Food & Dining

How Restaurants Can Be a  Model for Digital Transformation

Nadira Kalliecharan David Taylor

While the future of happy hours and table service remains uncertain, there is opportunity for quick-service restaurants (QSRs) to reimagine the customer experience while discovering value in new products and services, using data and rethinking business models. Having a service-based organization that brings agility, efficiencies and strong partnerships through digitally led solutions are a critical set of ingredients for the menu. Digital and technology allows restaurants to meet diners where they are.

Since the pandemic began, both QSRs and fine dining have pivoted toward pickup, while strengthening delivery directly or through third parties. Digitally transformed brands such as Panera, Chipotle, Domino’s and McDonald’s are reaping the benefits of digital, a key enabler in weathering the storm. Domino’s, for example, uses a delivery and takeout only model by promoting online ordering via its app and using the chain’s in-house technology such as GPS-tracked orders. Domino’s revenue is up 160 percent over the past five years due in large part to this digital focus.

Restaurant customers were also demanding more off-premise offerings and the pandemic has only accelerated this need. Restaurants must continue to focus on evolving their off-premise capabilities to quickly respond to customers’ concerns, incorporating emerging experiences such as voice, chat bots and in-car experiences to maximize efficiency.

''We will see more promotions testing core product innovation coming through off-premise and, of course, more creativity in the fight for loyalty and gamification to keep the brand top-of-mind and highly competitive''

Dan Lubetsky, Senior Director, Customer Experience and Innovation

U.S. online restaurant delivery revenue is projected to hit $26.5 billion in 2020, up 21 percent from 2019, according to data from Statista. Within that total, it’s worth noting that third-party delivery revenue grew 25 percent while restaurant direct delivery, or delivery handled directly through a restaurant without using a delivery partner, grew 17 percent. This represents a key area where restaurants can do more to diversify and maximize revenue by owning more of the delivery experience.

According to Publicis Sapient’s Digital Life Index, 74 percent of respondents said health and safety rank as one of their top three factors influencing their choice of restaurant. At the same time, some 55 percent of respondents also said contactless technologies rank as a top three factor influencing restaurant choice, another area where digital can make the customer experience safer and more efficient.

Exploring digital and technology advantages

As restaurants evaluate the spectrum of actions that enable them to diversify and maximize revenue through an improved customer experience, new product innovation, data and business model innovation, they must ask themselves:

Why should we consider investing in changes and/or new services?
Where should we invest in exploration of new services and/or exploitation of existing service efficiencies?
What opportunities will likely provide the best return on investment for the hypothesis?
Which initiatives can start now, and which need a bit more investigation?

The following chart addresses the actions restaurants can take to get started on each route to diversification and new revenue streams:

Customer Experience

Address safety with contactless touchpoints both on and off-premise, leveraging digital to eliminate high-touch moments in the customer’s journey

Be where your consumers are by ensuring frictionless delivery and a seamless omnichannel experience between digital and physical and removing friction and scaling curbside

Build trust and confidence by leveraging digital to bring transparency into capacity and queuing in compliance with social distancing needs

Products and Service Innovation

Use digital channels as a new avenue to merchandise products tailored to an off-premise consumer such as markets, meal kits, gift cards and merchandise

Develop the ability to adapt rapidly. One thing we know with certainty is the situation is constantly evolving

Accelerate new or evolved products and services

Focus on core products and harness innovation efforts from the core to extend the reach of popular, high frequency items

Data

Use data to engage the customer with more precise marketing and merchandising of new products and services- at the city level

Lean into loyalty for to drive reoccurring sales through keeping the brand top of mind and driving customer-centric campaigns across digital channels

Data as a predictor of supply and demand. As testing and contact-tracing ramp up, we will have a more accurate picture of how COVID-19 is behaving in cities

Business Model Innovation

Pivot into areas that unlock new revenue sources such as meal subscriptions and consumer packaged good

Platform strategies that tap into adjacent partners in the customer value chain e.g. meal and wine curation, or partnerships with third parties that cater to commercial consumers

Assess market trends and look outside the restaurant industry for new strategies, whether for efficiencies, growth and/or reinvention

Build a diversified revenue model

People will always need to eat and restaurants need to offer options, and digital brings the necessary agility and speed to pivot with evolving needs.

“Whether drive-thru, curbside pickup, delivery, walk-up grab-and-go or hotspots, food will be prepared and delivered to customers differently and menus may evolve as well to connect products fit for each delivery channel,” said Lubetsky.

Country music star and TV personality Jimmy Dean said, “I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.” Harnessing the power of digital and technology enables restaurants to address concerns about safety and serve consumers where they are, while deploying innovative goods and services with speed and at cost that was once unimaginable, while collecting valuable data.

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Insight

Despite economic uncertainty, many restaurants have realized the COVID-19 pandemic as an opportunity to experiment and learn more about what customers really want. Learn why restaurants should think like retailers during these unprecedented times.

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