Delivering the Future of Fast Casual

Dozens of fast-casual brands have been making smart investments in the guest experience within their restaurants, from remodeled dining rooms to digital kiosks or apps that make ordering faster and easier. Some forward-thinking chains are making these in-restaurant improvements now, laying the groundwork for a future in which that level of service extends “beyond the four walls” to delivery and, to a much greater extent, catering.

Pollo Tropical and Taco Cabana have added hand-held ordering devices to get customers through lines faster, and both of those brands will look to grow online ordering and catering sales from today’s 1.5% of total sales to “high-single digits or low-double digits” over time. Potbelly Corp. recently disclosed that “backline sales” of online ordering, catering and delivery increased 6% in 2014, and they now represent 14% of the sandwich chain’s total sales. Potbelly wants to double that percentage over the next few years.

Currently, the best example of fast casual’s evolution toward digital ordering and greater off-premise sales is probably Panera Bread, which is aggressively pursuing catering as a billion-dollar line of business as part of its phased rollout of “Panera 2.0.” The digital-heavy upgrades in that program will be extended to another 300 locations this year, officials said.

Chief executive Ron Shaich said during Panera’s fourth-quarter earnings call that catering, or “large-order delivery,” already represents 8% of total sales, or $300 million annually. The brand is developing its capabilities for catering by building new “catering hubs” that fulfill large orders in a given market. There are 21 hubs open and 11 more scheduled to open this year. “We are, like all restaurant companies, facing the need to add technology capabilities ahead of the sales curve and facing increased health care costs and rising wages,” he said. “To that end, we know we must grow our sales to pay for these increased costs.”

At the end of Panera’s fourth quarter of 2014, the brand derived 8% of sales via online ordering, its mobile app or self-service digital kiosks in the store. Adoption of these digital methods is accelerating rapidly, as Panera’s percentage of digital sales was less than 4% at the end of its second quarter last year.

Panera wants to eventually derive between 30% and 50% of sales from digital ordering, which would put it in the same class as the industry’s biggest pizza chains. It’s a huge, transformational goal for a non-delivery chain, but then again, Shaich and Panera are betting that the future of fast casual looks more like the pizza segment, which is built on delivery and is the part of the industry most influenced by technology.

A sign that Panera is integrating all these initiatives in the right way, in addition to its most recent same-store sales increase of 3.3%, is that it has increased its peak-hour throughput—which Panera internally measures as the number of entrées it serves between noon and 1 p.m.—by an average of 4% year-over-year in December.

While I can’t say with certainty that the fast-casual model of the future will look exactly like Panera 2.0, the approach and mindset it demonstrates seem on target for the coming decade. Providing the guest experience people want, either in the restaurant’s dining room or in consumers’ own homes, will require heavy investments in technology and people up front. But the more those digital channels grow, the more efficient and profitable fast-casual chains stand to become.

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Darren Tristano

Darren Tristano is President of Technomic Inc. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations.

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Comments

  1. As a company that provides the type of technology you write about, I would call attention to one small point you make in particular: about how Panera increased their peak-hour throughput.

    That’s not a stat most independent restaurants would track. But for restaurants wondering in a nuts-and-bolts way about how online ordering helps, it is an instructive one.

    An average Panera is a busy and complex work environment – and also a fairly optimized one. And yet, as you note, their averaged increase in peak-hour throughput was 4%.

    In our experience, an average independent restaurant’s worfklow for handling the mix of in-house, pickup, takeout, etc is full of inefficiencies and ad-hoc decisions. Good online ordering helps to smooth and standardize those workflows. The prime benefit is increased ability to through-put orders – but the knock-on benefits extend strongly to better customer service experiences and – espc – more face-time to engage with customers and problems that really need (and benefit) from attention.

  2. avatar LeerrrroooyyyyJeennnkiinnsss says:

    I don’t think people realise the potential of technology and the returns that businesses can get with simple tech integrations. Being an entrepreneur of many chains in my city I learnt that customers are more than willing to adopt technology (apps) to make their life easier. Customers spend a third of their time behind smartphones so it only makes sense to capitalise on this. I had a shaky start at first as I had my first joint in a difficult to find area (outskirts with a great view) with almost no walkins during the day. A friend of mine then told me about how tech can help me find my customers and I then reached out to “Zippr” and partnered up with them . Ever since I’ve had no problems with footfalls. Customers find it easy to find my restaurants and I find it easier to find them for deliveries. What I’m trying to say is that many businesses suffer from the ‘KODAK’ syndrome where just like kodak their failure to rise up with technology will eventually lead to their demise.

  3. All caterers who open up their own business need to find ways to market themselves and to find ways for the growth of their business. For that most caterers have traditional services for their target. The caterers today have more business opportunities than ever. I know a catering service called Franco Freshy, they have got amazing technologies as I have personally experienced it during my cousins wedding.

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