Article

Is online ordering a good fit for QSR?

The technology is working in the pizza space, but would it work for a Quarter Pounder?

July 17, 2011 by Alicia Kelso — Editor, QSRWeb.com

A majority of quick-service food is handed off to customers in less than 3 minutes. As an increasing number of QSRs deploy an online ordering option, things may get even faster.

However, the segment as a whole lags far behind its pizza and fast casual counterparts in adoption, according to a recent report, "Online, Mobile, and Text Food Ordering in the U.S. Restaurant Industry," from Cornell University's Center for Hospitality Research.

For example, after launching an updated online ordering system two years ago, Domino's is now the No. 4 online retailer in the country. More than 25 percent of Papa John's traffic is generated through electronic orders. Chipotle has had online ordering in place since 2005 and even remodeled its busiest restaurants with a line dedicated to online orders during peak periods.

Conversely, hamburger and frozen dessert categories have the lowest frequency of online ordering, with less than 10 percent of chains offering the service.

Sandwich, donut categories are a good fit

The QSR online ordering space isn't totally void of the option. Participating Subways and Quiznos units offer online ordering, as do D'Angelo's and Jersey Mike's. In fact, the Cornell research finds that sandwich chains are on par with pizza chains in online ordering frequency – with more than 65 percent of chains including the platform.

The high number for sandwich joints isn't surprising to Stan Garber, partner and sales director of ONOSYS, an online ordering company that designed Jersey Mike's and D'Angelo's systems. He said he has seen a huge spike for sub chains specifically because they have a group ordering appeal.

"It's simple logic to have one person ordering for the whole family or the whole office online. The goal is to let everyone have the ability to place the order they want and pay online," he said. "It's just easier and more convenient."

Donuts have that "whole-office" appeal as well and, in 2009, Dunkin' Donuts rolled out its DunkinRun.com application to better enable group orders.

And, although the frozen dessert category is way behind others in adoption, Cold Stone's customized ice cream cakes bode well for the chain's new online ordering component, launched in May through OLO online ordering. Jana Schneider, director of marketing for Cold Stone, said no other national ice cream concept currently offers online ordering that includes a payment option.

"We felt it was important to be first to market with a program like this so we can capture those customers who order online," she said.

Since the program began, more than 20 percent of online orders have been made when stores are closed. "In today's world, we know our customers are busy and we don't want to lose any cake orders because our store isn't open or our crew is busy serving others," Schneider said.

Online ordering with single-order, impulse concepts

Although it may make business sense for pizza and sandwich chains to adopt this technology, Garber seems a bit skeptical about the immediate necessity of having an online ordering platform at drive-thru-heavy burger joints.

"We see growth in concepts that have bulk orders or multiple orders. I am not sure you're going to make much money or benefit by selling one or two burgers through an online order," he said. "Those types of places have a lot of impulse buyers that don't really plan that far ahead."

Still, Mason-Harrison-Ratliff Enterprise LLC, the largest Sonic Drive-In franchisee, launched a 71-store pilot program in March through OLO. Sonic would not comment for this story.

Also, White Castle launched its online ordering component in early May and gets almost as many orders from its Crave Cases (30 Sliders) and Crave Crates (100 Sliders) as it does from customers ordering a single Slider or a cup of coffee, according to Jamie Richardson, vice president of corporate relations.

Although he won't quantify specific sales from program, he said White Castle is "really, really happy with the results thus far."

"This resonates with our customers and the pace of their lives," he said. "While it's quicker for them to pick up food, it also gives them a chance to slow down, compare options and make a decision when they're ordering. It takes off a lot of pressure for both the customers, who don't have to be hurried to order, and for the restaurants because we know in advance what time an individual will pick up their order."

On the contrary, Garber said that specified timeframe for a single order is tricky to navigate and could even generate food waste.

"You can't predict traffic or if you're going to be even a little late. Time on food is so critical in the QSR space and even if 5 percent has to be thrown out and remade, it poses a problem to the bottom line," he said. "Fast food is fast food. There's never going to be a huge wait time. So unless you're doing a big order with a bunch of information, I don't know if online ordering is going to be big or not."

He does, however, anticipate mobile ordering becoming common across all segments, including QSR. "More people want to walk into an establishment and sit down and order, then maybe talk to their friends and socialize while waiting for their food, even fast food," Garber said.

Eric Giandelone, Mintel's director of foodservice research, predicts an explosion of both components, even in the QSR space. Online ordering, he said, is not only in-demand because of its speed and convenience, but also because it ensures order accuracy for operators and can help organize the workflow.

"Whether an order is computer or smartphone-generated, you can still be impulsive about ordering if you know you'll be passing a McDonald's at some point," he said. "Chains like White Castle or Sonic might have some hiccups at first, but I think they're going to pave the way for bigger players to get involved with this. Online ordering will grow because people will expect it to be there as with all technology now."

And even if consumers don't change their drive-thru or in-store ordering habits because an online platform is available, they still want to have that choice, said Richardson.

"We're in one of the most dynamic marketplaces in history in terms of consumer liberation," Richardson said. "Consumers have more options and more control and having online ordering is just another way to stay relevant and make our product more available for them."

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