Actionable Insights From APT's Retail Practice

What Digital Ordering Means for Restaurants

May 14th, 2014 | Posted by CCorman in Restaurants

GrubHub’s recent public offering and rapidly growing user base (~4 million active users) is generating increased interest in understanding how online ordering will impact the restaurant business. APT’s recent survey of our restaurant customers shines light on the increased attention restaurants are placing on online ordering: restaurants reported that online & mobile ordering comprised 31% of all tests within operational initiatives in the last year.

Many restaurant chains already offer some kind of online ordering, but those that are venturing into this arena need to consider whether to use a pre-established platform or develop their own system (or both). Platforms like GrubHub/Seamless have the potential to attract guests who otherwise may not have had a particular restaurant in their consideration set; however, these third-party platforms also charge significant commission on each order. Restaurants need to determine if working with third party providers generates sufficient incremental transactions to offset the lower margin per order (this question happens to be very similar to the ones restaurants face when deciding whether or not to leverage daily deal sites).

  • Even for restaurants that use internally-designed ordering systems, it can still be extremely challenging for restaurant executives to understand how online ordering will impact their economics. Restaurants need to answer key questions such as: Should we shift labor allocation within our restaurants? Do we need more back-of-house staff to prepare orders quickly? Staff to exclusively focus on greeting customers who order online?
  • How will our check composition and size change if our servers aren’t able to upsell in-person?
  • Should our prices differ for online vs. dine-in orders?
  • Based on understanding what a guest is likely to purchase with a given item, how can we effectively cross-sell additional items?
  • And importantly, how can we use the customer data collected through digital platforms to fill empty seats on quiet nights? To increase visit frequency or check size?

The growth of online ordering, coupled with the rapid increase in the number of restaurant chains introducing loyalty programs, is creating a massive amount of detailed data about each customer. Innovative restaurants understand that they need to do more than simply collect this data; instead, they need to effectively leverage the data to understand which items to promote, which items to cut, which promotions are effective, and ultimately, how to drive incremental transactions and larger checks.

As with any emerging trend that will likely have a large impact on the restaurant business, trying new ideas in some markets or in some restaurants before making a broad change across your business is the best way to develop the most profitable go-forward strategy.

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