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Domino’s Pizza, Panera Bread, and Starbucks have led the way for chained foodservice operators looking to adopt and integrate restaurant technologies into their businesses. Thanks to mobile apps and new in-store ordering innovations, these quick-service and fast-casual brands are making it easier than ever to sell.
Nevertheless, many companies remain slow to adopt these new technologies, in part due to large capital requirements and a steep learning curve.
Some worry about perception. Though technology doesn’t kill jobs as much as it rearranges roles, consumers may see automation as a way of replacing workers, which can damage a company’s reputation.
But the case of Panera Bread should convince even the most analog executives: in 2017, the company was acquired by JAB Holdings for $7.7b after it hit $1b in digital revenue, 6.67x the $150m technology investment the company made in 2014 with the launch of Panera 2.0. Almost a quarter of the company’s total revenue is currently generated by digital channels.
Beyond increasing convenience — no small goal in the era of the time-constrained consumer — these innovations are improving customer satisfaction, increasing order size, and making operations more efficient.
Mobile Ordering Improves Customer Experience
The convenience restaurant technologies offer has had profound effects on consumer behavior. For one, guests are less concerned about being judged for their order when they place it digitally. Pizza chains such as Domino’s, Pizza Hut, and Papa John’s reported that spending on the average order is 18% higher online than via the phone.
Almost half of consumers also cite improved experience with digital order. They save time and skip long lines by picking up their already prepared and paid-for food. The ability to browse the menu at their own pace is another benefit of digital ordering, as is improved order accuracy.
From the business’s perspective, these technologies provide insights about consumers’ ordering habits and preferences, allowing for more tailored product offerings.
Mobile Order-and-Pay Technologies Keep Growing
With all these benefits, it’s no surprise that digital ordering is growing. Mobile ordering represents an immense opportunity for restaurant chains to penetrate a space where younger consumers spend hours every day: their mobile devices.
Starbucks and Domino’s have pioneered mobile order and pay. Digital payments make up nearly a third of Starbucks’ sales. The coffee giant opened the app’s mobile order-and-pay capabilities to non-Rewards members in 2018 and saw the share of digital ordering almost double: mobile order and pay represented 13% of company-operated transactions in the U.S. so far in 2018, as opposed to 9% in 2017.
Most Major Chains Installing Self-Service Kiosks
Self-ordering capabilities are becoming mandatory for QSR and fast-casual operations. In 2017, Credence Research reported that the global self-service kiosk market is expected to reach $16b by 2025. In one year, the number of self-service kiosks in some industry shows tripled.
Manufacturers continue to upgrade and polish their products while POS system providers have been working on units that incorporate mobile ordering, kitchen display systems, and back-office IT management systems.
McDonald’s has embarked on its aggressive Experience of the Future campaign, remodeling 1,000 units per quarter. Chief Financial Officer Kevin Ozan stated in the Q4-2017 earnings report that the company planned to allocate approximately $2.4b for this initiative, which puts self-service kiosks front and center. Wendy’s, Taco Bell, Shake Shack, and Subway are also working to integrate these services into their locations.
Self-Ordering Is the Secret Weapon for Successful Restaurants
Research shows that kiosks can produce check increases of up to a third, with some reaching even higher growth.
Self-service orders tend to have higher margins than counter orders because kiosks are so cost effective, allowing a higher volume of orders without increasing the number of front-of-house employees, building higher sales per labor hour.
The mix of superior revenues and margins and higher generated revenue per each labor hour has a direct positive effect on the restaurants’ bottom line.
Lead, Don’t Follow, the Tech Revolution
We’re in the midst of the Fourth Industrial Revolution, a period of incredible transformation and disruption. These restaurant technologies aren’t going away, giving leaders opportunities to integrate tech in a way that builds sales, deepens customer loyalty, and surfaces new insights into consumer behavior.
The question isn’t what technology can do for a restaurant operation: it’s what a restaurant operation can do with technology.
ABOUT AARON ALLEN & ASSOCIATES
Over the course of more than 2,000 engagements, Aaron Allen & Associates has gained experience in nearly every category, cuisine, segment, ownership type, and operating model. Our deep understanding of the factors and forces influencing both the industry and the consumer enables us to help brands optimize performance across every functional area at every stage of the business life cycle.