What Will the Fast-Food Experience Look Like in 2021?

    Customer-centric innovation remains the top target. But how has that changed?

    Burger King restaurant of the future rendering.
    Burger King
    Burger King's restaurant of the future designs go heavy on curbside and drive thru.

    This isn’t going to be your average December for restaurants. Typically, we’d look forward with last year’s lessons as guardrails. But COVID-19 rendered the present a purgatory of sorts. Will January be all that different than November? What about next March? It’s impossible to crystalize the near-term given how jagged the current landscape is. Things like potential federal aid, flu season, state-by-state lockdowns (or reopenings), a presidential transition, labor regulations, and more, have operators trying to breathe underwater.

    It’s why the myth of a “new normal” is worth tossing. Call COVID-19 an era or inflection, but it’s not a static environment that’s never going to change again. It’s shown that over the course of the past nine or so months.

    And so operators find themselves projecting through a different lens, yet with familiar undertones—what forces will define tomorrow’s consumer experience landscape?

    Rakuten Ready recently released its 2020 Key Trends report to examine what shifts might occur throughout the coming year, and what best practices restaurants should begin plotting. Preparation, not pivot, which is the biggest change from navigating COVID in 2021 versus 2020. 

    It split into four corners: Technology will continue to drive innovation in the 21st Century; Brands will re-imagine the brick-and-mortar experience; Privacy is moving away from the Wild West; and the shift in consumer behavior due to COVID-19 is real.

    Let’s start with tech.

    On the baseline, it’s worth looking back at past unlocks and how they triggered change. In the 1990s, the internet and ecommerce crashed retail. In the 2000s, we discovered the smartphone and condensed all of that potential into handheld form. People now carry offices in their pockets, not to mention their spending habits. This past decade, voices became interfaces to internet-enabled technologies, Rakuten said, powered by huge advances in artificial intelligence.

    While only one, weird year in, the company expects the 2020s to center on how these three core consumer technologies can be amplified by broadband access, enabled by 5G networks along with location technology.

    READ MORE: Is the restaurant of the future already here?

    In terms of merchants and restaurants, Rakuten sees the future characterized by something it labels, “bytes driving bricks.” Or where strategic brick-and-mortar transformation will be made with digital innovation and customer experiences as the primary catalysts.

    If this sounds familiar, it’s because it’s already underway. Take a brief tour of Taco Bell’s upcoming “Go Mobile” design. The store features “smart kitchen” technology that integrates with the chain’s app. So Taco Bell can instantly detect when a guest who’s ordered through the app shows up. It then suggests the quickest route for a seamless experience—curbside pickup spots or a priority option in a second drive-thru lane.

    Taco Bell
    Taco Bell

    Taco Bell's "Go Mobile" unit is a sign of things to come for the industry.

    Of just curbside, Taco Bell credited its inspiration as “another convenience alternative that modern consumers are looking for.”

    The whole design is built that way. As Rakuten said, customer experience imagined with a digital backbone.

    Some stats:

    81 percent: Americans who own a smartphone. This has zero chance of going anywhere but up as younger generations mature into the marketplace.

    34 percent: People who own a smart speaker. Perhaps this technology will change. Is it fading, though? If anything, consumers are finding more ways to connect themselves and the technology in their homes and daily routines.

    About 3 hours: How long Americans spend on their smartphones per day. The real kicker: its more than they spend watching TV. And if you think people are putting phones down to solely focus on their favorite shows (and commercials, if applicable), it’s a pipedream.

    For restaurants, this is manifesting in app proliferation and the ability to connect with customers where they spend the majority of their mental energy. In a previous study from Bluedot, 88 percent of respondents said they were using mobile more than before. And they were using mobile plenty pre-COVID.

    Jersey Mike’s CMO Rich Hope said the sandwich brand saw some 1.2 million app signs-ups in a matter of weeks at one point during the pandemic. It made the chain rethink text and email programs of old. “You send out notifications and there is a reaction,” Hope said of the app’s leverage.

    Early on, Jersey Mike’s tested waters by staggering alerts, say five times throughout a day, and seeing if online orders jumped. Hope said there was a spike “every time we sent a notification.”

    “Notifications are just impactful,” he said. Unlike email, customers have to do something with a notification. “You’ve at least got to dismiss them,” Hope added.

