Back in the day, when Starbucks first came to town and before jokes about whether you could milk an almond became standard for every boring uncle, there was a lot of chat about the “third place”. This place was, Starbucks hoped, Starbucks. And before long, there were many other vendors of non-alcoholic drinks vying to be the space defined by sociologist Ray Oldenburg as a place beyond home and work, where people could gather, relax and talk. And, by implication in the UK, not the pub, where we were already plenty talented at gathering, relaxing and talking.

 

And the sector was pretty pleased with this for a while. It scooped in people who either didn’t like drinking, were too young to drink or were off work with young children and concerned that social services might not appreciate them gathering in the pub. But things have evolved, as things are wont to do, and for many purveyors of the “third place”, having teenagers loiter around all day sharing one glass of tap water and an artisanal bun has not been the profit centre they might have hoped. Everyone wants to give back to the community, but picking up the slack where government funding has closed down youth clubs does not a fantastic business plan make.

 

So, the “third place” has shifted. Two years ago, when Starbucks announced its $450m North American store modernisation plan, it also announced that it was diversifying its portfolio of stores across cafes, pick-up stores, drive-thru-only and delivery-only locations. The “third place” may well be your lap while driving. Make sure the lid is firmly attached. The company said: “The ‘third place’ has never been defined solely by a physical space, it’s also the feeling of warmth, connection, a sense of belonging Starbucks. Digital technology is helping augment and extend that feeling of connection with customers – whether they are in Starbucks stores, in their cars, on their doorsteps.”

 

The “third place” is now your phone. Well, many of us already knew that, and some of us are trying to rein that in, but that’s another story for another day or concerned parenting WhatsApp near you. But this takes us back to that “third place” and what role it plays in your profits. In the hotel sector, public space has often been dead space. Rather, as a large corporate entity, will have a massive atrium – with a chunk of expensive art – to show off how they don’t need to make every square foot work. So, the higher up the chain scales you go, the more public space – with chunks of marble – you’ll find in the hotel world.

 

Unlike the money launderer in your local CBD, hotels have realised of late that they can’t have stacks of dead space lying around sucking the atmosphere out of their properties. Rising costs have meant the need to think about revenue per square foot, not just revenue per bed, and every inch is now having to work for a living. Guests also like fun things to do – experience, atmosphere – not just an echoing space to reflect in while being asked for credit card details.

Hotel property management systems are increasing, offering the chance to rent out parking space, co-working space, even rooms by the hour. Not like that – as meeting space. Not like that – business meeting space. Hotels have traditionally been seen by the local community as the big building at the end of the road that keeps foreigners off the street and might provide summer work for someone in your family. This is one of the many reasons the hotel sector is so awful at lobbying government; it hides in plain sight. 

 

This is all changing, as guests now want to interact with the local community and experience something beyond an identikit room. This is handy, because if you can lure the local community in and offer them a “third place”, people might spend money and top up your profits. This is now helping to drive deals, with Hyatt’s purchase of Me & All Hotels at the beginning of July making much mention of “a seamless fusion of check-in, bar, lounge, and co-working spaces”. Nice work if you can get it, thinks many a coffee house, wondering where it can fit bunk beds in.

 

For hotels, the option to have the “third place” on your phone is not there. The closest it has come is Airbnb, which, at its most-recent results, talked more about branded experiences. There are few hotel brands that have made it as true consumer brands, unlike Airbnb, which is a brand and a verb. It can now start to leverage this and think about not just revenue per room, but revenue per brand. 

 

With profits under pressure and people spinning out those lattes, is the “third place” now part hang-out space, part brand showroom? Takeaway became a must-have during the pandemic, but should you also have pop-ups at the local hotel? Products at your local supermarket? A lawyer who knows about licensing deals? The “third place” is now wherever you are. 

In my view, the future of hospitality hinges on how we evolve our kitchens. As ready meals get better, and delivery from dark kitchens improves, we need to make sure the food from our kitchen team is up to scratch. For me, there is a risk that over time some kitchens, maybe many of them, are seen as the modern version of a coal mine; hot, dark and a bit frantic. Of course, a great kitchen is none of those things, but the perception remains. 

