SERVICE IS A KEY INGREDIENT - HughesON · was the Eisenhower Interstate System, a government initia - tive linking major US highways. Consequently, everyday Americans started venturing

Service Is a Key Ingredient

SERVICE IS A KEYINGREDIENTThe True Impact of Network Outages on Quick Serve Restaurants

Research Partner


The Dawning of Roadside AmericaPost-World War II America involved far more than returning GIs and migration to the suburbs. Nicknamed the “Golden Age of Capitalism,” this era was characterized by higher disposable incomes and increased rates of automobile ownership among the working class. Complementing this was the Eisenhower Interstate System, a government initia-tive linking major US highways.

Consequently, everyday Americans started venturing en masse beyond their hometowns for the first time. Capital-ism readily responded with roadside motor inns, attractions, and hamburger joints ready to serve them quickly and affordably. Prior to this, travel and dining catered largely to affluent individuals.

By 1970, fast food chains—or quick-service restaurants (QSRs)—were generating an estimated $6 billion, and many had become household names. But by the 1990s and early 2000s, the picture began changing. Better edu-cated, dual-income households were growing. They had less time to prepare food but wanted healthier options. Soon, traditional QSRs were joined by fast casual chains offering affordable food that was fresh, high quality, and quick to procure.

In 2017, the National Restaurant Association estimated that QSRs generated $234 billion, out of a total $799 billion in food service sales. Roughly 50 million Ameri-

cans visit QSRs daily according to the Franchise Asso-ciation’s “Fast Food Industry Analysis 2018—Costs & Trends" study.

In recent years, demand for healthier options has spurred the growth of fast casual chains, adding another dimension to informal dining. According to NPD Group’s "Fall 2017 Recount" (Feb. 4, 2018), fast casual chains increased their number of units to 25,118 in 2017.

This healthier food trend is not the only factor challeng-ing QSRs. Higher salary demands among QSR workers, rising food and fuel costs, and a May 2018 FDA mandate that chains with 20 or more locations disclose nutrition and calorie information are impacting profitability. The FDA projected that through 2020, menu labeling com-pliance will cost restaurants $562 million. The National Restaurant Association estimates that 230,000 restau-rants will be affected.

Tech Savvy MillennialsCompounding the challenges of traditional QSRs

are the lifestyles of Millennials, who expect technolog-ical conveniences to characterize almost every experi-ence. To better serve this demographic and others, QSRs and fast casual restaurants have been investing in free Wi-Fi and other technologies that add to the overall speed and convenience of the dining experience.

A study from Hospitality Technology titled “Insight Enabled Innovation” (March 7, 2018) indicated that mobile payments (52%), delivery services (52%), and interactive kiosks (27%) topped many restaurants’ innovation agendas. Mobile apps and online ordering are also in high demand. Less visible to customers— but just as important—are technologies that improve kitchen efficiency, better manage inventory and POS functions, reduce waste, and alleviate labor costs.

Among the most successful functions added in recent years are online and mobile ordering. Embraced heav-ily by pizza chains in particular, they increase purchas-ing frequency and raise average ticket size through order customization and easier checkout, improving customer loyalty.

Mobile ordering even allows restaurants to set prompts on the system that facilitate cross-selling and upselling of high-margin items. Further, it greatly im-proves order accuracy when compared to orders placed

In 2017, the National Restaurant

Association estimated that QSRs generated

out of a total

$234 BILLION

in food service sales.

$799 BILLION


over the phone. With a phone order, it is easy for the QSR employee to record important details incorrectly, including items ordered and instructions for special diets (e.g., “hold the nuts”).

Adding to the convenience of mobile ordering is that customers can place orders while on the way home from work and pick them up a few minutes later, all without needing to carry a menu in their pocket. This technology can also attract new customers who may casually scan the Internet for local food choices.

Tillstar’s “2017 Online and Mobile Ordering Index” noted that today, one in 10 apps on a customer’s phone is a restaurant mobile app. During the first quarter of

2018, QSRs accounted for 2.70% of restaurant e-com-merce spending, up from 2.47% during the first quarter of 2017, according to Modern Restaurant Management (April 30, 2018).

Millennials are leading the charge in digital ordering. As indicated in American Express’ "Restaurant Trade Survey" (2017), 62% of Millennials have used a restaurant’s mobile app or website to order takeout over the past month, more than twice as frequently as Baby Boomers (28%). Fifty-eight percent of Millennials use order/deliv-ery services like Grubhub and Seamless, compared with 35% of Gen-Xers and 21% of Baby Boomers.

