Part 2 of BrandTrip Partners Restaurant Chain Turnaround Series
The past few months of 2016 have delivered even more gloomy news for restaurant chains. The store closures continue to mount, a new crop of bankruptcies have been filed, the C-suite is rotating like a centrifuge, and same store sales declines are affecting all categories including the industry darling fast casual segment.
To help navigate these stormy waters, BrandTrip Partners is publishing a series of articles exploring turn around strategies for restaurant chains. The first article, “How To Turn Restaurants Around – Exponential Leaps Through New Revenue Channels,” provided insights on how to look outside your current business model to find new sales streams. Successful new revenue channels are able to grow the value of your brand with exponentially accelerated results, significantly improving the overall valuation of your enterprise with long term sustainable growth.
In this second installment we will examine strategies to improve throughput. “Throughput Acceleration” simply allows the movement of more transactional behavior in a given amount of time. The innovation tends to be accomplished through technology enhancements, process improvements, or physical plant alterations. In their most successful implementations, Throughput Acceleration can be as highly impactful as the double-digit exponential leaps found through new revenue channels explored in our previous article. A more typical result drives solid single digit results.
DRIVING-THRU MORE TRANSACTIONS
One of the secrets behind Starbucks amazing record of sales growth
Everyone is aware of the amazing growth story of Starbucks. However, just before The Great Recession, they slowed down substantially in the United States with negative sales and transactions in addition to store closures. Their stock naturally reacted with a huge dive.
To make matters worse, there was a little company called McDonald’s that overnight opened their McCafe platform in approximately 14,000 locations throughout the United States instantly becoming the largest provider of lattes in the country. If you look at history with McDonald’s, they do well when they identify a major trend and offer a decent product at a lower price delivered more conveniently. McCafe was the text book example.
A critical component of the McCafe platform that stole market share from Starbucks was the drive-thru. Back then, you were required to wait in that painfully long slow line at most Starbucks locations. However, at McDonald’s you didn’t even have to get out of your car.
Eventually, Starbucks did make a comeback. It wasn’t because of the infamous seasonal PSL (Pumpkin Spiced Latte) and it wasn’t because of some other new chocolatey, caramely, creamy coffee concoction. It was because of a number of initiatives, but the one that clearly put big money in the bank was the drive-thru. Why? Because it drove double digit sales with Throughput Acceleration. In 2006, as reported in the Wall Street Journal, Starbucks reported that their locations with a drive-thu did 30% more volume than stores without them. Fast forward to a 2012 Motely Fool interview with Starbucks CFO Troy Alstead where he shares learnings from the culling of locations in 2008 and the plans to increase their portfolio from 40% of all locations featuring drive-thrus to 60%. The next year, Starbucks CEO Howard Schultz was quoted in a Nation’s Restaurant News report with these insights:
“Drive-thrus create incremental revenues and profits compared to traditional stores and represent a fast-growing and highly profitable format for Starbucks, comprising just over one-third of our U.S. company-operated stores but contributing nearly 45 percent of our U.S. retail profit,” Schultz said.
With these kinds of numbers, Starbucks could simply use this single tactic to continue to scale substantial positive volume and profits for years to come as long as the real estate sites allowed it.
In recent months, many other chains have announced joining the drive-thru club. Friendly’s reported that they can generate more than 25% in additional sales when they have a location that includes a drive-thru. They are simply leveraging the physical plant to serve more guests.
DISCONNECTING THE PHONE TO ACCELERATE SALES
Domino's relentless focus on any device ordering
There really is no better technology driven Throughput Acceleration example than what Domino's has done over the past few years with their “AnyWare” ordering obsession. They championed the virtually unlimited capacity to take online orders so much that they even produced advertising telling customers not to call them anymore to place orders. Domino's literally admitted they are bad at taking orders, thus offsetting their labor costs to strictly a production and delivery force in the restaurants.
Additionally, their relentless focus on attaining as close to a zero click transaction as possible is keeping them ahead of their competitors and crushing the independent pizza players. They are mastering ordering opportunities across everything from the mobile app to message bots delivering the ability to order their products with whatever communication device you may be near. Ordering pain points have almost vanished for Domino's customers.
This Throughput Acceleration technology innovation has produced 22 consecutive quarters of same store sales increases and has raised the value of their stock over 500% in the past 5 years! It wasn't because of a new pizza, a discounted "2 Fer" deal, or a movie release tie-in. The primary innovation was Throughput Acceleration through ordering technology supremacy.
R.I.P. TO WAITING
How Panera eliminated waiting, lines, and competition
How beautiful is the Panera 2.0 dine-in platform? You walk in, sit down at any table you want, order on your phone, input the table number, send the order, and food magically appears at your table moments later. No standing in line. Isn’t that what we all want? Isn’t this how life should be? We are shocked that no other significant quick service or fast casual brands have done this yet!
