Several factors seem to indicate that operators are taking Back Office more seriously as a valuable business tool:
Industry studies predict an uptick in spending on Back Office
Food and labor costs are rising and labor is in short supply. Back Office can give an operator or manager incredible insights into, and control of, these numbers.
Recent acquisitions of Back Office solutions could indicate increased interest in Back Office.
Back Office By Any Other Name...
Let’s start by defining what we mean by Back Office since not everyone in the industry uses this term. Most people are familiar with the tools they use for staff scheduling, payroll, labor cost tracking, inventory management, or food cost analysis. And they may have a range of software products to help them do these tasks. At Xenial, we consider ‘Back Office’ as the software that helps managers/owners/operators do any or all of these things.
In the past, software that handled operational aspects of the restaurant was largely an afterthought developed by point of sale (POS) companies to answer the needs of operators. Many of these solutions had shortcomings. A few rich, integrated, mature solutions were developed, however. These serve operators well across the range of uses (staff scheduling, payroll, labor cost tracking, inventory management, food cost analysis, etc.). Such holistic, highly accurate solutions are rare, however, largely because they are difficult and time-consuming to develop.
Some of the back office solutions you see today started out as one thing, say, accounting or inventory, so they’re strong in that, but they are weaker in other aspects of managing back office such as labor scheduling/forecasting.
The Time is Right for Powerful Back Office
Data has emerged as a key competitive differentiator in a business environment that has never been more competitive. For a long time, now, for example, data has been especially critical in knowing your customers and marketing to them. The importance has grown with the transformation to digital experiences. A recent Forbes article points out:
"The number of restaurants per capita is at a record high and the best way to differentiate in a saturated space is to very clearly know your consumers and what they want."
Operators are Now Hungry for Insights Into Operational Data Related to Labor, Food, and Sales
Having had several years to adapt to the brave new world of digital everything and the glut of data that digital and omnichannel service generate, restaurateurs are paying even more attention to data related to food, labor, and sales, since food and labor are their highest costs in operating a restaurant. And costs for both are rising - fast.
Both of these areas - food costs and labor costs - can be well served by a robust Back Office solution. So it’s no surprise that surveys of operators foretell a surge in restaurant investment in back office in the coming year.
The need to intimately understand labor, food, and sales numbers and all the possible causes and effects is prompting operators to look inwardly for efficiencies and to mine operational data to make informed decisions.
The Interest for Back Office is High
Consider Hospitality Technology’s 2019 Restaurant Technology Study, for example. HT’s survey of operators reveals that:
“Back-of-house software saw a boost in 2018, taking the lion’s share (30%) of software budget allocations. This is compared to 25% in 2016 and 22% in 2017 when it was eclipsed by software spend going to corporate and front-of-house software.”
Labor and staffing management is the largest driver behind operators’ interest in data, according to the 2019 Restaurant Technology Study.
“Staffing and labor management once again eclipses customer insights as a top target for more data (47%).”
The same study showed that 2019 strategic goals for QSRs align with the greater investment seen in back-of-house software and digital customer management software.
“These are areas that will support not only data management but also the online and third-party ordering options that will be vital to omni-channel and off-premise strategy.”
Back Office Rising to a Place of Prominence?
A report by Hospitality Technology called Industry Outlook, based on interviews with Hospitality Technology’s Advisory Board, suggests that Back Office is on the verge of rising to a more valued and revered place in the tech stack as a value-add tool.
In this outlook, Hospitality Technology asked its members several questions, including these:
Where is tech under-served?
Brian Pearson: “Too many solutions today offer only data. Without employing highly experienced data analysts, the existing toolsets rarely give guidance. The static reports we’ve all been looking at have been slightly varied flavors of the same stale information. Over the last 10 years the management pool has become younger and less experienced, with 98% having no formal education and beginning in the industry as dishwashers or hosts. BI and back-office have not kept pace with our workforce’s needs. Similar to the way third-party services completely disrupted the POS segment of our industry, predictive analytics engines are rocking the way we look at the traditional back-office players. (Hospitality Technology Industry Outlook)
As Pearson points out, we don’t expect today’s managers, regional managers, general managers to have the business acumen / background / education / training that they once had just 15 or 20 years ago. The software they use needs to fill that gap.
What emerging tech has application in hospitality?
Brian Pearson: “Predictive analytics. Casual and full service has been able to operate in large part using the “old ways:” manual processes and training techniques that have remained mostly unchanged. Now with the glut of choice consumers have for not only brands, but also revenue centers (in-house, third-party and delivery, etc.), operations have to be smarter than ever to meet their needs. By leveraging predictive analytics engines for everything from labor management, ordering product and identifying products that drive affinity, we can empower the inexperienced management pool we are all relying on to run restaurants by telling them stories instead of stacking reports that don’t give guidance.” (Hospitality Technology Industry Outlook)
The Industry Outlook goes on to suggest that predictive analytics based on a restaurant’s operations, augmented by AI and machine learning can help guide critical staffing, inventory, and other decisions is equally critical to help operators constantly operating with razor thin margins.
This area of prediction and forecasting seems to be an opportunity for improvement for Back Office solutions. These kinds of insights give operators the competitive leverage they need.
Recent Acquisitions in Back Office Also Point to to Increased Interest In This Part of the Restaurant Tech Stack
Several fairly recent acquisitions of back office solutions also point to the increased interest in back office as one of the tech stack essentials for success:
PAR acquired Restaurant Magic
Forth acquired Hotschedules
A few years back, Compeat acquired CTUIT.
Thoughts to Ponder
What has back office lacked, historically, and is the gap being filled? With today's store managers having less business acumen than their predecessors from 10 or 15 years ago, can back office fill some of these knowledge gaps? What do back office acquisitions mean for operators, and what value/features/capabilities stand out as table stakes that they should look for in a solution? Will these back office acquisitions result in greater investment in research & development, new capabilities, feature gaps being filled, and generally, overall, better products?
Discover Xenial Back Office: One of the Most Powerful Back Office Solutions on the Market
Built on the foundation of RTIconnect over 30 years of development, Xenial Back Office is a proven but modernized back office workhorse. Leading QSRs like Wendy’s and Burger King rely on Xenial Back Office to streamline operations, optimize food and labor costs, and run better, more profitable restaurants. Contact us today for a demo or to learn more.