Look at the quick-service restaurant (QSR) industry and see how, in some part, the future of retail technology is playing out, a trend that is leaning heavily on mobile and which, in the coming years, could stand as a main part of the emerging ecosystem of connected vehicles. All that was evident over the last two weeks or so, as QSR operators reported their financials for the first quarter of 2019.
Each new financial reporting season provides an opportunity to catch up and check in with QSR technology trends – a prime focus of sustained and original PYMNTS research, including the recent Restaurant Readiness Index, a Bypass and Bank of America Merchant Services collaboration. Among the main messages within that research is that mobile use in the QSR world is on a serious upward trajectory – a finding that has serious traction in the real world of QSR operations, as judged by this year’s Q1 financial reports and comments.
Take Shake Shack, an operation that has become known not only for its food, but also for its recent push to eliminate cash transactions (a push that has attracted its own backlash, underscoring the fact that not everyone is quite ready to go fully digital in the early 21st century). Shake Shack also stands as a broader example of a QSR operation that is trying to advance the digital frontier, in large part because it serves a customer base that is probably more digitally-focused than other QSRs: urban-based, largely millennial and demonstrably mobile order-ahead friendly.
For the first quarter of 2019, Shake Shack’s bets on mobile appeared to bring further benefits. The QSR’s revamped mobile app, as well as the addition of chicken offerings to the menu and warm weather in key areas, helped boost customer traffic by 1.6 percent. The company has been working to improve its digital technology and delivery, and recently hired its first chief information officer. It has also been expanding across the country and making strides abroad, with as many as 18 new international locations planned for this year in markets including China and Mexico.
Tech Perception Gap
As PYMNTS research has shown, 65 percent of QSR managers believe using apps to place orders delivers a positive customer experience. Not only that, but 92 percent of customers have a positive view of using an app to place a QSR order. That certainly stands as a big gap between manager and customer perceptions of the increasingly vital mobile channel – a gap that provides its own challenges and opportunities. But other operations in Q1 also demonstrated, perhaps, why more QSR managers need to board the mobile commerce train.
Take Dunkin’, that institution of New England, a nationwide example of how to run a relatively strong mobile customer loyalty program, among other mobile efforts.
With efforts to bring convenience to guests through mobile technology, Dunkin’ Brands reported first-quarter results that beat analysts’ top-line and bottom-line earnings estimates. The QSR chain, which counts brands such as Dunkin’ and Baskin’ Robbins in its roster, reported revenues of $319 million and earnings per share of 63 cents compared to $312.5 million and 62 cents.
The latest financials from the chain also demonstrated that technological innovation is not all that counts when it comes to QSRs better serving digitally inclined consumers. Dunkin’ Brands CEO Dave Hoffmann said in the company’s earnings conference call late last week (May 2) that last year, the company secured the perpetual license to the code that runs the Dunkin’ mobile app. As a result, the company can be faster to market and more flexible with its digital initiatives. “It’s the backbone to our digital ecosystem,” Hoffmann said, adding that the code powers initiatives like mobile ordering.
At the same time, Hoffmann reported that on-the-go ordering saw an average weekly sales increase of 25 percent year over year (YOY), comprising 4 percent of total transactions in the quarter. He also said it represented over 7 percent of transactions in locations without a drive-thru. Mobile orders exceeded 25 percent of transactions at high-volume sites in many urban areas. “On-the-go mobile ordering is a winning proposition for Dunkin’,” Hoffman said, adding that it lets customers get in, get out and be on their way.
Dunkin’ also recently rolled out a pilot test at more than 1,000 locations to allow diners to earn DD Perks regardless of how they pay. In the past, members of the rewards program could receive points by paying with a gift card. Now, at pilot locations, customers can earn points whether they use debit, credit, Dunkin’ gift cards or cash. To accumulate points, customers scan their DD Perks loyalty ID quick-response (QR) code prior to making a payment.
It’s getting harder to exaggerate the value of loyalty to QSR operations with each passing month, at least according to the PYMNTS Mobile Order-Ahead Tracker. Chipotle, a chain that has some 14,000 mobile app downloads each day, is a good example of that. The Mexican-themed food chain is working to improve its loyalty program efforts. Chipotle rolled out its rewards program in mid-March. Diners receive 10 points for every dollar they spend, and earn a free entrée when they accrue 1,250 points. On a recent earnings call, Chipotle Mexican Grill CEO Brian Niccol noted that guests have been asking for a rewards program for a long time. He also pointed out that the chain’s digital system – including order-ahead, among other capabilities – “is creating a more convenient and enjoyable guest experience.”
Indeed, when looking at the broader trends for Chipotle, its most recent financial report showed that during Q1, the company’s digital sales jumped 100.7 percent year over year (YOY) to represent 15.7 percent of sales at $206 million, with executives anticipated further digital gains fueled by the Chipotle Rewards program.
Nearly eight in 10 QSR customers – or 79.5 percent – see loyalty programs as features important to the success of those merchants, according to the PYMNTS Restaurant Readiness Index. The report also found that nearly half – or 47.5 percent – of QSR managers share the same view. Overall, the report found that approximately 80 percent of customers and managers have a positive view of loyalty programs.
Progress and technology deployments, especially those centered around mobile ordering and loyalty, promise to gain even more steam in the coming months and years in the QSR industry. There will no doubt come stumbles, but even those could help guide the way to new gains.