There was a time when the primary function of a restaurant’s mobile app was helping guests find the nearest location and allow them to look at the menu.
No more.
As a growing number of restaurant chains move into the mobile/digital space, the features available to guests are become increasingly complex.
With a strong digital presence, restaurant chains can allow guests to order ahead, pay for their meal and skip the line. Guests can choose to have their meals delivered. They can order and send gift cards; study the nutritional aspects of their customized choices; track their loyalty reward points; and sometimes even play games.
However, some data indicates that consumers don’t necessarily want more restaurant apps taking up valuable real estate on their smartphones.
A survey by OpenTable earlier this year found that 56 percent of consumers said they were “very unlikely” or “unlikely” to download an app for an individual restaurant, compared with 6 percent who said they are very likely to download such apps.
Respondents indicated that they prefer apps that aggregate information from multiple restaurants.
According to a white paper report by the National Restaurant Association with mobile provider LevelUp, different methods for digital programs have succeeded with different customer bases, but a number of features are beginning to stand out.
A look at what some of the leading players are saying about their digital programs shows that certain features can move the needle in driving traffic and sales.
Here’s a look at some of those features:
Order and pay ahead
, and the world is watching as the Seattle-based coffeehouse chain completed the rollout of the mobile order-ahead and payment feature on its app, which hit all 7,400 company locations across the U.S. on Tuesday.
The rollout, which started in December at locations in Portland, Ore., and has moved across the country in waves, has exceeded company expectations, shortening lines, speeding service and making in-store operations more efficient.
In July, company officials said mobile ordering and payment accounted for 20 percent of transactions, or about $9 million every week, and that number is only expected to grow now that the feature is available in dense urban markets like New York.
The move sets the stage for Starbucks delivery, which is expected to roll out next year.
In a report, analyst David Tarantino of Baird Equity Research said, “We believe mobile order/pay can be a major comps driver in fiscal 2016 and also provide a long-term structural advantage for Starbucks (enhanced customer experience; integration into My Starbucks Rewards program) that can produce a multi-year sales lift (including through higher average ticket, once the company turns on suggestive selling capabilities) and rapid mobile adoption (enabling one-to-one marketing).”
Panera Bread’s 2.0 remodel also takes an integrated digital approach, including a mobile app that allows guests to order and pay ahead, as well as use in-store touch-screen kiosks. By the end of fiscal 2015, the company expects 400 of its 1,926 cafes to be converted to the 2.0 model.
During its most recent earnings call in July, Panera founder, chairman and CEO Ron Shaich said digital utilization — which includes mobile, web and in-store orders by kiosk — accounted for 10 percent of sales in company cafes, and that number is expected to increase as the chain continues the 2.0 rollout.
In cafes that have been converted to the 2.0 model specifically, digital utilization accounts for more than 20 percent of retail sales, and it reaches 30 percent for 2.0 cafes converted more than a year, he said.
And as digital utilization goes up, he said, labor and order input costs go down.
“We believe strongly that digital has a powerful role to serve in our increasingly omnichannel business model,” Shaich said. “We are today generating a greater percent of our orders through digital than any public restaurant company we know of, exclusive of the pizza players that have been playing at e-commerce for almost a decade.”
According to the NRA/LevelUp report, an order-ahead feature — offered via mobile app or online — accounts for nearly 5 percent of sales in the first three months after it’s introduced.
LevelUp research indicates that customers who have placed an order online visit the restaurant 67 percent more frequently than customers who haven’t.
In 2014, Taco Bell was the first national quick-service chain to launch mobile ordering and payment. To date, the chain said 3.5 million have downloaded the app, and company officials say the feedback has been very positive.
In recent weeks, chains that have launched apps with order and pay-ahead capabilities, or plan to, include Jamba Juice, Firehouse Subs, and Papa Murphy’s Take 'n’ Bake Pizza.
BJ’s Restaurants Inc. was one of the first casual-dining chains to launch a mobile app last year that allows diners to order ahead, even though they might be dining in the restaurant.
The idea was to speed service. Payment through the app allowed guests to leave when they were ready, rather than waiting for the check.
However, BJ's CEO Greg Trojan said the app isn’t at the point where it’s driving significant traffic or volume yet, but he said it will.
“A lot of that is changing a mindset,” he said in a July interview. “People don’t really understand yet that they can order ahead and sit down in the restaurant. They understand takeout more easily, and our adoption rate is higher for carryout.”
Still, he said, “We love that others are starting to catch up in this regard. If people get used to it, they’ll start understanding [how it can work].”
Delivery
For Starbucks, the next step in digital innovation is offering delivery. Later this year, the chain will test two types: In New York, “green apron delivery” will be handled by Starbucks baristas. In Seattle, the chain will work with Postmates, a third-party provider.
The proliferation of such technology-based, third-party providers, like Postmates, has made restaurant delivery more accessible to consumers in an increasing “on-demand” economy.
But those providers train consumers to turn to the Postmates or DoorDash websites or mobile apps to decide what they want to eat.
Many restaurant chains are concerned that they will lose the opportunity to draw consumers to their own websites/mobile apps, which means they may also lose the data collection potential of that direct relationship.