Despite this, just 24% of restaurants currently use online order/delivery services, though 31% plan to implement or are considering them, as noted by Amer-ican Express. American Express also found that 24% of restaurants let patrons order ahead via their website or mobile app, and 42% plan to add or are considering this technology. Business Insider’s “Mobile Order Ahead Report” (2016) predicts that mobile order-ahead tech-nology should reach $38 billion by 2020 and account for 10.7% of QSR sales.

On Site Digital OrderingTraditionally, onsite orders have been written on

paper and posted on a rack or spindle. Poor handwriting, grease and water damage, and various other factors can contribute to inefficiencies in this process. Onsite digital ordering, often facilitated by digital kiosks or tablets near the service counter or at tables, can address many of these issues. By alleviating wait times during busy periods, digital solutions allow QSRs to take more orders, yielding high-er hourly sales and a reduction in labor costs and errors since requests go straight from customers to the kitchen. According to Modern Restaurant Management, 28% of QSR customers have ordered via kiosks; 27% have used tablets.

Some kiosks have games and entertainment options, keeping guests occupied during the wait and generating incremental revenue. Tabletop models can feature project-ed displays that generate high-definition images from a short distance, taking personal entertainment far beyond the realm of traditional diner jukeboxes.

Digital menus are another perk. Displayed behind the counter or at the drive-thru, they let operators immedi-ately update prices and promotions using a keyboard, not a ladder. Restaurants can easily add new items, auto-

Source: Hospitality Technology (“Insight Enabled Innovation,” March 7, 2018)

2018 Innovation Agenda

Mobile payments

Delivery services

Big Data

Interactive kiosks

Tableside ordering

Beacons

Guest Wi-Fi

AI (voice ordering)

IoT

Wearable devices

52%

52%

28%

27%

23%

19%

19%

11%

9%

3%


matically shift menus for different day parts, announce promotions, and eliminate sold-out or seasonal offerings.

Digital menus can also display ads or suggest add-ons. In New York, due to state regulations,information such as nutri-tion and calorie counts is posted as well. With the new FDA menu mandate, digital menus will facilitate and lessen the cost of these changes for restaurants in other locations.

Drive-thru ordering is also seeing innovation. Boston Consulting Group (“The New Digital Reality for Restau-rants,” Nov. 8, 2017) indicates that up to 70% of sales can come through the drive-thru. But people who do not want to leave their cars certainly do not want to wait or have their orders filled incorrectly.

During busy times at one major chain, employees walk drive-thru lanes with wireless tablets to take orders and relay them to the kitchen while other workers take payments. In addition to alleviating the wait, this pro-cess gives customers a chance to interact with employ-ees and develop a deeper relationship with the brand.Other QSRs use order confirmation units to verify that orders spoken into microphones are correct. Integrated

with the POS system, units display orders on a screen, allowing drivers to check them. These units are also used to suggest additional items or upsize orders.

Behind the Scenes TechnologiesMany useful technologies are invisible to

customers. These devices can monitor crucial processes and keep staff informed. Smart watches, for example, let managers access real-time inventory and other information outside their offices, allowing them to attend to guests and other matters. They also let staff receive important informa-tion in a timely manner (e.g., “fryer number three stopped working”) while keeping hands free and clean to prepare food or perform other duties.

According to IDC, the total wearables market is expected to grow from 113.2 million shipments in 2017 to 222.3 mil-lion in 2021, with a CAGR of 18.4% (“Worldwide Quarterly Wearable Device Tracker,” Dec. 20, 2017).

In the kitchen, QSRs are implementing technologies that help manage costs, speed service, alleviate waste, and improve food quality. Some rely on the Internet of Things (IoT), which, among other purposes, connects mobile devices to sensors that monitor temperature, in-ventory, or other criteria. Across industries, ReportLinker forecasts that the IoT will grow from about $170.6 billion in 2017 to roughly $561 billion by 2022, a CAGR of 26.90% (“Internet of Things Market: Global Forecast Until 2022”).

The IoT lets managers remotely check the status of particular ovens or holding equipment, including use stages. Staff can verify food storage levels or cooking temperatures via smartphone to verify preparation prog-ress and ensure that they are conforming to food safety standards (e.g., proper meat cooking or milk storage temperatures). Through a Bluetooth-enabled app, staff can monitor pH levels and refrigeration systems, with no need for employees to take manual readings.

