In-house technology solutions could be the next frontier for the restaurant industry. This quarter, several major public restaurant chains mentioned investing in proprietary technology during earnings calls—ranging from one-off applications to entire operating systems built from scratch.
Wingstop was one of the most prominent examples, as the company went into detail last week on building its $50 million proprietary tech stack that has been in the works for years, and will be launching in the second quarter of 2024. Most notably, the wings chain confirmed this week that the company announced it will drop Olo as its primary tech partner at the end of Q1 2024, in favor of going in-house. Olo’s stock plummeted by $1.60 per share on Tuesday with the announcement of the news.
“Wingstop aims to digitize 100% of transactions — We have made key investments in our proprietary e-commerce engine over the last three years and are excited to unlock increased levels of hyper-personalization and enhanced analytics on our journey to become a top 10 global restaurant brand,” a Wingstop representative said in a statement emailed to NRN. “We thank Olo for their partnership in helping grow Wingstop into a digital powerhouse.”
The spokesperson further clarified that Wingstop’s proprietary tech stack has been brewing for a decade, since the company first saw substantial digital sales mix. Today, almost 67% of Wingstop sales come from digital transactions —or almost $2 billion in annual sales — and the company’s goal is to eventually digitize every single sale.
“Our strategy remains unchanged [from ten years ago] and our tech stack is part of the digital transformation that we’ve shared publicly over the years – one that our brand partners and investor community have followed closely,” the company spokesperson told NRN. “These global tech investments are positioning us to achieve our goal of 100% digital business.”
But Wingstop isn’t the only company trading in third-party vendor partnerships for in-house solutions. Other public companies that either mentioned or went into detail about investments in proprietary tech solutions include Yum Brands, Sweetgreen, and Restaurant Brands International.
Yum Brands confirmed in its earnings call this quarter that the company will be rolling out proprietary automated inventory technology to the U.S. KFC portfolio by the end of 2023. AIM is described as an “in-house developed AI module that predicts and suggests the quantity of each product a restaurant general manager should order” and it is currently in place at 7,000 U.S. stores across the Yum Brands portfolio, Yum Brands CEO David Gibbs said during the Yum Q3 earnings call on Nov. 1.
“We have made significant progress in 2023 building, testing, and refining our proprietary technology platforms,” Gibbs said. “In 2024, we will further scale these platforms and continue to realize the value of our owned tech ecosystem.”
Sweetgreen and Restaurant Brands International also mentioned deploying new proprietary technology soon, though neither brand went into as much detail. Sweetgreen simply said the company is investing in more “proprietary tools” for the company and declined to comment further, while RBI is rolling out a proprietary operating system to “further streamline back-of-house flow for team members and products, especially in a digital era with multiple order and fulfillment channels.” CEO Joshua Kobza said during Friday’s earnings call said that the new system is already in 2,000 RBI restaurants, with plans to roll it out systemwide in the coming years.
This is likely just the start of a major trend toward restaurant companies taking their technology in-house. As Wingstop executives said during the company’s recent earnings call, switching to an in-house technology platform allows for companies to more readily tap into a consumer database, and utilize their customer data to improve personalization and tweak menu and operations based on consumer behavior.
Besides taking control of their own data, companies that are making the switch to proprietary technology are investing in a completely custom tech stack, which could be more beneficial in the long run than trying to piece together a formula for the perfect tech stack for a brand’s specific needs from several vendors. As the hospitality technology industry continues to balloon and options for tech investments grow exponentially, the option to build a tech platform from scratch could be a more viable option for larger companies that can afford the initial investment in an in-house technology team.
But given Olo’s stock plummet after Wingstop moved on to in-house solutions, does this mean that the tech vendor bubble is going to burst? As NRN has previously discussed, the restaurant tech industry has been going through some growing pains, and the days of big investor checks for every trendy tech startup out there are coming to an end. We predict that within 10 years, most of the largest restaurant companies will bring their technology operations in-house. However, there will always be a need for third-party technology solutions because not every restaurant company is as resource-rich as a Yum Brands or Wingstop. The average independent restaurant or emerging brand simply cannot afford to build their own operating system.
As restaurant companies of all sizes begin to invest more of their budget and resources into digital technology, personalized solutions will likely become the norm. Tech vendors have the option to evolve with the times and begin offering more personalized solutions or even completely custom tech stack builds, or else they will risk losing their business to an in-house team of IT professionals and engineers.