort put forth by Red Robin Gourmet Burgers Inc RRBG.

When it comes to digital payments, analysts see a major opportunity in the restaurant business for companies such as VeriFone Systems Inc PAY and Vantiv Inc VNTV.

Finally, analysts see a mixed bag for social restaurant review sites and believe that “advertising isn’t worth it for many big spenders” when it comes to sites like Yelp Inc YELP.