Olo, a New York-based digital ordering provider, this month announced a new delivery service called Dispatch that addresses that concern. The service is scheduled to roll out nationally in the fourth quarter.
Noah Glass, founder and CEO of Olo, said the service will enable large restaurant chains to offer delivery at a scale not available through third-party providers, which currently operate in a limited number of markets.
Dispatch allows guests to use the participating restaurant chain’s app, placing their order and paying ahead. At checkout, a “delivery” option is available. Guests then can see a selection of delivery price quote options and times from local delivery providers, like Postmates and DoorDash, who serve as the last-mile couriers.
The order goes directly to the chain’s point-of-sale system. Olo has already worked out integration with many major point-of-sale providers, something third-party delivery players are still working on.
For the restaurant operator, no human intervention is involved, beyond cooking the meal. Dispatch will know that a certain dish takes eight minutes, and that the delivery driver selected by the guest is five minutes away, so it directs when the dish should be fired to be hot and fresh when the driver arrives.
The guest, meanwhile, will be able to track the order in real time, which Glass described as “like Domino’s Pizza Tracker, but on steroids.”
Perhaps the biggest factor, Glass said, is that the restaurant operator has direct access to data about the consumer who placed the order, their order history and contact information.
“They don’t have to give up that sovereign relationship they have with the guest. The guest stays on their app,” he said.
Glass said in the increasingly “convenience-crazed economy,” delivery is a crucial component for any restaurant chain with a digital presence because an estimated 80 percent to 100 percent of orders are incremental.
In the pizza world dominated by Domino’s, Papa John’s and Pizza Hut, more than 50 percent of orders are digital, leading the industry.
Glass predicts that by 2022, 50 percent of non-pizza limited-service orders will also be digital. “Non-pizza limited service is about a $200 billion market, so that’s a $100 billion shift,” he said.
Loyalty
At Starbucks, chief financial officer Scott Maw predicted that the addition of mobile order/pay will also boost participation in the chain’s My Starbucks Reward loyalty program.
That boost will allow the brand to reach more consumers with more targeted marketing.
In 2016, for example, the chain will add more upselling components to the mobile app. If a loyalty member orders an iced tea, for example, a photo of a panini may pop up as a suggested addition, or something based on that person’s order history.
Taco Bell has also said a loyalty program is the next step after the mobile app launch, and a roll out is expected later this year.
The Irvine, Calif.-based Wienerschnitzel chain recently launched a mobile app tied to a loyalty program, with reloadable payment options. Guests can earn points for every dollar spent toward a free combo meal. On their birthdays, they also get a free sundae or corn dog.
The app also connects users to Wienerschnitzel’s latest videos and allows them to see social media content with the #Wienerschnitzel hashtag.
According to the NRA/LevelUp report, order and pay ahead features help build loyalty program adoption rates.
The rate of adoption for traditional loyalty programs is about 5 percent to 12 percent, the report said.
For mobile payment combined with loyalty programs, the adoption range increases to 18 percent to 28 percent.
Put mobile payment together with order-ahead capability and a loyalty program, and that range climbs again to between 15 percent and 35 percent, the report said.
Brands like Starbucks and Dunkin’ Donuts have found that one of the hidden benefits of tying payment to loyalty cards is that consumers reload their accounts with higher amounts than they would pay, the report noted.
Rather than making smaller transactions that have a higher minimum interchange charge, users load $25 to $50, which for the restaurant chain appears as a larger-ticket transaction.
“Before you get too excited about replicating this in your own business, it’s worth pointing out that these restaurants are uniquely situated to do this,” the report noted. “Customers at these establishments make frequent transactions, often daily, and understand the rewards of preloading their mobile app.”
McDonald's digital update
McDonald’s Corp., began rolling out a mobile app in August in certain markets and it’s expected to be available nationwide by October. The quick-service chain is taking a deliberately modest approach, however. For now, McDonald’s’ app is primarily a restaurant locator, but guests can get nutrition data and access to coupons and discounts, as well as a drink loyalty program that gives a free drink after the purchase of five McCafé beverages.
McDonald’s CEO Steve Easterbrook, in earnings calls with Wall Street analysts admitted that the Oak Brook, Ill.-based chain is a bit behind the digital curve, but he has vowed to catch up. How the chain plans to do that remains to be seen.
McDonald’s team is “already hard at work developing additional features to hasten the shift from mass communication to personal one-to-one engagement with customers in the future,” he said in July.
Easterbrook hinted that order-ahead capability, and geo-location technology that could recognize guests in the drive-thru lane before they even place an order, are possibilities for the chain to adopt.
The features that McDonald’s comes up with will be closely watched by the entire industry. But clearly Easterbrook sees digital features as an opportunity to meet the varying needs of consumers.
“I think technology will be a differentiator to give us different service models, but it will still be a McDonald’s,” he said during the earnings call. “They will still enjoy the McDonald’s experience, but just in different ways.”
Correction: September 25, 2015 An earlier version of this story incorrectly stated that Papa Murphy’s Take ’n’ Bake Pizza has launched a mobile app. It is scheduled to launch before the end of the third quarter.
Contact Lisa Jennings at [email protected].
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