While off-premises sales had a firm foothold in the restaurant industry before the pandemic, COVID-19 and its related restrictions turned them into a frenetic Zaouli dance with apparent staying power.
During the pandemic, restaurant operators increased investments in new tools, systems, procedures, store layouts and service models to turn to-go and delivery business into an integral revenue stream.
While the coronavirus polished the already golden drive-thru real estate, less-fortunate locations adapted with genius innovation, turning lobbies into take-out staging areas, adopting technology tools to alert them when customers were nearby and squeezing nearly all the friction out of selling meals to the hungry patrons.
“We historically always had great takeout and off-premises sales,” said Keven Miles, CEO of the 37-unit fast-casual Mendocino Farms, noting that it was 65–67% of total sales before the pandemic and the spigot turned to 100% with COVID-19 restrictions.
Mendocino Farms’ off-premises have stabilized at about 89% as the brand emerges into the Vaccine Era, Miles said.
Off-premises investments at Mendocino Farms have included online ordering, an app, curbside and touchless ordering.
“We had just launched online ordering prior to the pandemic,” Miles said. “During the pandemic, we did add an app. We did add curbside and the seamless touchpoints,” such as touchless ordering.
Los Angeles–based Mendocino Farms was not alone. Dine Brands Global’s casual-dining Applebee’s Neighborhood Grill & Bar introduced a drive-thru window at a location in Texarkana, Texas. Brinker International debuted a virtual Its Just Wings brand fulfilled in the kitchens of more than 1,000 Chili’s Grill & Bar and Maggiano’s Little Italy restaurants.
Dinner-only Texas Roadhouse turned its waiting-area lobbies into take-out staging areas during the pandemic, and the Louisville, Ky.–based brand is continuing to adapt to off-premises sales.
Tonya Robinson, chief financial officer for Texas Roadhouse, said in a first-quarter earnings call that the brand was retaining off-premises sales as dining rooms reopened.
“We're seeing the percentage come down,” Robinson said, “but the per-week sales number is sticking in that $24,000–$25,000 range, which is definitely good to see.” Digital sales are also ratcheting upward, to about 55% of sales in the first quarter versus 50% in the last quarter of 2020, she said.
To accommodate the continued demand in off-premises orders, Texas Roadhouse has adapted.
“We're continuing to do some curbside,” said Jerry Morgan, Texas Roadhouse CEO. “But our convenient pickup windows that we've put in across the concept have really been a hit with our guests. … The ability to text and communicate with our guests, for them to stay in their car and then come get their food, has been a big win.”
Texas Roadhouse also upgraded its smartphone app.
“We've tested a couple of drive-up windows — not drive-thru, but a drive-up window where people can text, stay in their car and then come pick up their food,” Morgan said. “Our operators are really figuring out the to-go side and making it a great experience when those folks land at home and they open up that food around their dining-room table with their families.”
In July, Outback Steakhouse, a division of Tampa, Fla.–based Bloomin’ Brands, also redesigned its smartphone app. The steakhouse brand tripled its off-premises sales during the pandemic.
The new app integrates Bloomin’s Dine Rewards loyalty program, and a company representative said upcoming features will include enhanced curbside pickup with push messaging and order updates, improved menu viewing with easy add-ons and menu suggestions based on prior orders.
Operators now consider digital tools as part of the restaurant experience, Miles of Mendocino Farms said.
“The digital experience is something we really focused in on,” he said, noting that it even extended to technology used to answer the phones at the restaurants. “We had more of an older antiquated phone technology where it was hard for the operators to hear and speak with a guest,” Miles said. “We upgraded our phone system so it could communicate.”
Mendocino Farms also expanded its footprint with a virtual kitchen, opening one in Long Beach, Calif., in November. A second is planned for Oakland, Calif.
“We are really looking and approaching that more as an in-fill strategy,” Miles said, adding that the virtual brands are serviced through third-party kitchens.
Restaurant brands have increased their investments in technology as they see customers more readily embracing it for off-premises orders over the past year and a half.
“We invested in technology, particularly within our to-go capabilities, to meet our guests' growing need for convenience and desire for the off-premises experience,” said Gene Lee, CEO of Darden Restaurants, parent to Olive Garden, LongHorn Steakhouse and other brands, on the company’s most recent earnings call. “Our business model has evolved and is much stronger today.”
Darden has invested in technology for online ordering and introduced new capabilities, such as to-go capacity management for operators and “Curbside I'm Here” notifications to improve the experience for guests. As a result, 64% of Olive Garden's to-go orders were placed online and 14% of Darden's total sales were digital transactions in the latest quarter.
Some brands are expanding convenience to off-premises-only locations. Oak Brook, Ill.-based Portillo Hot Dogs, for example, announced plans in July for a 3,750-square-foot Portillo’s Pick Up with a triple drive-thru that is expected to open in Joliet, Ill. It will also include a pickup area for orders placed online or through the brand’s smartphone app.
Miles of Mendocino Farms said he and other consumers have adapted and accepted innovations such as QR, or quick response, codes for menus. Brands have also changed their real estate checklists to include areas for curbside pickup and less indoor seating, he said.
“We don't believe that the off-premises [trend] is going to go away,” he said, “so how do we make that more convenient not only for the guests that wants to walk in, but also the third-party drivers that are coming in and having a designated space for them so they can get in and out and be more efficient and timely with those deliveries.”
Prior to the pandemic, Mendocino Farms would look for sites with 3,000 square feet. “We're looking now — post-pandemic — a little bit smaller as long as we have a nice patio,” he said, adding that the company is building a 2,200-square-foot unit in California now with a 1,000-square-foot patio.
“We will continue to look somewhere in that 2,500–3,000 range but slightly less dine-in seating and more outdoor seating and a to-go area,” he said.
Miles said any technology or design that can make the customer’s experience easier will continue to be a focus for the restaurant industry.
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