For a glimpse at how innovation is playing out in the retail world, it always helps to take a look at recent developments in the world of quick-service restaurants, or QSRs. And things are getting much more mobile and digital – a trend that promises to play out in the new decade.
For instance, Yum! Brands, the owner of Taco Bell, KFC and Pizza Hut, reported an overall year-to-year revenue gain in the second quarter of 2019 of about 10 percent, to $1.31 billion – which also beat analysts’ estimates of $1.28 billion. Digital technology and delivery helped to fuel that growth, according to company officials on the post-earnings conference call with analysts and investors.
Recipe for Success
“While each market is unique, the recipe for success has a consistent theme. Its disruptive value is coupled with amplified innovation, compounded by an effective digital and delivery strategy,” said CEO Greg Creed. That includes not only operations in the U.S. but also abroad, he said. For instance, “Iberia’s 11 percent same-store sales growth was driven by continued momentum from strong media campaigns and their third-party delivery partners.”
Yum! underscored the growing importance of digital innovation in this corner of the retail world by its recent hiring of Chris Turner as chief financial officer.
“From his time at PepsiCo to his years at McKinsey & Company, Chris is a broad-thinking business leader who brings nearly 20 years of strategy, finance and operations experience,” Creed said. “He is also deeply knowledgeable about digital and technology solutions shaping the future of retail, which will be valuable to Yum! given the role technology will play as we leverage our scale to improve franchise unit economics and accelerate same-store sales growth and net new unit growth.”
Delivery and digital innovation are the name of the game in Q2 for QSR retail, at least based on recent financial results. For example, with upgrades to its mobile app and new product offerings, Dunkin’ Brands grew its digital and delivery platforms while rolling out menu innovations with broader customer appeal in the second quarter.
Dunkin’ Brands Chief Executive Officer and President of Dunkin’ U.S. David Hoffmann said in a call with analysts earlier this month that in June, the company announced Dunkin’ Delivers via Grubhub and Seamless across the boroughs of New York City. The company worked closely with Grubhub and its franchisees to create a delivery system with point-of-sale (POS) integration. Hoffmann said in the call that the company plans to scale this to major U.S. markets by year-end.
As digital sales continue to skyrocket and a new rewards program takes hold, Chipotle Mexican Grill beat analysts’ expectations for second-quarter earnings. The QSR chain reported revenues of $1.43 billion and earnings per share of $3.99 compared to estimates of $1.41 billion and $3.76 per share.
The chain’s digital sales grew 99.1 percent and accounted for 18.2 percent of sales in the second quarter, while in the first quarter, digital sales grew 100.7 percent to represent 15.7 percent of sales. In a call with analysts on July 23, CEO Brian Niccol said delivery remains a “key driver” of the firm’s digital growth, given enhanced app and website capabilities along with expanded reach. He also noted that the QSR still sees a residual lift in delivery sales that last beyond any promotion, and that there is little guest overlap between the company’s in-app delivery and third-party delivery apps.
Look for these trends to continue in the third and fourth quarters.