This digital process saves time and labor costs and prevents information from being “fudged.” The latter happens when employees fill out paper forms without taking actual read-ings, often because they are busy. Since restaurants are au-dited regularly by government agencies, digitally collected information can be accurately recorded for reference. This consistent log of equipment performance also alerts opera-tors when equipment is about to fail or requires service.

Mobile order-ahead technology should reach

$38 BILLIONby 2020, accounting for

Source: Business Insider’s “Mobile Order Ahead Report” (2016)

10.7% of QSR sales.

Up to of sales can

Source: Boston Consulting Group, "The New Digital Reality for Restaurants" (Nov. 8, 2017)

70% come through the drive-thru.


Overloading the CircuitsThis onslaught of technologies helps better

service customers, improves the dining experience, and facilitates business management. But with innovations occurring almost daily, QSRs are running into bandwidth constraints, putting them at risk for system failures and outages. If the circuits fail and the customers bail, guest loyalty and profits are jeopardized.

Many restaurants have relied on wide area networks (WANs) to link sites to corporate business systems, thus connecting business locations and technology. WANs use circuit-switched phone lines, fiber optic technologies, radio wave transmissions, MPLS (multiprotocol label switching), Ethernet, and IP connections to move informa-tion through telecom networks.

WANs provide connectivity across wide geographic areas. Historically, WANs have used a hub-and-spoke design, where data flows from a site to a corporate data center. Application prioritization and QoS are based on telecom standards, which route information from a single site to a single destination. WANs have trouble prioritizing applications and dealing with processes that operate at different speeds or communicate with multiple locations. QSRs' expanding technology needs and growth of Wi-Fi

systems for guests and employees have begun placing heavy burdens on WANs and their users.

A reliable network provides seamless engagement for cus-tomers and employees, helping to bolster brand loyalty and convenience. Excessive outages can have the opposite ef-fect by causing both groups to become frustrated with their inability to accomplish tasks. As the number of guest- and employee-interfacing technologies grows across different locales and cloud locations, connecting systems and touch-points is becoming increasingly challenging, particularly when new technologies are continually added.

To keep business flowing and to support the continued adoption of cloud applications and in-store devices, some QSR chains have installed software-defined wide area networks (SD-WANs). What makes a network software-de-fined is that multiple network functions are executed through software deployed on a single platform; this is different from a traditional router which provides a single network function with software designed for special hardware. Another advantage to SD-WAN is that applica-tion traffic is functionally separated from network control and management traffic to minimize operational impact during maintenance and updates.

A critical distinction of SD-WAN is its use of two circuits simultaneously, managed by the software in the SD-WAN platform, to identify which path to send traffic across and where to apply optimization in order to improve network and application performance. To prevent downtime, SD-WAN solutions seamlessly move application traffic to the best-performing path. The network administrator can direct how applications are managed accurately, securely, and effectively to best meet business needs. Network efficiency and availability improve while management effort and ownership costs decline.

To ensure consistent performance for mission-critical functions, each application is prioritized. This process, called flow control, allows higher-priority apps to be sent across the WAN without delay, while lower priority applications are slowed down using queuing techniques. This ensures that critical applications can get through and protects against congested network conditions, which can cause network brownouts due to packet loss and high latency that occur when application traffic volume exceeds available WAN bandwidth.

SD-WANs are particularly beneficial to QSRs. By automating network management and policy implementation, SD-WAN solutions excel with highly distributed organizations

IF THE CIRCUITS FAIL AND THE CUSTOMERS BAIL, GUEST LOYALTY AND PROFITS ARE JEOPARDIZED.


they may also be checking their email via the restaurant’s Wi-Fi. A network problem that impacts the POS or self-or-dering system at this busy time could cause a customer waiting for food to be late for work. Similarly, in the eve-ning, a customer who has been sitting at home waiting an hour for a pizza due to a malfunctioning phone or digital ordering system may cancel and order elsewhere.

In addition to being unable to accept non-currency payments, a malfunctioning POS system cannot han-dle loyalty programs, accrue customer data, or tabulate special offers. All of this further degrades the customer experience and impacts a restaurant’s ability to serve its customers. And POS challenges are just one of the more visible systems impacted by network issues. Problems with back-of-house systems that rely on sensors to mon-itor connected devices can cause soda fountains to run dry, ice cream to melt, and perishable food to spoil.

The bottom line is that when sales stop due to any of these malfunctions, so do profits and revenue.

The Impact on Communica-tion, Productivity, and Security

Unfortunately, the list of business areas affected by network outages does not end here. Communication, productivity, and network security are impacted as well—and with signif-icant financial consequences.