    The reinvention of the brick-and-mortar experience.

    Driven in large part by competitive threats and significant changes in consumer shopping patterns, Rakuten said, restaurants are witnessing the early stages of a fundamental transformation of the role of the brick-and-mortar store.

    This is true of other industries, too, like grocers, where Kroger is investing in highly automated “sheds” as large as 350,000 square feet to satisfy online ordering for pickup and optimize the fulfillment experience. Other grocers are betting on micro-fulfillment centers often connected physically to stores.

    But zeroing on restaurants, the best place to start is the drive thru. A host of brands, from McDonald’s to Burger King to KFC to the aforementioned Taco Bell, are concepting units without dining rooms in an effort to capture a growing occasion. And perhaps the most underserved angle is how to do so without blending into the field. Beyond just saying, “we’ll see more drive thrus in the future and smaller dining rooms,” expect these brands to use technology to reinvent the experience. AI and personalization. Upselling through tech, not training. McDonald’s, for one, is working on ways to streamline transactions through automated ordering and payments made by identifying customers at the display screen.

    KFC

    New fast-food models are popping up across the quick-service lexicon.

    Restaurants driving brand loyalty via digital channels today also recognize data-driven benefits. NCR Corporation said leveraging growing digital channels gives restaurants power to recognize customers instantly, track their behavior, analyze preferences, and reach them directly. McDonald’s Dynamic Yield at the drive thru does everything from suggesting food based on weather to what’s trending, and it’s only getting more sophisticated.

    Consulting giant Deloitte recently polled operators and one in particular said they were using computer vision to recognize a car or license plate, eliminating the need for ordering or payment interactions.

    “The drive-thru, especially for [quick-service restaurants], is ripe for innovation thanks to these tools,” NCR said. “When a customer enters a drive thru, their vehicle can be automatically linked with their persona and ordering preferences. Those orders can then be tracked over time to deliver relevant, tailored advertisements, and promotions. And, with the rapid increase in mobile ordering this year, much of this data is already available and ready for use.”

    So all these fancy prototypes dropping of late? It might actually be what’s inside that’s matters most.

    Shifting to privacy

    The increase in high-profile data breaches over the previous decade means restaurants must also refine their cybersecurity practices and controls, NCR said. Loss of sensitive customer information can result in significant damage to a restaurant’s brand and image. And all of the changes listed above make this more imperative than usual.

    Rakuten said brands continue to develop consumer applications that promise to make consumers’ lives dramatically easier:

    Mobile devices can access the precise location from consumers and use that data to predict arrival times and provide better consumer experiences at pick up. Stored payment information can simplify every subsequent interaction.

    “With more consumer data becoming available and privacy concerns increasing, it’s vital to make clear to customers how you’re using their data and why it’s beneficial to them,” Rakuten said

    Consumer privacy permissions in digital environments are multiplying as restaurants try to adapt to ever-changing mandates from governments and big-tech companies. An example: Apple’s new iOS 14 operating system added a new level of complexity by creating two layers of location tracking and by adding new permissions.

    “However we feel about this, the future is fairly clear,” Rakuten said. “There is an incredible array of consumer data available to merchants, but they need to operate with the assumption that their customers will be persistently reminded of their privacy options, what data is being collected and stored, and how said data is being used. This significantly elevates the burden on merchants to deliver incredibly effective and convenient solutions derived from consumers’ personal information. Anything less will likely not make the cut.”

    A change to last

    Despite how often we hear about them today, curbside and in-store pickup were not outlets born out of COVID-19. They’ve just moved up the priority scale, to put it lightly. Today, they must be a prioritized channel. This might not be true for every restaurant in America, but it’s the case more often than not. And as lockdowns and winter weather go hand-in-hand, relying on dine-in business is not going to come without risk.

     

    Rakuten Ready

    Curbside is now a standard.

    Here’s a telling example from the past. Back in October 2018, Chipotle CEO Brian Niccol said the brand was at less than 50 percent awareness with its reenergized digital platforms. This wasn’t an outlier. Often the biggest hurdle to digital transactions is awareness, especially with older consumers. Operators tout the digital channel’s “stickiness,” or the fact once somebody tries it they realize the benefits and come back to it. “Who wants to wait in line and order when you can walk in, pick-up and go about as you please?” In certain circles, it made digital investments a complex ROI equation. Are we a social brand that wants to push dine-in? Is it worth building an app and adding pickup shelves if nobody gives us credit for them? How do we push customers toward those options?

