The majority of chain and independent restaurant companies do not yet offer online ordering, but the situation is rapidly changing, according to Cornell University research.


A survey conducted in May by professor Sheryl E. Kimes of Cornell’s School of Hotel Administration polled 372 restaurant companies offering takeout, delivery or catered meals and found that about 100, or 26.9 percent, said their businesses supported online ordering.


But many respondents also indicated that they planned to implement it in the future.


Of those operators who currently offer online ordering, about 89 percent said their systems provide incremental business, improved service or both, and all but 4.5 percent of them said the return on their investment in such technology had met or exceeded expectations.


The study, “The Current State of Online Food Ordering in the U.S. Restaurant Industry,” was conducted by Kimes on behalf of Cornell’s Center for Hospitality Research and will appear in the Sept. 16 issue of the Cornell Hospitality Report. 


It was the third of three Nation’s Restaurant News-sponsored Cornell studies based on surveys of chain restaurant websites, consumers and operators, involving takeout, delivery and catered restaurant meals, and online-ordering technology.


Kimes said operators who were not offering online ordering at the time of the latest survey gave a variety of reasons for that decision. Among them: 


• They felt that customers prefer to communicate with restaurant employees.


• The operators themselves prefer having a personal connection with guests.


• They believe such systems are too complicated or cost too much.


• They don’t trust the technology.


• They feel consumers are not interested in such ordering options.



The ramp up


Despite such concerns, operators not offering online ordering recognize it to be a service option that will become increasingly important in the future.


Kimes’ survey found that the 26.9-percent share of respondents offering online ordering could rise to 41.5 percent in the near term, as nearly 20 percent of non-users, or about 54 respondent companies, were in the process of adding such systems at the time of the survey. The share also could increase to 49.5 percent within a year if another 11 percent, or 30 companies, adopt the technology as planned. 


In comparison to that anticipated 84-company swing to online ordering during the 12 months following the survey, approximately 25 respondent companies deployed online ordering tools in the year prior to the survey.


If respondent companies add online ordering systems as suggested, approximately 60 percent of that group will support online ordering within three years, the research indicated. 


A survey by Kimes of 470 Internet-using consumers earlier this year (Nation’s Restaurant News, May 2, 2011) found that nearly half of all respondents, or 48.5 percent, had ordered restaurant takeout or delivery foods using an Internet browser, text messaging or smartphone mobile apps.


Respondent breakdown


The split of chain restaurant to independent restaurant representatives among the 372 May survey respondents was 55 percent to 45 percent, respectively. Of the chain operators, Kimes added, 63 percent worked at the corporate level of systems with more than 100 restaurants.


About 71.3 percent of the chain representatives and 79 percent of the independents operated restaurants with annual sales of less than $3 million. 


On average, Kimes said, takeout orders generate about 22 percent of the respondents’ total sales, with orders for delivery, catering and other foods to be eaten off premise combined contributing another 11 percent.


The operators said 52.4 percent of their takeout, delivery or catering orders were placed by phone, 40.8 percent came from walk-in business and the remaining 7.8 percent through a variety of online channels. A breakdown of ordering channels by the percentage of respondents using them was as follows: 


• in-restaurant orders, 93.3 percent


• telephone orders, 88.7 percent


• proprietary restaurant website, 22.9 percent


• third-party, multirestaurant order aggregating websites, 6.7 percent


• mobile apps for smartphones, 3.3 percent


• fax machines, 1.8 percent


• interfaces on Facebook pages, 1.4 percent.


By menu type, the percentage of respondents that offered online ordering ranged from 46 percent among pizza restaurant operators to about 3 percent of those operating hamburger restaurants. In between were operators of sandwich concepts, 37.9 percent; Mexican, 36.8 percent; Asian, 36.4 percent; chicken specialists and bakery operators, both about 27 percent; other, about 24 percent; and American, 18 percent.


The percentages of respondents offering online ordering by service type were as follows: fast casual, 37.5 percent; casual dining, 29.2 percent; quick service, 26.9 percent; family, 21 percent; fine dining, about 19 percent; and upscale-casual dining, about 17 percent.


A full 75 percent of the respondents that offer online ordering said they had done so for from one year to more than four years, while 25 percent said they introduced the order option within the past year. 


How it affects business


Some respondents reported that their average check from online orders was more than 20 percent lower than their on-premise average, while others said their online order channel average check was more than 20 percent higher — which was in keeping with some reports cited by Kimes about the benefits of online-ordering systems. 


