Restaurant Roundup: Brands Turn to Off-Premise Formats to Boost Profit Margins

Brands Turn Off-Premise to Boost Profit Margins

As restaurants look to boost their digital sales in 2022, some major brands are developing new restaurant formats with a focus on off-premise sales. For instance, at the 2022 ICR Conference this week, fast-casual chain Shake Shack discussed plans to try out drive-thru locations without dining rooms.

“We’re … going to test [a drive-thru] in the in the New Jersey area…with limited to no seating inside,” Shake Shack CEO Randy Garutti said during the brand’s presentation. “What can drive-thru look like as a true drive-thru experience for most of the sales happening there? Or an outdoor dining patio — that could be a format we look at in the future.”

The drive-thru channel is in high demand right now, according to data from this month’s edition of Digital Divide Report, “Digital Divide: Minding The Loyalty Gap,” a PYMNTS and Paytronix collaboration, which featured a survey of more than 2,400 U.S. adults about their restaurant habits. The study found that drive-thru pickup was the third-most popular answer restaurant customers gave as to which feature would go the furthest in encouraging them to spend more, behind online ordering ability and loyalty programs.

Get the report: Minding The Loyalty Gap

Similarly, 700+-restaurant casual dining chain TGI Fridays announced at its ICR presentation its new, smaller “Fridays on the Fly” 2,500-square-foot format, which will be focused on fulfilling off-premise orders, including preparing foods from virtual brands.

Hot dog chain Portillo’s is also joining in on the trend. The brand announced Monday (Jan. 10) that it will soon open its first pickup-only restaurant, Portillo’s Pick Up, with three drive-thru lanes and a digital orders pickup area.

Innovations such as these can go a long way toward boosting restaurants’ most profitable channels. Research from the Minding The Loyalty Gap report found that 34% of consumers see order-related abilities as being among the most impactful for encouraging restaurant purchases, and 30% say the same of order-related abilities.

Domino’s Scales Back on Promos to Offset Costs

In additional ICR news, pizza giant Domino’s announced new pricing actions in response to labor costs and rising food prices, the chain’s CEO Ritch Allison announced at the conference. Specifically, he stated that the chain will make changes to its $7.99 carryout chicken wing deal.

“We’re not going to change the headline number because the equity around that $7.99 is so important,” he said.

Specifically, the chain is making the offer only available for online orders and reducing the number of wings per order from 10 to eight. Through this change, the pizza chain incentivizes consumers to turn to the most profitable ordering channels.

“Moving the offer to online has several benefits,” Allison said. “One is a higher ticket, two is a lower cost to serve because we’re not having to answer the phones, and third is that we get access to critical data.”

Coffee Drinkers Seek out Drive-Thrus, Dutch Bros Results Suggest

Coffee chain Dutch Bros, known for its drive-thru model, announced Monday (Jan. 10) its preliminary fourth-quarter and full-year results, seeing same-store sales for the former increase 10% year over year and for the latter 8%.

These results show both rising demand among consumers for options to get their coffee needs met through the drive-thru channel as well as strong loyalty from the people already taking advantage of these channels.

“In theory … almost 100% of our [customers could come from] people who are registered rewards members,” the chain’s CEO Joth Ricci stated during an ICR fireside chat discussing these results Tuesday. “Today it’s 50% which is … one-and-a-half times where we thought we’d land at the end of ’21.”

Checkers and Rally’s Automate Drive-Thrus Nationwide

Checkers Drive-In Restaurants, the company operating more than 830 Checkers and Rally’s quick service restaurants (QSRs) across the United States, announced Monday that it is rolling out artificial intelligence (AI) based drive-thru voice ordering at all its corporate-owned locations.

The restaurant company tested this technology, powered by touch, vision and voice solutions provider Presto, in a four-month pilot in 2021. The news comes as many restaurant brands are facing a difficult labor market, looking to automated solutions to alleviate these challenges.

“We are excited about this new era in partnership with Presto, a leader in the restaurant hospitality technology field,” Checkers and Rally’s President and CEO Frances Allen said in a statement. “As a company, we embrace technology that will help our team members maximize time and efficiency while making their jobs easier and more enjoyable, creating a better experience for them as well as our guests.”

Additionally, Presto CEO and Founder Rajat Suri told PYMNTS in a November interview, “I think drive-thrus are going to become a lot faster, a lot more personalized, where you’ll have a chance to opt in to be recognized every time you go, and you’ll have a burger made exactly the way you like it, and they’re going to need a lot less labor to run efficiently.”

See also: Drive-Thrus Get a Long-Overdue Tech Upgrade for the 2020s