Restaurateurs seeking a bright spot since the pandemic's onset may have found one.
Restaurant revenues have grown by 82 percent over the last four months in the U.S., according to the National Restaurant Association. Restaurant tabs totaled just $30 billion in March — less than half the amount customers spent in January — when shutdowns were ordered to prevent the virus from spreading. Sales have risen in the months since, however, as eateries reopened with limited seating.
The tentative recovery appears to be steady. May saw earnings increase to $39 billion, consumers ventured out to greet the warmer weather in June to boost gains to $50 billion, July returns swelled to $52 billion and August saw yields exceed $54 billion. These transactions won’t fill the $185 billion hole the pandemic dug, but they are a start.
Reconfiguring operations to accommodate off-premises orders has breathed life into the struggling restaurant sector, with restaurants quickly launching takeout, curbside pickup, delivery and drive-thru services. Seven in 10 operators reported that such digital transactions represent a higher portion of their total business compared to pre-pandemic levels, according to a survey of 3,500 restaurant operators conducted between Aug. 26 and Sept. 1. Sixty-seven percent of restaurant operators have added curbside pickup since the pandemic's onset, including Mexican fast casual chain Qdoba.
The San Diego-based chain quickly launched its curbside pickup model and has responded to customers’ changing ordering preferences as well as chargebacks, said Adam Fox, director of digital experience and media for Qdoba. The company also had to adjust its payment offerings to facilitate safer, contactless methods.
Online orders comprised 15 percent of Qdoba’s sales prior to the pandemic. Digital sales peaked at 60 percent during the height of the pandemic, however, Fox said. That percentage has been reduced over the last few months as dine-in and carryout has returned but remains well above pre-pandemic levels.
“Even as guests come back into the restaurant to order and carry out, they are looking for that contactless experience,” Fox said in an interview with PYMNTS. “We’ve marshaled a lot of resources across the organization to support that.”
Meeting Demand for Contactless
Qdoba has more than 730 locations throughout the U.S. and Canada, but it implemented curbside pickup within just four days of the mid-March shutdown.
The chain, like many restaurant operators, also had to contend nearly simultaneously with customers’ evolving ordering preferences since they were primarily dining at home. The biggest shift that coincided with pickup was customers’ migration to digital, leading to the company’s efforts to keep up.
“We put significant energy behind growing our own digital channels, which would include our website, mobile app and now delivery,” Fox said.
There has also been a dramatic move across the space toward offering contactless payments. Qdoba harnesses tools from a mobile payment platform provider, Fox explained, and the company changed online ordering and loyalty providers earlier this year to build a seamless platform. He noted that more guests have created mobile accounts to access order histories, reorder past meals and participate in the rewards program since the company made the switch.
“Now we are continually able to respond to changes that are happening in the industry, making sure we are staying on top of what consumer preferences are and making sure we are able to respond to [them],” he said.
Fox said he expects mobile ordering and payments will continue to play a huge role for industry revenues as fast casual and quick-service restaurants (QSRs) gradually reopen to customers at fuller capacity. COVID-19 may have accelerated the move to digital ordering and payments, he observed, but it was already happening well before the pandemic hit.
“In a business like ours, where we have a dine-in component and a very large carryout business, we expect guests to continue to use their mobile devices from an in-restaurant standpoint,” he said. “The contactless trend will continue even as guests come back into the restaurant.”
Identifying Chargeback Fraud
With consumers’ massive shift to ordering through digital channels comes an unfortunate — yet unavoidable — uptick in fraud. Qdoba selects its security vendors after performing a thorough review, Fox said, adding that the company continues to evaluate its partners' practices as time goes on.
“Given that security is an ever-evolving part of the industry and there are bad actors that are always out there looking to do new things, we are always looking at how to stay one step ahead with the partners in our ecosystem,” he said.
Fox takes the view that chargebacks are simply the cost of doing business in the digital space, where cards are not present. He said the company works with its online ordering provider to flag suspicious transactions that show up as chargebacks.
“We are able to flag those transactions as fraudulent so that if those guests continue to order and ... to fraudulently charge back transactions, we are able to identify them,” he said.
Qdoba’s mix of corporate- and franchise-owned stores has made the company very conscious of the fact that those chargebacks, in many cases, hit franchisees' pockets directly.
“We have remained very focused on that, and I think, with the tools at our disposal, we have been able to keep chargebacks at a very low, acceptable level,” Fox said.
He also noted that the company has not received much feedback on chargebacks.
“That’s a good thing,” he noted. “People don’t call you to report that they don’t have chargebacks. So, we’ve seen the fact that the overall volume is low as a positive sign.”
Ramping up off-premises sales through a combination of digital channels and secure contactless payments appears to be the key to success as restaurants cope with the impact of the pandemic. Most states still have limited seating and some customers may be nervous to dine in. Customers’ healthy appetites for curbside pickup and mobile order-ahead are likely to keep QSRs’ sales cooking, however.