Web Exclusive | August 2015 | By Bruce Horovitz

Down to a Science

Wendy’s, Dairy Queen open R&D labs to test new, Millennial-forward ideas.
Big QSR brands invest in research and development labs to create new products.
Wendy's opened its 90° Labs near Ohio State's campus to capitalize on the presence of Millennials, its target demographic. image used with permission.

Some savvy limited-service chains are suddenly taking very literally the long-held notion that fast food is a science.

Both Wendy’s and Dairy Queen have recently opened new research labs aimed at better serving and better understanding their customers.

The new Wendy’s lab, which the company calls the 90° Lab, is aimed at testing and evolving new technologies related to mobile ordering, mobile payment, and special mobile offers via a new loyalty program. The new Dairy Queen lab, DQ Bakes! Institute, is all about product innovation for the chain’s new menu that’s focused on higher-quality products, like artisan sandwiches, hot desserts, and snack melts.

Both labs share a similar goal: to investigate new ways to attract and keep customers. But while Dairy Queen opened its DQ Bakes! Institute right inside its Minneapolis headquarters building, Wendy’s opted to hitch its tech research wagon to a college campus; the 90° Lab is right across the street from the bustling, Columbus, Ohio, campus of Ohio State University (OSU).

“It was a very conscious decision for us to build near such a strong pool of our next generation of buyers,” says Drew Domecq, vice president of technology solutions for Wendy’s. There are roughly 60,000 college students on campus, and being so close to such a key demographic was critical, he says. In addition, Wendy’s corporate headquarters in Dublin, Ohio, is just 20 minutes away.

The lab gives Wendy’s an opportunity to do something that it can’t do within the confines of corporate headquarters: interact daily with Millennials, its key demographic. And it can take learnings from within the lab and test them at the Wendy’s restaurant located just seven blocks away on the OSU campus, Domecq says.

“It was a very conscious decision for us to build near such a strong pool of our next generation of buyers.”

For Wendy’s, it’s all about watching—and learning from—the 20-somethings. “Technology keeps changing, and we have to consider, what can our technology do to help people do something better?” Domecq says.

Inside the bright, window-filled lab, on the second floor of a building across from campus, Wendy’s plans to build and improve mobile and web apps that enable customers to instantly place orders and pay for those same orders via their mobile devices. The company also hopes the research will help it create offers through its mobile apps that will get increasingly personalized as it builds out its loyalty program.

Within the lab, there’s a faux Wendy’s restaurant with an ordering counter that looks identical to those at the chain’s newest locations. “There is literally a shell of a restaurant,” Domecq says. There’s even a simulated drive-thru pedestal and window that emulates the customer experience.

While Wendy’s new lab is focused on the customer experience, Dairy Queen’s DQ Bakes! Institute is more intent on developing the menu. DQ Bakes! is a new menu platform that’s aimed at creating and selling fast casual–quality food at fast-food prices.

“DQ Bakes! is one of the biggest launches we’ve done in the 75-year history of Dairy Queen,” says Bill Barrier, executive vice president of global product development at American Dairy Queen Corp. “It gives us the opportunity to start selling food in every concept.”

Nine new products have rolled out, including artisan-style sandwiches like its new Chicken Bacon Ranch and Turkey BLT; snack melts like Buffalo Chicken and Chicken Quesadilla; and hot desserts like the Triple Chocolate Brownie and the new Stuffed Chocolate Chip Cookie.

“Millennials are looking for things with higher-quality ingredients that are made fresh and made to order,” Barrier says. They’re also looking for more choices throughout the day, which is why Dairy Queen is looking into a breakfast program under the DQ Bakes! platform, he says.

“We want to make sure that Millennials continue to come to us and eventually bring their kids,” Barrier adds.

Making sandwiches with focaccia and ciabatta bread, Barrier says, is a new operation for the brand. Dairy Queen is also looking into creating hot appetizers.

The DQ Bakes! Institute has about 22 employees, many of whom formerly worked in the company’s test kitchen. “We reprioritized the talent that we currently have,” Barrier says.

DQ Bakes! has more than 100 concepts in the hopper right now—about 15 percent of which, Barrier estimates, may eventually make it to market. The chain plans to begin nationally advertising the new DQ Bakes! platform in September.

One key to successful R&D labs, says Gary Stibel, founder and CEO of The New England Consulting Group, is that the labs themselves be reasonable driving distance from corporate headquarters so that any improvements can be analyzed by top management on a timely basis. Just as important, however, is that the insights be widely shared “so that insights from Boomers in Birmingham and Hispanics in Houston are also captured,” he says.

While the research labs are critical, Stibel says, equally critical is learning how to share system-wide the knowledge that’s gleaned from them. That, much like fast food, is a science, too.

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