    Chipotle

    Chipotle recently built its first digital-only store.

    That’s likely not an issue today. One thing COVID did was shove consumers into places they hadn’t been before, or the only places available and safe. That skewed toward online ordering, or delivery, or finding ways to pickup food in-store with as little friction as possible.

    The pandemic erased many digital adoption gaps. Now the question becomes, how can restaurants differentiate from each other in a crowded pool and keep those users coming back?

    Returning to Chipotle as a success case study, some two years later, fueled by COVID’s assault on consumer habits, digital sales soared 202 percent, year-over-year, to $776 million, or 40 percent of sales in Q3. The brand held 80–85 percent of digital sales gains in the period even as it recovered 50–55 percent of in-store business. All of this even inspired Chipotle to build a digital-only model called “Chipotle Digital Kitchen,” the first of which is located just outside the gate of the military academy in Highland Falls, New York. It serves pickup and delivery only, and will allow Chipotle to enter more urban areas that typically wouldn’t support a full-size restaurant, the company said. Additionally, it will unlock flexibility with future locations.

    Food for thought

    Rakuten shared three conceptual thought starters intended to encourage restaurants to reimagine their trajectories as we barrel further into COVID and beyond.

    The first it labels, “a literal interpretation of consumer centricity.” The easiest way to describe this would be to take the term “consumer centric” to a more literal place. In the past, you’d be hard pressed to find a company that didn’t put the consumer at the center of its decisions. Or least claimed to. But today, mobile and geo-location technology enables a more powerful, literal meaning and will define important strategy shifts in the years to come, Rakuten said.

    The technology that exists in consumers’ hands today can literally revolve around the consumer. To understand this concept, think about Uber, whose business revolves around the current physical location of the rider,” the company noted. “Armed with permission to access the customer’s location and with the consumer’s desired destination, Uber pivots around those two data points to deliver the best route and experience.”

    Just like Taco Bell (and others) McDonald’s new “Express Pickup” store will boast technology to alert employees to prep orders when customers are nearby. This is critical beyond just the direct-to-consumer interaction. Nathan’s SVP James Walker said one of the biggest issues amid coronavirus with delivery growth is a driver shortage. The result being it takes longer for food to show up for guests, regardless of how quickly and painlessly they can order.

    McDonald's

    Not just more drive thrus, but better drive-thru experiences end-to-end.

    A solution for Nathan’s was to adjust fire times so the product wasn’t prepared upon order, but rather based on when the driver was expected to arrive. This way, perhaps the driver has to wait a minute or two. But at least the customer isn’t sitting at home for 45 minutes bracing for cold product.

    So this technology from McDonald’s is ideal for guests, yet it also bears real benefits for delivery drivers and the overall experience, end-to-end. Rakuten has an ARRIVE technology as well that allows brands to fulfill orders around when parties show up to the restaurant.

    “The brands that will define the 2020s will not look at their business as homogenous stores and restaurants,” it said. “They will instead build a trusted, technologically enabled relationship with consumers, which literally puts the consumer at the center of the enterprise.”

    Next is “format proliferation.” For as long as restaurants looked to grow, they tried to define the best brick-and-mortar model and set to work scaling it. It was a race to gain the efficiencies brought on by scale, like supply chain leverage, and the belief guests put a premium on consistency. A Chipotle in Texas is a Chipotle in New York, and so forth.

    The pandemic darling of this has been ghost kitchens and the ability to seed and test consumer demand with lower overhead. Full-service barbecue brand Famous Dave’s is doing this across multiple formats, including housing ghost kitchens inside Johnny Carino’s looking to make up for lost interior space and depressed revenues from dine-in declines. Through this, the chain plans to enter several new markets and figures it could turn the ghost kitchens into dual stores (with branding out front) if they work out. And if not?

    “At least you didn’t build out a million-dollar restaurant just to test out that territory,” CEO Jeff Crivello said. It’s a way to plot future physical infrastructure. And, of course, restaurants across America, from Chili’s to Chuck E. Cheese, are launching virtual concepts (often out of their own kitchens) with fresh branding to tap into the off-premises stream.