 

In order to avoid this becoming our reality, we need to establish a strong competitive advantage, which I believe resides in several crucial areas. The first and most obvious advantage is great cooking. The skills of a talented chef are unparalleled, and no one can match the artistry and precision that a master in the kitchen brings to the table. The value of a great chef goes beyond just the taste of the food. Like a fine wine, the expertise and creativity of a skilled chef command a premium, and people are increasingly willing to pay for this experience. We are able to deliver high-quality meals, which set us apart in a crowded market.

 

The second advantage comes down to our equipment. Our kitchens are equipped with sous vide machines, deep fat fryers, chargrills and rationales, among other advanced tools. These sophisticated pieces of kit enable us to produce food of a better quality, far beyond what can be achieved with standard home cooking appliances. Even if the operator’s skill isn’t at a first-class level, the capabilities of this equipment ensure consistently excellent results.

 

And then there’s the crucial advantage of the freshness of our ingredients. I couldn’t count how many times I have been at home and have failed to add dill, yoghurt, or an ingredient I have never heard of in the latest Ottolenghi cookbook, simply because I do not have them to hand. For me, this kind of situation highlights the big difference between home cooking and a professional kitchen. In our kitchens, we have a wide array of fresh ingredients readily available every day. This constant access to fresh, high-quality ingredients makes a huge difference in the dishes we produce.

 

So, what are the challenges and how can we improve the future of our kitchens? Several things need to evolve in the next few years to achieve this. First of all, I think the supply chain needs to take on more responsibility for preparing dishes that hold well over time. For example, making a Boeuf Bourguignon doesn’t necessarily need to be done in a central kitchen or on-site; much of it can be efficiently handled by machines. The real challenge lies in how manufacturers can adapt to small-scale, bespoke production, but fortunately, some are already starting to do it.

 

The dishes we serve must be better than the store-bought M&S version. Our goal should be to add the finishing touches. We add the parsley, make it look good on the plate, and then serve it with a smile and a lovely glass of red.

 

Ticket management has typically been one of the most challenging skills in the industry. Managing three tickets simultaneously is common, but handling more than five is rare and exceptional. While ticket management systems are evolving, they are typically used by operators with multiple sites or very large spaces. What we need is a simpler form of ticket management that everyone can use, regardless of their operation’s size. Will we ever see the end of the tab grab? Only time will tell.

 

Ordering should be simple, but it often requires a level of technology that many of us still lack. Achieving a system where the correct amount of fish is ordered based on actual usage, and where we process larger fish to meet a standard specification, is still a work in progress. But, if we could receive the right food at the right time, with the system advising us on what to cook, life in the kitchen would certainly be a lot easier.

 

Working on these three areas would undoubtedly transform our kitchens for the better. There would be less work to do, lower stress levels and lower numbers. Efficiency would be optimised by shifting more responsibilities vertically to tech suppliers and food manufacturers, allowing us to streamline our operations and enhance overall productivity.

 

All of this is not to say that there wouldn’t still be some challenges in running our kitchens. However, I think that these changes would allow us to focus on our key advantages and deskill the less important areas of our kitchen, which seems to be the most important next push for the industry. 

The restaurant industry has fundamentally changed since the pandemic, and running a successful restaurant has never been more challenging. The pressures facing the industry show up in the data. The number of restaurant closures increased by 45% in 2023 compared with the previous year. There are a variety of reasons for this, but most can be attributed to inflation. 

 

The industry’s operating model has been ravaged. Food costs are up, labour costs are up, energy costs are up, off-premise costs are up, taxes are up – the picture being painted here is one of intense pressure. Lean profit margins are not a new gripe for operators, but they are the leanest they’ve ever been. For example, the average profit margins for restaurants have reduced from 20%-25% pre-pandemic to 10%-15% today. This means you could be only a few bad days away from your monthly P&L moving into the negative.

 

So, what does this mean for operators? It means that if you’re going to stay in the game and make a run at it, you have to scale. You effectively need two restaurants for every one you operated in 2019 to get the same cash flow outcome. Read that again. Double the locations, double the revenue, double the headcount and double the complexity! 

