Could Brinker's Use Of Technology Revolutionize The Restaurant Industry?

Am I the only person that gets seated at the local chain restaurants on Friday and Saturday nights just to sit and wait for an hour (well maybe really just 5 minutes but it seems longer) until the server finally shows up to get my drink order? All I really want is to be able to sit back and enjoy a Great Lakes or Sam Adams (SAM) brew while I look at the menu to decide what to eat. But instead, I always seem to end up at understaffed restaurants with servers that give you a disgusted look when you ask what is on draft besides the traditional light domestics. So when this recently happened to me, I glanced down at my phone sitting on the table and said "Too bad that Google can't help me order a good beer!"

Technology In Restaurants?

At the ICR XChange Conference last month, Brinker International (EAT) CFO Guy Constant stated that his company's Chili's restaurants would like to use technology to boost its curbside to-go business at lunchtime. Although I don't think that the curbside to-go business is an area for rapid growth, I do think that technology could be a catalyst for improved margins and growth.

Chili's has been rolling out tabletop tablets at many of its restaurants, with the primary purpose right now to allow customers to play games while dining and make payment with a credit card. The tablets that Chili's is using are made by Ziosk and feature a wi-fi enabled 7" Android™ touchscreen. Brinker management must be relatively pleased with the performance of the tablets installed so far, because in the 2Q2014 earnings conference call, they stated that the company is:

still on track to complete a full rollout to the rest of our company-owned locations by the end of the fourth quarter. And we are excited to leverage this technology to enhance our current guest experience.

While Chili's claims that the tablets are not intended to replace servers and meant to serve a more complimentary role, I believe that this technology could be the first step in a seismic change to the restaurant industry.

Could Google Be Your Server?

In addition to giving an update on the tablet rollout in the 2Q2104 earnings conference call, management also stated:

Additionally, we are working with partners to rethink multiple aspects of our business with tabletop technologies. The possibilities are numerous and we are proud to be leading the way for the industry.

After hearing this statement, I couldn't help but think that Google (GOOG) might be one of the partners that Brinker management was referring to. With the growing popularity and technology for intelligent personal assistants, Google Now could be implemented into the Android tablets and could provide a huge benefit to both the restaurant and customers. Not only would customers be able to use the touch screen functionality, but Google Now could interact with customers in almost the exact same fashion as a traditional restaurant server, minus the annoying wait times.

For instance, as soon as customers were seated at a table, Google Now would be able to ask what each person wanted to drink, and actual servers would then be able to get the order and bring the drinks much quicker. The customers would then also be able to order food at their own leisure, or possibly even ask Google for any recommendations. Google has openly stated that it is trying to create the ultimate personal assistant, and has been investing heavily in the natural language understanding (NLU) that would be necessary to support this function.

Competition

Since Ziosk uses Android tablets, Google Now would be the most obvious personal assistant that Brinker could utilize; however, there would almost certainly be competitors that Brinker could adopt as well. Apple (AAPL) is an obvious competitor with its well known personal assistant "Siri", and the technology appears to be falling into place.

Through Apple's relationship with Nuance Communications (NUAN), Siri would be able to utilize NLU that would even allow for Siri to learn how to become a better server through every transaction. Nuance has been investing heavily in its cloud infrastructure that would be necessary to perform this function, and in fact, in Nuance's 1Q2014 earnings release the company noted the following:

1. We are making significant investments in R&D, especially in natural language understanding and reasoning systems, implementation services and platforms to address these opportunities; and,


2. In Mobile & Consumer, segment profit and margin fell as … increased costs to deploy large, custom solutions for key customers, and significantly increased investment in R&D for cloud-based speech systems and natural language understanding advancements.

So when Apple set up a Boston satellite office, it was speculated that Apple may be working on developing its own technology to replace Nuance, but I believe that Apple and Nuance may actually be collaborating on ways to improve Siri.

In addition to Google and Apple, Microsoft (MSFT) may also be able to eventually compete as well, after reportedly investing $15 million in FourSquare to help power its Cortana app. While Cortana is rumored to be voiced by Halo's AI companion and in development for Windows phone devices, it seems to be much further behind Google Now and Siri in development.

Benefits of Using a Personal Assistant

In addition to possibly reducing wait times and frustrated customers (such as myself for the situation I described in the introduction), personal assistants would also likely be able to utilize voice biometrics that could keep each person's individual bill simply by their voice. I also wouldn't be surprised if technology eventually evolved to where the personal assistant could access someone's Facebook (FB) profile to determine what each customer likes, and would be then be able to recommend that they try a certain beverage or food that the restaurant may want to highlight. The restaurant may be able to try introducing higher margin products, or just simply ensure that the customer finds something they like and would want to come back. Then as the customer was done with their meal, they could then ask the personal assistant for their bill and make payment through Google Wallet or the Apple payment solution that Apple is rumored to be working on.

Would It Fit Brinker's Business Plan?

Using a personal assistant with a tabletop tablet would be a great application for the software as a service (SAAS) model. A contract would likely be setup as a per transaction or per table fee, which means that Brinker would not have to incur large upfront capital expenditures. It also means that if customer acceptance of the personal assistant is very sluggish, then Brinker would still be able to operate with the traditional service model without much of a hit to the company's bottom line. The use of a personal assistant would also fit with the three main criteria that Brinker uses to evaluate a potential investment, which are:

1. It has to be good for team members


2. It has to be good for the guest


3. It has to be good for the company

The team members would benefit from being able to take on more tables and responding to specific customer requests. This would allow team members to be more efficient and provide better service, which in turn would likely mean better tips. The guest would benefit from being able to order and pay at their own leisure, which would also mean that Chili's would become a much better lunch destination for customers who need to get in and out fast. The company would benefit from quicker turnaround of tables, ability to market specific items, and likely cut down on some employee expenses.

Conclusion

Whether Brinker believes that personal assistants would improve profits or customer experience, I believe that this may be one of the ways that the company is trying to "lead the way for the industry." The technology appears to be falling into place, and a SaaS business model would allow for easy experimentation without hurting the bottom line. With tech giants like Google, Apple, and Microsoft all pouring money into NLU and continually trying to advance the next big technology idea, I believe it will be a matter of time before personal assistants become the norm in the service industry.

Source: Could Brinker's Use Of Technology Revolutionize The Restaurant Industry?

Disclosure: I am long NUAN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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