As economic challenges continue for restaurants and their customers alike, these businesses are finding that consumers’ ordering channel preferences can put additional pressure on their margins.
Research from PYMNTS’ new study “The 2022 Restaurant Digital Divide: Food Aggregators Find Their Footing,” which drew from an August survey of more than 2,200 U.S. consumers, found that the vast majority of restaurant orders are still done the old-fashioned way. Specifically, 77.6% of consumers reported having placed their last restaurant order in person, paying a human employee. By contrast, only 2.5% of consumers had placed their last restaurant order through a third-party aggregator.
This mix presents challenges for restaurants. Certainly, third-party ordering is far from the most margin-friendly channel, given the steep commissions that aggregators often charge. Yet, running a primarily in-person business can also have its drawbacks relative to some digital channels, given the industry’s ongoing labor challenges.
Nearly half of restaurants are having trouble hiring and retaining employees, according to data from PYMNTS’ study from earlier this year, the 2022 edition of the “Restaurant Readiness Index,” which drew from a survey of 519 managers of quick-service restaurants (QSRs) and table-service restaurants.
Consequently, many restaurants are trying to drive online orders through their direct channels and in-person orders through automated kiosks, which currently account for 10.3% and 6.5% of transactions respectively, per the Digital Divide study.
Take, for instance, fast-casual chain Shake Shack, which has more than 350 locations across over 10 countries. The brand has been focusing on driving kiosk adoption for years. On a call with analysts last month discussing the company’s second-quarter fiscal year 2022 financial results, Chief Financial Officer Katherine Fogertey noted that kiosks yield higher checks and a higher attachment rate for special officers than traditional channels.
“We see guests responding quite positively to it,” Fogertey said. “It’s also one of our highest margin channels as well, and we see that we’re able to get some staffing efficiencies in our shacks where we have kiosks, so we’re very excited to … roll them out to essentially all of our shacks over the next 18 months.”
Read more: Shake Shack, KFC, Others Tap Kiosks to Boost in-Restaurant Margins
Around the same period, Yum Brands-owned QSR giant KFC, which has more than 26,000 restaurants across 145 countries, shared that it has been rolling out kiosk ordering internationally. Yet, these kiosks can be a mixed bag. The Digital Divide study noted that only 36.8% of those surveyed believe that more technology means better customer service.
The good news for restaurants is that there is hope for the future. Generation Z consumers are far and away the most likely of all generations to pick up their orders for off-premise consumption, with 55% having done so for their last purchase, compared to just 32% of baby boomers and seniors. Additionally, millennials and bridge millennials are significantly more likely than Generation Xers to do the same. If restaurants can appeal to these younger consumers, they have the opportunity to shift the channel mix to one that would be better for their bottom lines.
