The stickiness of digital
Headed into COVID, off-premises sales increased nearly four times faster than dine-in business, per financial services Rabobank. That meant 80 percent of restaurants’ U.S. dollar sales growth over the last three years came away from the dining room. By November, according to NPD, dine-in visits were down 48 percent in the 12 months ending September 2021 compared to the year-ago measure. Off-premises orders upped 20 percent versus two years ago.
Dine-in visits represented 28 percent of total quick-service trips pre-coronavirus. That fell to 14 percent in the year ending September 2021. On-premises visits to quick-serves, some 19 months later, were 52 percent below old levels, while off-premises were 16 percent above.
“If you look at the restaurant industry for the five years before COVID came along, what was growing? Off-premises transactions were growing,” Portalatin says. “The [quick-service restaurants] were taking share from full-service restaurants. Digital orders were growing. And we were increasingly talking about the rising percentage of restaurant meals that were consumed at home.”
Portalatin says there’s little to zero question of whether or not digital occasions are going to stick around. NPD looked at customer receipts to be sure. What’s visible, he says, is the new digital buyers picked up when the category pulsed last year have been retained. “And yet, we continue to incrementally add new ones on top of that,” he says. “Once we adopt behaviors as consumers, we don’t really give them up.”
It’s not just delivery, either. Digital order for pickup is growing just as fast, Portalatin notes. In survey data from location company Bluedot, 43 percent of consumers said they prefer to place their order by mobile phone, well ahead of the 18 percent for “staff member.”
“I think you’ll see the top-performing chains be the ones that really know how to lean into digital to unlock a higher capacity of off-premises occasions that the consumer picks up,” Portalatin says.
An AdColony report in November discovered 65 percent of consumers order takeaway food on an app or website more so than before. Over a third of mobile users, of all ages, said they eat fast food at least once a week, while one in five were doing so more frequently. Overall, 65 percent of users in the survey noted they order takeaway on an app or website at a higher clip these days.
But how that unfolds is where the recalibration is taking shape.
Mike Wilson, head of industry at driving app Waze, says restaurants continue to invest in flexible formats and layouts to tackle an omnichannel opportunity. “For example, many customers are still hesitant to use in-store kiosks to order, and we’ve seen an accelerated use of mobile restaurant apps increase order accuracy and satisfaction,” he says.
With delivery, the battleground is shifting to the last mile given the category’s proliferation (its share of foodservice sales doubled to more than 15 percent last year). This has become an expensive proposition on multiple fronts. While it might make sense if the consumer is purchasing a $500 TV, how does it work for a lower-priced quick-service meal? Guests are getting wise to that, Portalatin says, and it’s another reason why he sees the digitally ordered for pickup occasion gaining share out of COVID.
A traditional quick-service restaurant with a single drive-thru lane could be nearing its limits in terms of capacity as well, he adds. So the push toward multiple-lane setups is just kicking into gear, with brands like Taco Bell and Shake Shack plotting multiple-lane buildings. Often, one of the lanes is dedicated to digital business, and that’s a go-forward reality worth banking on. Also, typically manifested in pickup lockers, like those featured in CKE Restaurants’ prototype, expect to see more curbside-centric models and physical infrastructure that opens capacity for the drive-thru or pickup channel.
However, you can’t understate what the drive-thru did for quick service in 2020. In the same Bluedot study, nine out of 10 respondents said they visited a drive-thru in the last month. Seventy-two percent had pulled up either the same amount or more in that span than previously. And the No. 1 channel for order pickup, at 39 percent, was still the drive-thru, followed by in-store (31 percent) and curbside (30 percent).
Fazoli’s CEO Carl Howard says COVID was a game-changer. Simply, it led restaurant-goers to brands with drive-thrus, either due to closures or safety concerns. It was difficult to tell who was open and who wasn’t. Not so with lines snaking around quick-serves across America.
“And that has forever changed the brand, from our [average-unit volume] to our unaided awareness,” Howard says. Recently, 217-unit Fazoli’s same-store sales were up 28.7 percent on a two-year view. Multiple-digit increases have become the norm.
“It was the advertisement I could never afford,” he says. “We had trial rejecters and lapsed users, and we had all this data quantified in different surveys in 2020 and 2021.”