    “Given the disruption in the brick and mortar landscape caused by digital technologies and consumers’ appetite for better experiences, we believe that this is not a time for merchants to lock themselves into one format that they then scale nationally,” Rakuten said.

    “We believe that the brands that will dominate the next decade will develop pickup and delivery formats that serve many different types of consumers across a proliferating number of possible purchase channels, all tethered around the concept of literal customer centricity,” it added.

    Rakuten also projects “A-Commerce,” or auto commerce, to begin emerging as a critical force in the next five to 10 years. According to The Washington Post, people spend more than 200 hours per year on commutes (this was before COVID), in addition to the time running errands and going on trips.

    For restaurants, the idea of eating in a car has also adjusted during the pandemic. It’s not just snacking on the drive thru from point A to point B. This is grabbing takeout, parking, and having a “car picnic” just to get out of the house. Will this jolt open up a new realm of ecommerce that will reshape the landscape for purchases that require immediate fulfillment? Rakuten thinks so.

    A-commerce examples available today:

    On your drive home, you can ask your voice- powered assistant to order a Domino’s pizza and have it ready for curbside pickup; location technology enabling instantaneous pizza-to-car drop-off.

    You haven’t had date night with your spouse in a while. During your morning commute, you can tell your car to make reservations for dinner at Flemings Steakhouse.

    “Purchasing safely from our cars, we believe, has the potential to make consumers’ lives considerably more convenient, and we believe that the passive communication of geolocation between consumer and merchant will be a critical enabler of the best A-Commerce experiences,” Rakuten said.

    Shake Shack

    More consumers are dining in their cars. Can restaurants capitalize on that?

    Things for the road

    Here were some starting points Rakuten provided to prepare for 2021 and everything that comes along with it.

    Prioritize trust

    The coming opportunities that we see, driven by 5G, geolocation, expansion of mobile capabilities, and opportunities for new retail and restaurant formats are dependent upon a high level of trust from consumers, Rakuten said. Failure to protect consumer personal data, including current location and planned destinations could set merchants back years while competitors speed by. Creating a transparent and customer-centric relationship built on trust is critical.

    Focus on the location of customers, not stores

    One thing you’ve seen pick up of late is the revaluation of restaurant portfolios. Starbucks is shedding 800 locations. Dunkin’, roughly the same amount. Burger King also expects to trim U.S. venues. Just focusing on Dunkin’, 450 of those came with Speedway closures, which paints the picture.

    COVID allowed companies to accelerated their brands into the future—something that was always going to come at the expense of closures. Starbucks and Dunkin’ want to get as many “future-ready” models into place as they can, as soon as they can. Drive thrus. Mobile pick-up models, in Starbucks’ case, etc.

    Rakuten said operators of all types “need to transform this opportunity to foster a far more active management of their real-estate strategy and a culture of organizational agility. Merchants need to develop mechanisms to keep their real estate footprint in a constant state of evolution. Too often, real estate acts as an anchor to innovation, rather than as an enabler of innovation. Real estate should be driven by the location of the desired consumers and the trends those consumers in those markets have, versus thinking about the location of the store and driving consumers to it.”

    Invest to understand evolving customer behavior

    Improvements in point-of-sale systems, ecommerce sites, and location technology will be necessary in the years to come as brands invest in innovation and technology to give them a superior perspective on customer behaviors, Rakuten noted. Just call it the melding of tech and behavior changes. Always best to have systems ready to meet demand than play catch-up with a quickly moving guest.

    Experiment with A-commerce

    A good place to start would be voice-powered mobile applications and business modes to prepare for mainstream adoption.

    Maintain a COVID pace, after COVID

    COVID-19 has forced merchants to scramble to develop and deploy minimally viable products that were, in many cases, imperfect and highly analog behind the scenes, Rakuten said. Successful restaurants will maintain these values in innovation, even when COVID-19 is gone. The point being, the technology that sprung out of COVID wasn’t a one-time fix. Given the proliferation of things like curbside and mobile order ahead technology, this coming year will be the time to refine not forget. And to cater pandemic investments to the core user, just as restaurants always have.