Hello restaurant industry! It’s almost 2017! Do this and you achieve nearly 100% order accuracy, 100% happy guests, 100% the correct change, 100% etc. The technology exists.
Why should I stand in that line at Shake Shack, IN-N-OUT, or any other restaurant line? There is absolutely no reason for this pain point to exist anymore at any restaurant chain. Just bring me what I want to where I am, already pre-paid. This is, of course, is not to mention that this same technology at Panera Bread allows for take-out orders and delivery orders too. You can also otherwise skip the line and use a kiosk ordering tablet.
Case in point is a quote from Blaine Hurst the EVP and Chief Transformation and Growth Officer in a Nation’s Restaurant News interview earlier this year. “One, it is more at [customers’] pace. Some people like to browse; some people want to go faster. In addition, at a busy peak I can get more people through a busy café with the same number of cashiers. Our 2.0 cafés have a disproportionate amount of sales because we’ve freed up capacity at lunch.”
In other words, Blaine is lovin’ his transaction drivn’ and sales climin’ Throughput Acceleration platform.
THE PROCESS HACK
BJ's mobile app redefines casual dining ordering and payment process with streamlined technology
In 2014, BrandTrip Partners CEO Tim Hackbardt was part of the team at BJ’s Restaurants that launched the first casual dining restaurant chain mobile app and online ordering platform that allowed you to order your meal for a dine-in occasion. The cumbersome process of placing your order and paying for it in a sit-down environment can be fraught with a long list of pain points depending on how efficient your staff is during that shift. The BJ's team focused on those irritations and applied the appropriate pressure to the age old casual dining ordering and payment wounds.
The new process allows you to place the order on your phone, show up (all mobile orders automatically get you placed on the preferred seating waitlist by the way), get seated and the food starts coming right out. More importantly, when you want to leave, press a button on the mobile app and your bill is paid. Done and done.
Note: The fact that the CEO of BJ’s was also a board member at Domino’s should not be lost in this conversation.
No longer did you ask the server for the bill, wait for the server to come back, wait for the server to come back to get the credit card and bill, and wait for the server to finally bring back the credit card and bill for you to sign. That entire exchange was eliminated, providing a more pleasant check out experience for the guest and faster table turns that results in more sales volume and also more tips for the servers at the end of the night.
CEO Greg Trojan explained it well in an interview with Nation's Restaurant News during the rollout in 2014, “It’s really a paradigm shift” for casual dining, he said. “If you take out the front-end time (when people peruse the menu and order their meals) and take out the time spent waiting for a check, our experience becomes more of a 35-minute experience, as opposed to close to an hour. But you don’t feel rushed.”
Fast forward now to almost 2017 and still no other casual dining chain has introduced that speed or convenience for their dine-in guests.
A FASTER PHYSICAL PLANT
Johnny Rockets clamps down on the slow flat top grill to speed up hamburger production
Like Starbucks, Johnny Rockets was interested in adding on those double digit drive-thru sales. However, since the inception of the brand they had been flipping burgers the old fashioned way on the classic flat top grill. This equipment was not conducive to the expectations of a customer that the drive-thru is the high speed lane to getting fed. They needed to evolve their physical plant to take advantage of the expansion opportunities they wanted for the brand both domestically and internationally.
The answer was blowing up the kitchen. The new high efficiency kitchen now features a clamshell style grill that reduces the cooking time down to only one minute. They also made changes to be able to make shakes faster and other process improvements.
The brand can now grow around the world with many more real estate opportunities than ever before and achieve higher revenues than the previous business model, thanks to their new Throughput Acceleration based kitchen design.
THROUGHPUT THROUGH TIME
Much of restaurant history is littered with successful Throughput Acceleration milestones that took market share away from competitors or launched new categories and brands. Fast food, fast casual, Domino's 30 minute delivery guarantee, the drive-thru, and online ordering are just a few examples that have delivered substantial financial rewards for these type of improvements.
Less well known are the countless programs behind the doors of restaurant chains that have simplified operations shaving seconds, and sometimes minutes, off of cook/preparation times to drive more transactions. Fast food knows that just a few more cars through the drive-thru can result in significant sales comps. Casual dining knows that table turns do the same.
By focusing on the opportunity to achieve more transactional throughput by leveraging technology enhancements, process improvements, or physical plant alterations you too could easily exceed the industry average and set your brand up for many years of success.
MORE RESTAURANT TURNAROUND RESOURCES
Additional articles in the BrandTrip Partners "How To Turn Restaurants Around" series that you might enjoy can be found below: