COVID-19 Related Feature and Product Updates

Business is no longer “as usual” for anyone, but especially for restaurants, which are among the hardest-hit industries in the country. That’s why Paytronix is rolling out a series of product features and updates designed to help keep restaurants open by managing the changing world of off-premise dining. New Curbside functionality offers a seamless guest experience and an additional mechanism to get food to your guests during this time of uncertainty. We also created a missed visit score and an online order history score within the loyalty platform so brands can specifically segment these guests and communicate with them accordingly.

You can find more details on our site, along with information about the restaurant industry in this new world. If you have additional questions, please don’t hesitate to reach out to your account rep or anyone else at Paytronix.

Where Ordering and Delivery Meet the Pocketbook

Last week saw some major movement in the third-party delivery world. First, the New York Times pointed out how much delivery truly costs the consumer, noting in a headline that delivery charges can often nearly double the cost of the order itself. Then DoorDash, the industry leader with at least a third of the delivery market, announced that it plans to IPO. DoorDash last raised money at a staggering $13 billion valuation, which is equivalent to the market cap of Domino’s Pizza, the seventh-largest restaurant chain.

The contrast between these two headlines strike at the debate about whether third-party marketplaces are a disruptive trend or simply a passing fad for niche opportunities. At Paytronix, we are always focused on what is best for our restaurant clients. We think this issue comes down to a basic question: How does third-party delivery impact brand value?

When our clients turn to third-party aggregators for delivery, it’s often because they are testing a service model outside of their four walls at a very low cost. Conversely, in-house fulfillment has fixed costs for recruiting and training, and during the early stages, it’s not obvious that enough orders will come in to cover it all.

Delivery’s Cost to the Consumer

An article in the New York Times suggests that what’s truly happening here is that the costs are shifting to the consumer, which is just making meals more expensive. “Up to 91% More Expensive: How Delivery Apps Eat Up Your Budget” found that orders placed with the top four delivery companies– Grubhub, DoorDash, Postmates, and Uber Eats – came with a markup of between 7% and 91%. On top of that, there were some truly crazy charges, such as a $3 “small order” fee from Uber Eats.

Some brands hike their menu prices for delivery orders, while others list higher prices within the app to compensate for increased delivery costs. Yet consumers may be willing to pay these incremental costs to enjoy the benefits of ordering and eating without ever having to leave their couch.

Delivery’s Cost to the Brand

Restaurants need to ask themselves how delivery impacts their individual brand. It’s no small question in light of a massive shift that is shaking the restaurant world to its very core. The guest experience used to be defined by how people felt when they visited a restaurant. Owners mostly focused on choosing a good location, how the restaurant looks, what smells greet people when they come in, and of course, how the food tastes. While those things are still important, a change in how consumers operate is emerging.

The ability to order from home is, in most cases, a positive. But restaurants need to consider pricing as it applies to the total costs for their guests. If people feel that they’re being gouged or not receiving value, it can negatively affect the brand.

Mobile phones enable consumers to create their own interaction point. Whether it be via Google, Yelp, third-party delivery apps, or a branded app, the interaction ends up driving their decisions, bringing in factors like speed and convenience. Meanwhile, the emergence of subscriptions has the potential to completely remake the market. Panera Bread recently received a lot of attention for its $8.99 monthly coffee subscription, and DoorDash is offering unlimited deliveries for $9.99 a month with its DashPass.

These changes in consumer expectations drive changes in how restaurants evaluate everything from where they’re located to how people receive and eat their food. The ultimate costs for meals also need to be taken into consideration, since studies show that consumers are more likely to blame issues on the brand than the delivery company.

As for the DoorDash IPO, investors are clearly betting that the company will be a chief beneficiary of this evolution in how consumers choose to interact with restaurants. The demand for ordering items and having them delivered isn’t decreasing anytime soon, which is why we here at Paytronix invested in our own Order & Delivery solution. We also work with all the major delivery brands to ensure that our clients’ guests have consistently favorable experiences.

