Posted July 23rd, 2017 in Digital.
Ripple Marketing understands the impact that Digital is playing within the market today. It’s no longer, “maybe we should try out digital and see if it works for our business.” Just like, long gone are the days of calling in food orders. They have been replaced with orders placed online with your smart phone or tablet. Starbucks, Domino’s and Panera Bread are dominating this trend. This read explains how businesses are making changes internally in order to succeed in this new era of digital.
Keeping up with Digital Demands
Last year, restaurants crossed a digital milestone: The percentage of orders booked online or using a smartphone or tablet app—now 6.6% of the total— exceeded the quantity placed verbally over the telephone (5%). Indeed, at a time when in-person visits to restaurants—human beings actually sitting at a table to break bread—are declining, electronic orders have been a boon to the industry. They’ve tripled over the past five years. But that digital transformation is bringing a host of challenges—and many are resolutely non-digital. They range from the need to rethink the design of some restaurants and kitchens to creating containers that will keep more types of food crisp and fresh while they’re being transported, since orders placed via app are often delivered to homes and offices. Broadly speaking, there have been three models in restaurant logistics in the U.S. There is the traditional eatery with a dining room and kitchen, which dominated until around World War II. Then came the era of mobile eating, which led to the rise of fast-food companies such as McDonald’s (MCD, – 0.10%). That in turn caused the redesign of many kitchens, customer areas, and parking lots to facilitate serving food to people in cars rather than at tables. Now the rise of digital ordering means that many establishments that weren’t set up for large quantities of to-go orders or home delivery have to think about the layout of their facilities and how they deploy their staff. For example, restaurants with lots of digital orders may need fewer tables and chairs and a bigger space for food pickup. Speed is often of the essence for the smartphone set, so certain parking spots might be set aside solely to facilitate quick drop-ins. Ditto for a separate pickup spot inside the establishment. The remodeling can extend to the kitchen. At Chipotle Mexican Grill (CMG, -1.24%), for example, two separate food-prep lines hum throughout the day: one for in-restaurant customers and a second for digital patrons. There are other decisions to make. Does a decades-old chain create a mobile app or restrict itself to a web offering? Does it hire its own fleet of delivery drivers or rely on startups—such as Seamless and UberEats—which are relatively new and untested on a large scale? In truth, restaurants have been all over the map when it comes to mobile ordering and delivery. “ ‘Omnichannel’ isn’t a word that’s frequently used in the restaurant space,” says Maria Steingoltz, a retail and consumer products expert at L.E.K. Consulting. Many chains are just beginning to participate. McDonald’s is starting to test mobile ordering and delivery. Red Robin Gourmet Burgers and Denny’s added digital platforms only this year. Delivery was historically relegated to pizza and Asian foods rather than otherwise dominant burger giants. It’s expensive and can be difficult to ensure food is delivered hot and fresh (see buns, mushy). “The pizza guys are best positioned to take advantage of the delivery and digital trends,” says Peter Saleh, restaurant analyst at BTIG. “I’m not sure how well a Chipotle bowl will travel great distances.” As a result, packaging has become an area of investment. Denny’s (DENN, – 1.35%)spent two years developing specialized boxes and plates to ensure eggs, burgers, and waffles will travel smoothly. Red Robin is still tinkering with various containers. Panera Bread (PNRA, -0.01%) is adding some 10,000 delivery jobs by the end of 2017. It predicts that will bolster each store’s average revenue by about 10%. And Panera benefits from a menu stocked with sandwiches and salads. “We don’t deal with cold, soggy french fries,” says president Blaine Hurst, who says about a quarter of its transactions are digital. Equally important, Panera has used mobile orders and in-store touch-screen kiosks to dramatically decrease the time it takes to serve customers. Two other chains have also been ahead of the trend: Domino’s (DPZ, +0.42%) and Starbucks (SBUX, -0.47%). The popularity of the Starbucks app helped the coffee giant amass a loyalty program with 13 million active users in the U.S. At its busiest stores, around 20% of transactions during peak periods are derived from Mobile Order & Pay. But the digital evolution hasn’t always been smooth: Mobile ordering has become so popular that crowds mass during peak times, discouraging walk-in visitors. Domino’s, meanwhile, has reported 24 straight quarters of U.S. comparable sales growth, and it says digital is a key ingredient. “Technology has clearly been a big part of what’s been driving the business over the course of the last five years,” Domino’s CEO Patrick Doyle told investors during an industry conference earlier this year. There is no limit to the ways that diners can order a pizza through the company’s app: a text, a tweet, and smart watches and televisions will all do the trick. It’s pizza tracker, which monitors the location of pies from oven to destination, has delighted customers. Of course, not every patron is on the technological cutting edge. Chipotle still keeps fax machines in its restaurants because office workers regularly use them to place big group orders. No word on whether the chain accepts orders by telex.
A version of this article appears in the June 15, 2017 issue of Fortune