Network Architecture

PRIVATE

INTERNET

Fast Casual restaurant

QSR

Unified communication Digital signage

VoIP

Retail CRM Virtual desktop

Customer loyalty

Cloud DC

Data center

Customer assistance

Guest Wi-Fi

Mobile app

CCTVPOS

Cable Internet

that lack full time on-site IT support. Further, their smaller size and focus on single platform solutions save space for smaller footprint locations.

The True Impact of OutagesNetwork outage risks are particularly high during

peak periods. During the morning rush, consumers may be lined up at the drive-thru, placing digital orders and paying with credit, debit, and loyalty cards or mobile payments;

The average per capita cost of a data breach was

$225.Cost of data breach response

activities is estimated at

Source: IBM’s Ponemon Institute, “Cost of Data Breach Study, Global Overview" (June 2017)

$1.56 MILLION.


On the customer facing side, QSRs’ ability to process telephone takeout orders—often an important source of revenue--can be seriously impeded. According to NPD’s ReCount® report, 49% of food deliveries involve phone orders. If orders do not get through or are delayed, cus-tomers become frustrated and may order from a com-petitor, causing the restaurant to lose revenue. A good number of those customers may not return.

Due to affordability and a more advanced feature set, many retailers have replaced legacy phone systems with voice over IP (VoIP). However, VoIP systems depend heavily on the network and can be slow to implement when used with MPLS.

During a network outage, employees assigned to take phone orders may end up sitting idle, along with ca-shiers handling POS systems and people performing other important functions. When employees are idling at work stations, they still must be paid the same wages.

Communication with headquarters is impacted as well. When outages occur, QSRs cannot transmit crucial informa-tion regarding daily sales, inventory, and other operational issues to the main office or suppliers. Consequently, head-quarters will struggle to plan and execute companywide operations and functions, including maintaining inventory levels and scheduling timely deliveries.

Also at risk is data security, a problem whose impact is potentially serious but not immediately apparent. Data security issues can cost money in both lost customers and in rectifying subsequent problems. They can also cause potential new customers to not trust the company. Across business segments, US retailers and restaurants are among the most vulnerable.

All of the afore-mentioned connectivity issues are magnified by the number of outlets a QSR operates. If a company has 100 locations and each suffers one hour of network outage monthly, that equals 1,200 hours of outages annually.

Overall, costs incurred by network outages can be cate-gorized as tangible (direct) or intangible (indirect).

Tangible/direct costs include transaction revenue, lost wages, remedial labor costs, lost inventory, marketing costs, and bank fees.

Intangible/indirect costs include lost business oppor-tunities, declining employee morale, decrease in stock

The managed SD-WAN market reached

$700 MILLIONin 2017.

Source: Frost & Sullivan (2017)

80%of enterprises chose managed SD-WAN.

By 2022, the managed SD-WAN market is expected to reach

$3.5 BILLION.

IDC estimates that by 2021, worldwide SD-WAN infrastructure and services

revenues will reach

$8 BILLIONgrowing at a compound

annual rate of

69.6%.Source: IDC Press release (July 27, 2017)


value, loss of customer/partner goodwill, brand damage, loss of business to competitors, and bad publicity.

Managed SD-WAN BenefitsSD-WAN can alleviate many of the problems

plaguing companies that want to augment guest service and convenience but face the threat of overburdened networks, outages, and consequential lost revenue. With SD-WAN, these companies can continue to add the customer-centric and behind-the-scenes technologies that today’s market demands without downtime, lost sales, or erosion of customer loyalty.

SD-WAN uses a software approach, moving more network control into the cloud. Since applications can be prioritized, the customer-centric POS function can supersede account-ing or HR applications if needed. And SD-WAN can be implemented on top of an existing MPLS network.

SD-WANs do not use the traditional hub-and-spoke network. Branches and other locations are connected through a network fabric that blends dedicated last-mile circuits, some combination of middle-mile circuits, and the Internet. Data is routed across this fabric as required to most efficiently get cloud traffic to its various cloud destinations, Internet traffic to websites, and data center traffic back to the data center. The advantage to this fabric approach is that traffic is able to exit the network at its most advantageous point, often directly from the edge of the network, as opposed to always routing through a central hub or data center.

IDC estimates that by 2021, worldwide SD-WAN infra-structure and service revenues will reach $8 billion, growing at a compound annual rate of 69.6% (press release, July 27, 2017).

