The Rise, Fall (and Rebirth?) of Food Robotics

Part III: The Future of Food and Robotics

Coming off the National Restaurant Show in Chicago, it felt like the perfect platform to meet with a good number of industry folks to chat about the future of food. I am always impressed with the amount of innovation on display there. So as we enter into this final installment (see part I and part II here,) we will look into some of the solutions for what the sectors are facing to find a way forward to help restaurants do more with less.

Darian Ahler

As a quick reminder, the F&B industry has been working hard and spending a TON of money innovating in the space to maximize revenue and keeping costs down, while keeping up with changing customer demands. They have optimized many parts of the process by pushing customers toward pickup and delivery with solutions like ordering kiosks, removing dining rooms, AI-operated dual-lane drive-thrus, third party and robotic last mile delivery and an increasing digital mix. This has so far kept up with customer demand (mostly), while pushing all labor into the kitchen to churn out as many meals as possible.

Churn really is the operative word there, too. With the significant physical and mental demands of working fast food (specifically in the back of house), it is hardly a surprise that the average turnover for the fast food industry is 144%. While I’m sure restaurants have always looked for ways to reduce turnover and its associated costs, with rising hourly wages the need to reduce turnover has now become imperative. Gone are the days when restaurants could lose a low-wage worker and backfill with another one the following day. Now the workers have increasingly high wages and it takes longer to replace them. This leads to increased employee burnout at a minimum, but also decreased revenue, longer service times and decreased quality. Restaurants will have to find ways to keep their employees longer. Where there are a number of ways to go about this, one of the main ones is reducing the amount of physical and mental stress involved with working these jobs. This is where automation comes in.

Now, to be clear, automation isn’t the only solution. Restaurants will have to improve their offerings (which costs more,) help with employee education and give them paths to grow so they know they won’t be stuck flipping burgers for the same minimum wage with which they started. Automation can be a part of that solution that frees up the employees to do the more meaningful tasks, focusing on quality, precision and hospitality.

Tech companies have their own work to do as well. They need to find ways to nail their product-market fit and get revenue earlier. Finding clever ways to get a product to market faster can show that they can be effective with little capital and understand the problem they are trying to solve. This is how they will get customer orders and/or investment. At this point they are fighting an uphill battle on those fronts because of their predecessors, but this also means they have just as many case studies to learn what NOT to do. As we saw in the recent history of food tech, the industry was HOT in the 2010s and everyone was trying to get in on the action. Most of the companies from that era failed to scale and took hundreds of millions of dollars of investor money in the process. With companies like Zume taking $500+ million, this leaves today’s investors gunshy to get into this industry without some key indicators of a company's success.

Today’s brand name players trying to revolutionize the future of food have also raised a significant amount of money and have yet to scale. Wonder has raised a whopping $1.7B, CloudKitchens is close behind with $1.3B. Even “smaller” operations like Miso ($125M, ~20 locations) and Kernel ($36M, 1 location) are still requiring large amounts to attempt market adoption. Looking from the outside one might believe that scaling a food technology solution requires hundreds of millions of dollars (if not billions) and still has a high risk of failure. So let’s get down to how we can make this all work.

Both restaurants and tech companies need to be thinking about what a restaurant looks like 10-20 years from now. Trying to shoehorn new technology and automation into spaces that were designed 40 years ago for humans is not only going to be challenging, it might not be effective. The cost and complexity will be too high and the impacts (read: ROI) will be too low. They need to approach the kitchen as pure whitespace and look at the end product. Think about the jobs to be done to get delicious, fresh affordable food into customers’ hands quickly. From that perspective the restaurants and tech companies can build a path to get there from today’s operations.

Once the restaurants have that vision developed, they can start to plot waypoints on what automation will be required and how to integrate that automation over time. They also need to understand that hardware doesn’t develop and scale at the speed that software or operation change management happens. If they know they will need a specific piece of hardware five years from now, they need to seek out these early stage companies and invest in those solutions now to ensure it is ready when they need it. By reallocating just a small amount of their current “restaurant improvement” budget to “hardware innovation” can be extremely impactful for both them and the tech companies. 10% of these budgets is in the $10-100M range (or more). A $100k investment can make an idea real. A $500k investment can get a prototype into the field. A $10M investment? Given to the right tech company it can be a step change for that restaurant's future operation.

For the tech companies to succeed the startups need to think about the end users today and in the future. The staff, the customers, the managers and technicians required to make all that work. A good industrial designer recently said to me “a lack of user understanding is severely hampering success” when it comes to a number of food automation solutions out there. No more solutionism. This can’t just be focus groups and desk research and engineer best-guesses. This is field work, building mockups and prototypes and listening to the employees for how the work gets done and what the biggest challenges are. Of course this also presumes the restaurants are willing to open the doors a crack to allow designers to talk to their staff.

The hardware startups need to understand their market and find ways to gain revenue faster. Make hard decisions, build and iterate quickly to get your product out there. A hardware company can’t expect to get a $5-10 million investment without some actual data on product-market fit AND some real world revenue. Proving your product is actually beneficial and that someone is willing to pay you for it shows you’re onto something. If this sounds obvious, it is, but you’d be surprised how many startups skip this step and try to raise tens of millions of dollars because “the market is huge”.

These solutions from the restaurant side and technology side aren’t an “either/or”. This is “yes and.” Restaurants and hardware companies will need to embrace their inner improv actor and dive into the ambiguity of what the future holds for the industry, take some risks and play the long game. The fate of fast food may just depend on it.