 

For some operators, scale has always been the name of the game. International quick service restaurants and large-scale franchise groups have built their entire business models on systemising their operations for scale, but it’s time for this mindset to go mainstream. 

 

Scale is easy to say and write but hard to execute successfully. Taking a restaurant from a single popular location and expanding it into multiple successful locations is no easy task. The transition usually comes with numerous challenges that can derail even the most well-managed operations. This is the point where many businesses “crater”.

 

The most common challenges faced by restaurants attempting to scale are in maintaining a consistent guest experience and ensuring operational and financial consistency across all locations. Inconsistency has become one of the significant reasons why restaurants “crater” when trying to scale. While an owner operator might have the skills and knowledge to run a highly successful single location business, operationalising that know-how across multiple locations is a completely different ball game.

 

Typically, what happens is as each new location opens, the quality and consistency of operations dilutes. The owner and the operations team spend their time flitting between locations firefighting or supporting inexperienced front-line teams with day-to-day operational decisions. This shows up to customers in the form of less than expected service or product quality. 

 

This scenario quickly becomes a negative flywheel. Front-line teams and restaurants aren’t staffed, stocked or trained appropriately. This leads to inconsistent guest experiences, poor staff morale and unpredictable profit margins. Inevitably, if you are stuck here, this means a business won’t survive in the medium term. 

 

If you are in this situation, it is critical that you pause, reflect and take drastic action to get out of it. One of the best ways to do this is by leveraging new technologies like artificial intelligence (AI) to get control over your numbers (guest, team and financial data) and help increase your reach and ability to guide your front-line teams. 

 

Leveraging AI is where modern technology can really help restaurateurs navigate the minefield that is scale and be that “digital helping hand”. AI-powered tooling can help you democratise knowledge on how to run a successful restaurant to ten, 100 or even 1,000 front-line teams. Here are some of the ways that you can train AI models to support your business:

 

Enhancing productivity and profitability is naturally integral, but one of the most valuable elements is its ability to provide predictive analytics. By regularly analysing large amounts of data, AI can accurately predict customer demand, giving restaurants the insights they require to optimise inventory and manage staff levels efficiently. This ensures restaurants can be adequately prepared for peak periods and even reduce waste during times that are slower.

 

This is something that we have observed first-hand with Irish-based Mexican restaurant, Masa. Since adopting Nory, Masa has been able to forecast sales within a 3% margin, instilling enhanced confidence in the restaurant’s financial planning and allowing for more proactive strategies and budget optimisation. Following the implementation phase, Masa has been able to control its labour to within 1% of what it had planned, equipping Masa with the control that it needed to maintain optimal staffing levels while minimising unnecessary expenses.

 

Cost of goods sold and labour costs are the bread and butter for all operators. If you can’t consistently nail these, then everything else is secondary. AI is perfectly set up to help learn what a business needs and support front-line teams making decisions in these areas. Using the aforementioned demand predictions, AI models can also analyse staffing patterns to suggest optimal staffing levels based on future demand and labour budgets. 

 

We’ve seen a huge impact from getting better control over labour costs using intelligent scheduling. Josie’s, a UK-based group of independent coffee shops, was struggling to manage operations efficiently as a result of using multiple systems for workforce and inventory management. After implementing Nory’s integrated workforce solution, the business was able to reduce labour costs by 23% in just four months, observing a 20% increase in productivity, measured by sales per labour hour.

 

Similarly, Roasting Plant Coffee has revolutionised its workforce management with Nory, cutting labour costs by 18% within two months. These results highlight the role AI can play in transforming operational efficiency and helping businesses achieve significant cost savings. AI can also support the kitchen management side of the house. Breaking down future revenue projections into prep lists, production plans and order guides will drastically reduce waste and safeguard your gross margins. 

 

The need to scale and the challenges that come with it aren’t going anywhere, but it’s how well you can ensure consistency in your operations that will determine how successful you are. No matter the size of your hospitality business – from independent coffee shops to large multi-country restaurant chains – AI will enable you to better systemise your operations, transform front-line teams into P&L owners and build a platform for successful scale.