Starbucks (NASDAQ:SBUX) has for some time been a technology leader in the restaurant industry, thanks in large part to its pioneering mobile ordering and payment app. Now, Starbucks aims to turbocharge that app by leveraging a third party's technology for the next step in its development.
The coffee giant has taken an equity stake in Brightloom, "a San Francisco and Seattle tech company that is working to create a best-in-class end-to-end digital customer experience platform for the restaurant industry," according to a press release. Starbucks will also hold a seat on Brightloom's board, while the tech company will get access "to select components of Starbucks proprietary digital flywheel software."
What is Starbucks doing?
Brightloom (formerly known as eatsa) will marry its existing platform to pieces of what Starbucks already uses. The combination will allow the tech company to develop, "a cloud-based software solution for the restaurant industry that will connect customers to their favorite restaurant brands," according to the press release. That, Starbucks noted, is "particularly valuable given the recent hypergrowth of mobile ordering and 3rd party delivery platforms."
Perhaps the most interesting aspect of this deal is that Brightloom's product won't be proprietary to Starbucks. The digital platform it's building will be on offer to the entire restaurant industry.
"We believe any restaurant brand should be able to engage customers digitally using a seamless combination of mobile, omnichannel ordering and loyalty offerings," said BrightLoom CEO Adam Brotman in a press release. "Up until now, only a select few brands could afford, or knew how, to put together a truly seamless mobile ordering, loyalty, and topnotch digital platform. Because our digital flywheel offering will be in the form of simple and affordable software as a service, it will truly level the playing field for all."
Sacrifices and trade-offs
On the surface, this deal may seem to be an odd choice for Starbucks. By licensing its technology, it's giving up a big competitive advantage.
In reality, though, it's an indication that the company recognizes that this type of platform will be developed whether it helps or not. This way, the coffee chain will profit when its peers license BrightLoom's software. That's a forward-thinking strategy for handling the inevitable: Rivals make a habit of quickly copying all of Starbucks successful tech innovations, so its current lead wasn't likely to last.
"At Starbucks, we have experienced first-hand the power that comes through digital customer connections that are relevant to the customer," said Starbucks CEO Kevin Johnson. "The results we've seen in customer loyalty and frequency within our digital ecosystem speak for themselves, and we're excited to apply these innovations toward an industry solution that elevates the customer experience across the restaurant industry."
Starbucks' mobile app set a new standard in the restaurant industry, and with this partnership, it will continue to push the technology boundaries, but it will also make money by licensing its innovations to its peers. The long-term win here should outweigh the short-term edge it's sacrificing.
In short, Starbucks has figured out a way to have its cake pop and eat it too.