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2016: The year to master digital ordering

In 2016 and beyond, restaurant industry success will be determined not by mastering the drive-thru, but rather by mastering digital ordering and meeting the needs of the on-demand consumer.

February 15, 2016 by Noah Glass — CEO, Olo

The legendary management consultant Peter Drucker wisely counseled, "What gets measured gets improved."

In the restaurant industry as in all industries, we strive to find those metrics that will determine success, measure them and improve them. For decades, industry soothsayers focused on the limited-service restaurant segment have focused on drive-thru speed and accuracy to determine drive-thru mastery as a corollary for winning. In 2016, drive-thru mastery is no longer the appropriate determinant of success.

By reviewing 10 years of Olo's internal data from more than 150 restaurant brands around the nation, I've come to believe that the determinant of success in the restaurant industry is no longer mastery of the drive-thru. Rather, the determinant of success in the restaurant industry is mastery of digital ordering. Digital ordering mastery far transcends a restaurant brand having a website that enables its customers to order online for faster pickup at the store. The rules of the game have changed due to the rise of a new breed of consumer.

Today's consumer can stream any song at the touch of a button, download any movie or television show with the touch of a button, or hail a car at the touch of a button. This new breed of consumer expects on-demand service. The restaurants that succeed in 2016 and beyond will be those restaurants that master digital ordering and meet the needs of the on-demand consumer by making their food available at the touch of a button.

In 2016 — whether you're a restaurant operator, restaurant executive, restaurant investor, or restaurant analyst — the appropriate metric to measure and improve is "percentage digital": What percentage of restaurant sales come through the digital channel?

Digital ordering has come to represent the paramount of food convenience, replacing the 50-plus year reign of the drive-thru. It enables parallel processing of multiple orders and handoffs at the same time. By contrast, the drive-thru requires customers to order in serial processing fashion — processing one order at a time and one handoff at a time. That is, your experience in the drive-thru is dependent on my experience in the car in front of you.

For example, if I submit an overly complex order, it directly and negatively impacts your experience because of the serial processing nature of the drive-thru. And no matter how fast we get the drive-thru per-car time (180 seconds, 178 seconds, 176 seconds), it is never as fast as the zero-second experience that digital ordering enables when a customer's order is prepped and ready for handoff at the precise moment that he or she arrives at the restaurant.

Since introducing the ability to order food with the touch of a button to the U.S. market in November 2005, Olo has witnessed that brands using digital are seeing the same exponential results — doubling each year. If the non-pizza limited-service segment's digital-ordering penetration comes to look anything like the pizza limited-service segment, we're just years away from industry-wide 50-percent digital-ordering penetration — the massive prize of $100 billion of market share changing hands from those who are poor at digital ordering to those who are good at digital ordering.

We see restaurant brands journeying up the same exponential, doubling-each-year growth curve. Take Wingstop, which recently declared a 15-percent digital ordering mix, up from 7.5 percent the year before. The strategy paid off; the average mobile order size is $4 larger.

At the micro level, brands must not fall behind their competitive set when it comes to digital ordering. The double-each-year nature of the market means that a brand being 365 days behind its competition is stuck receiving just half of the benefit of digital ordering than its competitor — forever. 

2016 is the year for restaurant brands to not only get to market with digital ordering, but master it holistically and contemplate and plan for a world in which 50 percent or more of their orders will be coming through digital channels from an on-demand consumer who expects the order to be ready and fresh when they arrive to collect it. That requires engaging with a sophisticated digital-ordering platform that offers online, mobile and call-center-based ordering, developing an operational plan for digital ordering excellence and shifting one's gaze to the digital-ordering mix as the key metric of success. The brands that are best positioned to win 2016 and the future are already doing so.

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