There are two common ways SD-WAN is installed: do-it-yourself (DIY) or purchasing through service providers (“managed”). Entities choosing the DIY method need IT resources to manage the technology. Only large corpo-rations have the resources to do this and provide the critical 24/7 support to ensure that any issues are ad-dressed in a timely manner. With managed SD-WAN, the service provider manages the network for the enterprise, including all of the broadband providers (which can be dozens) plus hundreds of different access plans. Even some big corporations do not want to devote time or resources to this.

Gartner’s research indicated a proclivity for managed SD-WAN, with its "2017 SD-WAN Survey" finding that nearly two-thirds of organizations want a managed solution.

QSRs can keep existing WAN infrastructure if the SD-WAN supplier supports pass through setups that make that feasible. Forrester’s “Data Global Business Tech-nographics Networks and Telecommunications Survey” (2017) noted that 64% of US-based entities plan to be-gin or expand installation of SD-WAN from a traditional WAN over the next 12 months.

Since SD-WAN is centrally controlled, all provisioning and changes to the network and applications are per-formed centrally. This reduces the time and personnel required for network management. Security policies are centrally managed, allowing IT administrators to make security updates on all devices on the network quickly and easily. Technologies for new locations can also be remotely implanted and updated, which is crucial for companies that are aggressively expanding or have a high number of geographically dispersed sites.

SD-WAN continually monitors every MPLS and broad-band connection, quickly identifying path outages or other issues. If headquarters IT personnel recognize a problem in a particular restaurant, they can quickly address it, further reducing downtime. SD-WAN can also help alleviate enterprise WAN bandwidth costs—without sacrificing reliability or security.

For VoIP applications, SD-WAN prioritizes voice traffic and provides the QoS needed to offer seamless telephone service with significant savings for each location. This is important for QSRs that take telephone food orders.


A Restaurant’s StoryA restaurant chain with 2,980 company-

and franchise-owned fast food and casual dining locations nationwide was facing mounting band-width constraints. Mobile-based loyalty programs, free customer Wi-Fi, and technologies designed to improve employee engagement and retention were good for business but were taxing the network. Main-taining network security, including PCI compliance, was another concern.

With managed SD-WAN, bandwidth for this restaurant chain is now delivered via affordable broadband services. Individual restaurants can prioritize important applications like POS over less critical applications while sharing the same available broadband bandwidth. The service provider manages and supports network connectivity, security, and application performance 24/7 so IT staff can focus on other issues.

Guests and employees are experiencing faster Internet speeds, transaction times, and web page loading. Customers and employees can easily access the Internet and future cloud-based applications over their mobile devices using the Wi-Fi network deliv-ered as part of the overall solution by the service provider. Each location has either high-speed 4G or a satellite link backing up the primary landline connec-tion in case of an outage–although the company has reported that network brownouts and blackouts have nearly been eliminated due to the dual broadband circuits at each site.

Additionally, the new network provides world-class security. Business and customer data is well pro-tected with features like next-generation firewall, stateful packet inspection, intrusion protection, and antivirus and antimalware.

Research Partner

ConclusionToday, 72% of Millennials discuss their restaurant experi-ences on social media, as reported by American Express. While this is great for promotion, it also facilitates demo-tion if the food is late, mobile ordering fails, or the POS system goes down.

Understanding the root causes of network outages can help QSRs avoid these calamities that result in lost rev-enue, productivity, and guest loyalty in a business model that centers on convenience and speedy food delivery.

To improve business on all fronts, many QSRs are implementing managed SD-WAN to realize all of SD-WAN's benefits while lowering the implementation risks and offloading the IT, network, and bandwidth provider management overhead. SD-WAN guarantees remotely managed, uninterrupted network connectivity for locations, including those that may be in isolated and difficult to serve locations. At the same time, a QSR's ability to process credit/debit cards and digital payments improves. It can also better manage inventory and food orders.

The QSR can also confidently add customer-centric mo-bile and other technologies that drive guest convenience and help maintain a competitive edge while knowing that the chances of data loss, digital ordering failure, re-duced productivity, and financial loss are greatly reduced.

Through a reliable network, business-critical appli-cations can be managed effectively, allowing QSRs to achieve every company’s goal: business transforma-tion, increased revenue, and customers who continue returning for juicy burgers, loaded pizza, and an overall satisfying dining experience.

Documents

SERVICE IS A KEY INGREDIENT - HughesON · was the Eisenhower Interstate System, a government initia - tive linking major US highways. Consequently, everyday Americans started venturing