Thinking beyond
Philip Daus, managing partner and head of the North American Restaurant Practice at Simon-Kucher, says there are a number of factors that will change how guests pick restaurants in a post-COVID era. As covered, the perception of sanitation standards is chief among them.
But there are other factors at work. “Presence in the third-party delivery app of choice is key to avoid churn in a digital world—chains will need to be present in all big players such as UberEats, Doordash, and Grubhub,” he says. “In that context, being smart about delivery fees and menu price inflation versus in-store pricing is becoming absolutely critical. Lastly, chains with a clear loyalty strategy, who invest in customers with high lifetime value and reduce churn proactively, will have an edge over competitors.”
Fast food spiked during COVID as guests traded down and sought the most readily available channels. Drive thru, digital, etc.
Simon-Kucher & Partners’ study suggests that dynamic will slide to normal over time.
Restaurant type purchase evolution prior to, during, and after COVID-19
Percentage of restaurant meals
Pre-COVID
- Fast food: 39 percent
- Fast casual: 23 percent
- Casual dining: 26 percent
- Fine dining: 11 percent
Q4 2020
- Fast food: 47 percent
- Fast casual: 20 percent
- Casual dining: 21 percent
- Fine dining: 12 percent
After COVID
- Fast food: 39 percent
- Fast casual: 23 percent
- Casual dining: 27 percent
- Fine dining: 11 percent
This isn’t entirely surprising. Much of fast food’s boom was tied to mandates over straight-lined demand. Who was open and who wasn’t. Also, sit-down chains tried to serve a category they had little experience in before. They had to cross awareness gaps quick service left behind decades ago.
For instance, nobody thought twice about getting McDonald’s takeout in April 2020. At their favorite steakhouse restaurant? A different idea.
Which brings us to the less stable corner of COVID’s disruption. Yes, customers are going to return to dine-in-centric brands in time. But they’re not going to abandon digital activity in full as they do so.
Order channel evolution prior to, during, and after COVID
Percentage of restaurant meals
Pre-COVID
- In-store: 51 percent
- Drive thru: 26 percent
- App/website: 23 percent
Q4 2020
- In-store: 36 percent
- Drive thru: 33 percent
- App/website: 31 percent
After COVID
- In-store: 46 percent
- Drive thru: 27 percent
- App/website: 27 percent
“As COVID transitions into becoming an endemic, and as a significant numbers of consumers will remain reluctant to share space at a restaurant even as mask requirements are lifted, tackling operational challenges will continue to be important,” says Patrick Ding, consultant at Simon-Kucher. “Best-in class restaurants create a hassle-free curbside pick-up and drive-thru experience and invest in related value drivers such as adequate packaging to assure food temperature. We also see more players invest in their own fleets to speed up delivery times.”
Just like menu price and other trends, the stickiness of which digital channel gets a COVID bump will vary across segments as the pandemic ends.
Digital channel share of meal orders after COVID by consumer segment
Percentage of restaurant meal orders via app/website
Urbanicity
- Rural: 22 percent
- Suburban: 24 parent
- Urban: 33 percent
Income level
- Lower: 25 percent
- Middle: 24 percent
- Upper: 33 percent
Age
- Young: 36 percent
- Middle: 28 percent
- Senior: 9 percent
So urban, upper income, and young guests are going to be most likely to tap digital channels after COVID.
What’s important to note, too, is the proliferation across the lexicon. Some part of every demographic is going to consider digital in the future. That wasn’t the case previously. Or at least it was so minimal it wasn’t worth investing toward. Customers tried digital this past year out of pure necessity. It’s in their playbook now, even if it’s not their preferred option.
Per Simon-Kucher & Partners’ study, restaurant websites and apps will figure more prominent than third-party apps, especially for quality-focused customers.
Percentage of app orders by app type after COVID
- Restaurant website/app: 57 percent
- Third-party app: 43 percent
The key value drivers for guests leaning toward direct apps and sites: cleanliness, food quality and taste, and speed of service.
For third-party app loyal users: Price and promotion availability.
Similar to app/website ordering, gains in delivery, curbside, and drive thru should last beyond the crisis.
Consumption method prior to, during, and after COVID
Percentage of restaurant meals
Pre-COVID
- At restaurant: 40 percent
- In-store pickup: 19 percent
- Drive thru: 22 percent
- Curbside: 7 percent
- Delivery: 12 percent
Q4 2020
- At restaurant: 19 percent
- In-store pickup: 22 percent
- Drive thru: 30 percent
- Curbside: 12 percent
- Delivery: 16 percent
After COVID
- At restaurant: 35 percent
- In-store pickup: 18 percent
- Drive thru: 23 percent
- Curbside: 10 percent
- Delivery: 13 percent
The high-level point here is that only 35 percent of orders are expected to be consumed in a restaurant after COVID, down from 40 percent pre-virus.
Delivery and curbside gains align with trends seen with app ordering both overall and from a segment standpoint with urban, upper income, and young respondents indicating the highest rates of adoption.
“Digital proliferation will continue to grow … especially with urban, high income and younger consumers as the value of convenience increases,” Clement says. “The digital race is real and brands that embrace it fully and implement it optimally will improve customer experience through faster and more customized interactions, ultimately driving growth.”