5 Financial Considerations for Restaurants Planning To Invest in AI
Artificial intelligence (AI) has become an increasingly popular and viable option for making business improvements across industries, and restaurants particularly have a lot to gain. The buzz surrounding the benefits and innovative advantages have 16% of restaurant operators planning to invest in AI integration in 2024.
But, the key to AI’s potential for restaurants isn’t necessarily in its novelty. It’s in how you strategically apply it in the context of your restaurant’s data and financial health.
Before your restaurant makes an investment in AI, weigh these five financial considerations.
1. Identify Opportunities through Financial Analysis
AI’s capabilities seem nearly endless, but that doesn’t mean you should automatically implement AI into every aspect of your restaurant. AI is most beneficial when it supports your bottom line, so it’s best to prioritize the areas where AI can enhance the activities, functions and roles that directly impact your revenue.
To identify these opportunities, begin with a thorough financial analysis of your restaurant. Review your revenue streams, profit margins and cost structures to identify the most pertinent areas where improvements can be made.
Based on this review, you may discover that there are specific ways you can leverage AI to yield good financial outcomes. For example:
- If you have a high food cost percentage or an increasing cost of goods sold (COGS), you may look into reducing food waste through AI-driven inventory management.
- If overtime hours are increasing, you may consider implementing AI-powered scheduling solutions to cut down on labor inefficiencies.
- A low revenue per labor hour could indicate low productivity or efficiency among staff, which may be improved by optimizing kitchen operations with robots that automate repetitive tasks.
- If you have a high customer acquisition cost, you may consider enhancing your online reservation process with chatbots to streamline the booking experience.
It’s all about using your financial data to address your restaurant’s specific challenges with AI in a way that will be well worth your investment in the long term.
2. Forecast Costs and Create Budget
Once you’ve used your financial analysis to identify an opportunity, it’s time to plan for the financial aspect of integrating AI.
Applying an AI tool requires an initial investment cost, as well as indirect and ongoing expenses (such as training staff to work with the new technology, paying subscription fees or projecting maintenance costs).
To avoid unwanted surprises and unanticipated expenses, take an objective look at exactly how much it will cost to acquire the AI technologies you want, and then develop a realistic budget for maintaining the AI systems for the long term.
Compare your budget to your recent financial analysis. Is your desired use of AI financially feasible? What is the potential ROI? What do the results of a cost-benefit analysis show?
If it costs more to implement a tool than you stand to gain from its benefit, it may not be the best commitment for your company. On the other hand, if an AI tool can multiply your efforts at a reasonable cost, it could be a great decision. You’ll know the difference by consulting the numbers.
3. Minimize Financial Impact of Implementation
No matter the size of your budget, implementing AI will demand financial resources. However, there are a few ways that you may be able to offset the financial burden of adopting AI.
With some research, you may be able to identify industry-specific grants you can apply toward costs. National and local restaurant associations may offer loans. And if your restaurant can benefit from a particular AI-enabled technology being offered by a food tech company, consider reaching out to the company to inquire about partnerships.
You should also discuss potential tax credits, incentives or deductions with your tax advisor.
4. Prioritize Risk Management
AI and AI-enabled solutions are not infallible.
Technical failures could cause downtime in some areas, which could lead to lost revenue. Errors caused by AI could damage customer trust, which could result in lower sales. Problems integrating AI into existing systems could cause further technological issues and remediation expenses.
These risks shouldn’t completely deter you from implementing AI, but they should be on your radar. Making AI risk management a priority will help ensure you have the mechanisms in place that will enable your restaurant to withstand unexpected problems. Start by identifying risks for your specific situation and AI use, and then develop corresponding risk management strategies.
To minimize wide-scale missteps, consider starting a pilot program in select locations before executing a full-scale implementation across the entire restaurant. Create a feedback loop with employees and customers to gather insights into how your AI performs in real-life conditions.
With the right preparation and approach, you can refine your rollout and make necessary adjustments at the right time to avoid expensive disruptions.
5. Monitor Performance and Financial Impacts
Your restaurant’s AI journey doesn’t end when AI has been integrated. It’s critical to continuously monitor how well the AI integration is faring and whether it is producing the desired ROI.
Identify targeted KPIs to measure before, during and after your AI integration, and periodically revisit the numbers that led you to identify this AI opportunity in the beginning.
If you implemented AI to reduce food waste, have you seen changes in your COGS? If you’re using a tool to streamline staffing, have your overtime costs gone down? If you added kitchen robots to optimize your kitchen, have you seen increased efficiency?
Knowing the numbers is the best way to determine if your AI is working well for you, or if you need to make adjustments.
Learn More About Using Your Financial Data to Inform the Use of AI in Restaurants
AI can offer tremendous benefits to restaurants. It’s exciting to leverage new technology within your business, and AI can make innovative impacts on your organization—but it’s most valuable when it enhances your profitability.
Knowing your unique financial situation is the key to identifying these opportunities for growth.
To get help with implementing AI in a way that supports your restaurant’s long-term financial health, reach out to your Warren Averett advisor or ask one of our advisors to reach out to you.