However, she said, among respondents to the Cornell survey, the average change in average check for online orders versus on-premise orders was a “more modest” growth rate of 2.3 percent for takeout foods, 1.9 percent for delivery foods and 1.0 percent for catered foods.


Survey data and operator comments prompted Kimes to conclude that online-ordering systems primarily benefit sales efforts by simplifying the ordering process to the point of eliciting a greater frequency of individual guest, group and catering orders. 


“On average, operators who used online ordering saw an increase in order frequency, most commonly for takeout orders — 42.5 percent [of respondents] — but also for delivery — 28.5 percent — and catering — 14.2 percent,” she wrote.


Kimes noted that the key customer information provided through online-ordering registration and usage can be useful for developing promotional strategies, including targeted offers to increase off-peak demand, specials aimed at certain customer segments and couponing strategies. 


She said about one-third of respondents offering online ordering said they have used online promotions, and another third said they are now devising such promotions. Of the respondents who had offered online-ordering promotions, 52.4 percent said such offers “worked better” than did their other promotions, Kimes said.


Asked if the addition of online-ordering capabilities had improved customer satisfaction, 36 percent of respondents with such capabilities said it had, 22 percent said it had not, and 42 percent said they couldn’t tell.


Operational issues 


While most of the operators offering online ordering reported no detrimental impact on kitchen operations related to the technology, 23 percent said their back of the house had been overwhelmed at times when trying to deal with incoming orders during rushes. About 5 percent of the operators whose restaurants or chains offer online ordering said their business had established a dedicated production line for online orders.


One-fourth of the respondents offering online ordering said their restaurants had a separate food pick-up area for such orders.


To reduce potential production problems associated with online orders, about 35 percent of the operators offering that option said they used a metering system to limit the number of orders delivered to the kitchen at any one time. Because such metering can delay order fulfillment, Kimes said that about two-thirds of the operators using such systems leverage them to notify online customers of when their orders will be ready.


Payment patterns


About 78 percent of the respondents with online ordering capabilities used an outside vendor to develop their systems, and among that group about 60 percent manage their own site on an ongoing basis. The other 40 percent rely on third-party managers. 


According to Kimes, 37.6 percent of operators receiving third-party support for online-ordering systems pay a flat monthly fee, 17.7 percent pay a per-transaction fee, and 15.6 percent pay a percentage of the transaction total.


About 49.6 percent of the operators offering online ordering said they integrate those Web-based systems with their in-store point-of-sale systems. The other methods used to relay online orders and the percentage of respondents using them: fax machines, 15.6 percent; IP printers, 14.9 percent; and e-mail, 13.5 percent.


Operators speak out


Open-ended questions also asked operators offering online ordering what they liked or disliked about that capability.


Kimes said the most common answer for what operators liked about the technology, or 38.1 percent of such comments, related to labor savings and freeing employees from the need to work the phones, followed by the way the technology improved order accuracy, 21.4 percent. Also seen as benefits: enhanced convenience for guests, 19.1 percent; simplified order processing, 13.7 percent; added marketing opportunities, 11.4 percent; and higher average checks, 8.4 percent.


Referring to survey points about online ordering and labor, Kimes wrote, “In general, respondents reported little changes in staffing in the front or back of house, but indicated that they had experienced a decrease in staffing needs for order taking (22.8 percent of respondents) and an increase in delivery staffing (24.4 percent).”


Comments about the downside of online ordering, Kimes found, included that it: results in less guest interaction, 22 percent; comes with technology issues, 17.1 percent; allows guest input errors, 16.3 percent; has costs, 6.5 percent; and can challenge the kitchen, depending on the timing of orders, 6.5 percent.


Some misperceptions 


Kimes applied regression models to input about what drives consumer online ordering usage from restaurateurs and consumers — including restaurateurs who did and did not offer online ordering and restaurant customers who did and did not use online ordering.


“Operators, both users and non-users, indicated that they thought increased convenience was the top factor driving customers to use online ordering, but customers, both users and non-users, indicated that perceived control was the more important factor,” Kimes said. “None of the four groups considered technology anxiety to be a significant factor driving use or non-use of online ordering.”


The full report may be viewed and downloaded from Cornell’s website at www.hotelschool.
cornell.edu/research/chr/pubs/
reports/2011.html.


Contact Alan J. Liddle at alan.liddle@penton.com.