Because no matter how consumers receive their food, they still expect a great brand experience.

Panera Enters the Subscription Game

Panera Bread recently became the latest big-name restaurant brand to enter one of the hottest segments of the loyalty market: subscriptions. We’re proud to be part of that launch, as the program is built on our loyalty platform.

At $8.99 per month, the MyPanera Coffee subscription gives customers unlimited coffee or hot tea for the price of about four cups of coffee. This program exemplifies how smart, forward-thinking brands are embracing subscription models.

Subscription programs tend to operate in one of these three ways:

  • Recurring payments – As with the Panera program, subscribers pay for a given time period. Cancellation can occur at any time.
  • Lump-sum payment with time-bound usage – The industry standard is Olive Garden’s Never Ending Pasta Pass, which allows unlimited meals for nine weeks. Limiting the number of passes sold provides customers with a sense of exclusivity.
  • Lump-sum payment with limited times or items – An example is the Grill Pass offered by HuHot Mongolian Grill. Last summer, loyalty members could spend $50, $100, or $200 to buy 5, 11, or 25 meals. 

Subscriptions enable brands to drive incremental revenue while letting customers prepurchase their favorite items at a discounted rate. Those who already buy four cups of coffee a week at Panera will find that the coffee program pays for itself. But it’ll also drive them back at times that they may not have normally stopped in, providing opportunities for additional sales. Once consumers have invested in a program, the act of buying another item, like a cookie or a snack, seems less of a burden.

Clients that run subscription programs report high attachment rates and upselling. Panera achieved these results by following the three key steps for implementing a subscription program:

  1. Create a loyal following. With a long-standing loyalty program, Panera has spent years developing its base.
  2. Pick the right model. By understanding its customers and their habits, Panera had the information it needed to build a program that reached its best and most loyal customers.
  3. Communicate the value. Since the monthly price is the equivalent of just a few cups of coffee, the value came through loud and clear in Panera’s messaging.

Whether it’s movies from Netflix, pet supplies from BarkBox, or clothes from Stitch Fix, consumers are increasingly receiving goods and services through subscriptions. Restaurants have a great opportunity to capitalize on this trend. To learn more, check out our on-demand webinar, “How Restaurants Can Take Advantage of the Subscription Business Model.”

Restaurant customer experience in the age of automation

The Center for Hospitality Research at Cornell University estimates that the cost to restaurants for employee turnover averages $5,864 per person. There is also an ongoing labor shortage brought on by a combination of low unemployment, a decaying transportation system, and a lack of suitable housing near the nation’s urban cores. With minimum wages rising around the country it’s easy to understand why restaurants want to automate as much of the guest experience as possible. This is why Taco Bell is now paying some managers six-figure salaries. 

Turnover in the restaurant industry reached nearly 75% in 2018, with quick-service restaurants registering higher numbers. Panera Bread reports a 130% turnover rate, while Chipotle says that turnover for its hourly employees is 145%.

It’s no wonder that more restaurants have turned to kiosks and mobile ordering with in-store pickup. In fact, many guests are happy to avoid human interactions and simply pick up their orders. Plus, people tend to buy more when they’re at a kiosk vs. when ordering from a human. McDonald’s, which is at the forefront of kiosk expansion, saw a 30% order increase, while Taco Bell saw a 20% order premium. 

Kiosk usage is up across all age segments, suggesting that the growth we’ve seen isn’t slowing down any time soon. In fact, most major brands either have launched kiosks or are planning to do so in the near future. 

As this change continues, the challenge for restaurants will be to normalize the customer experience across all platforms, both on-premise and off. For example, the continued rise of mobile ordering requires brands to reimagine the end-to-end customer experience because it may exist digitally and in the consumer’s home. Everything from the mobile experience to one-to-one communications through the delivery packaging will come into play.

As all these technologies take hold, brands will need to not only understand their identity but understand how that identity can have its unique attributes both when the customer touches a screen or when they speak to an employee.