Earnings

Yum And Its Pizza Hut, Taco Bell And KFC Brands Push Forward With QSR Tech

Delivery, kiosks and other digital efforts are taking more prominent roles at Yum! Brands, moves that serve as a good reflection of overall trends in the quick service restaurant (QSR) space. Yum operates the Pizza Hut, Taco Bell and KFC chains, and the company’s fourth-quarter results, released Thursday (Feb. 7), provided details about where those online and mobile efforts are headed in 2019 for those well-known restaurants.

Yum’s closer embrace of the new technology fueling QSR operations — a trend documented by the latest PYMNTS Restaurant Readiness Index — was underscored by Yum CEO Greg Creed during the post-earnings conference call. “With technology increasingly at the forefront of our strategic planning efforts and given its importance to all four of our growth drivers, we’ll be hiring a new senior leader reporting to me who is focused on global, digital and technology strategy,” he said.

He offered no further specifics, and the company’s fourth quarter 2018 financial release was light on details about Yum’s mobile and digital efforts. Overall, the company reported a Q4 year-over-year revenue decrease of about 1.2 percent, to nearly $1.56 billion. That was driven by a 46 percent year-over-year decline in company sales, and partially offset by a 3 percent year-over-year increase in franchise and property revenue.

Going forward, Yum is putting much of its hopes on digital with its work involving online delivery food platform Grubhub, according to Yum executives. The company last year announced it would buy a 3 percent stake in Grubhub, and that it was teaming up with the company to provide delivery from two of its brands — Taco Bell and KFC. Food delivery via third-party online ordering platforms, of course, is among the hottest trends in eCommerce, with major players — along with some smaller hopefuls — battling it out for market share, and to keep consumers and restaurant operators within particular ecosystems.

The goal for Yum?

Having 70 percent of its restaurants offering delivery by 2020, said CFO David Gibbs on that same call.

The Taco Bell launch with Grubhub is first up, Creed said, adding that consumers can “jump on to TacoBell.com or go directly to grubhub.com or the Grubhub app to place their order.” That effort will be supported by a significant marketing effort, he added. “We were at a Taco Bell a couple of weeks ago. I’ve seen all the marketing around the advertising supporting the Grubhub launch. It’s as good as any work I’ve ever seen come out of Taco Bell.”

Marketing is only part of the story.

Point-of-sale technology must be up to the task. “In this case, getting POS integration in place is really important. And so, obviously, we’ve spent a lot of time with Taco Bell and Grubhub getting the POS integration done,” Creed said during the conference call. “That’s now complete and that’s, obviously, why we’re launching it. [Now we are] working on the KFC team to make sure that” integration works, too.

As the Restaurant Readiness Index documents, having the right technology and having the proper buy-in from QSR management and workers are key to such moves.

Consider this data point: When it comes to innovation, nearly 38 percent of QSR managers prefer that it serve to reduce delivery errors. That said, only 2 percent of large QSR operations offer third-party delivery services, a statistic that shows the opportunity present for any chain that gets it right.

Such lessons seem to be playing out in the Yum universe. “We don’t want to go out without the integration because we know (that) with great integration, it improves speed of service, it improves order accuracy, it does everything that the customer wants,” Creed said. The rewards so far? “Higher checks [and] incremental transactions,” he said without offering details.

Kiosks, too, are another area of innovation targeted by Yum in 2019. By 2020, Gibbs said, “our goal is to have 5,000 restaurants with kiosks.”

Indeed, according to that PYMNTS research, “larger chains are more likely than smaller ones to have in-store kiosks, and they’re also more likely to offer their own mobile apps.” That said, only 3 percent of QSR managers said that self-service kiosks stand as the most common method for placing orders.

That said, the research also found there is a divide between QSR customers and managers when it comes to the restaurant technology, and that finding is illustrated via kiosks.

“Managers cite pleasing their customers as their primary reason to implement new technology — they want to make their customers happy,” the PYMNTS report said. “The most common reason managers don’t like features like self-service kiosks and online ordering is that they believe customers don’t like them — which is contrary to customers’ own sentiments.” In fact — and this evidence adds support to the Yum kiosk deployment, though it also describes possible tension — about 74 percent of QSR customers have a favorable view of kiosks. That compares to about 30 percent of QSR managers who said the same.

Loyalty, too, is another feature that QSR customers want more of, with nearly 80 percent of them saying such programs are important to the future of success of QSRs. That compared with about 48 percent of QSR managers who said the same. Yum, according to its Q4 conference call, seems to be increasingly tilting toward those customer perceptions.

Talking about Pizza Hut, Gibbs told analysts that “since the kickoff of Hut Rewards and updates to our mobile app in late 2017, we have been squarely in the digital game. We have over 12 million active users in the loyalty program and hope to be adding more as our off-line channel gains momentum. It’s an impressive achievement, considering we rolled out the program in the second half of 2017.”

Much technological progress remains for the QSR world as managers and operators catch up with the demands and expectation of customers. But as Yum has shown, that progress is happening with some of the biggest restaurant chains out there.

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