The media coverage of late seemingly suggests, the dine in model of restaurant dining is on the wan in favor of a third part delivery model. However, in reality is, this could not be further from the truth, with dining in preferred by the majority of Americans. Digital ordering, perhaps skewed the result in favor of a delivery model, however dine in restaurants have risen to the challenge and incorporated digital ordering into the dine in experience. Although convenience and experience appear to be at opposite ends of the spectrum, this does not have to be the case, and providing a service that represents both is a trend that is forcing many restaurants to redefine their service model.
- After briefly romancing the delivery experience, consumers are trending toward dining in. Dining in is the most popular restaurant experience, despite suggestions its popularity is waning. Irrespective of generation, 62% of Americans prefer to dine in when it comes to restaurant food. This is compared to 34% who prefer delivery or takeout. A recent survey finding 83% of Americans were eating out, either the same or more this year compared to last, provides persuasive further evidence,
- In fact, more Americans dine in, once or twice per week (56%), compared to those using delivery with same frequency (47%).
- The dine in model plays a role in determining the restaurants consumers choose to dine at. 38% of consumers choose a restaurant based on their experience, This includes the atmosphere and staff. Another survey corroborates this data, with experience (25%) and affordability (25%) key in the consumer decision making process.
- The reason dine in remains so popular is directly related to what consumers are looking for in a restaurant, quality (experience) and affordability. Quality, of course, can be adversely affected when food is delivered or consumers take away, which may a factor in why dine in is preferred.
- Delivery models are increasingly losing out to the dine in model in the affordability stakes, as well, with many of the third party delivery companies charging, what is perceived among consumers and restaurant owners, excessive commission-based delivery fees, In some states the fees have become some exorbitant, the state has stepped in and regulated maximums”
- It is projected digital ordering in the restaurant industry is forecast to triple over the next few years, a trend that seemingly favors the third party delivery services. However, dine in restaurants have risen to the challenge.
- Incorporating technology into their operations has become a priority for restaurants. Digital sales increased 23% over the last four years, with a current annual value of $26.8 billion.
- There are an increasing number of QSR restaurants looking to enhance their digital sales. Self service kiosks are a popular option; MacDonalds being a restaurant chain that has invested in this option, with self services kiosks slated for every US location by the end of the year. Many are trying to incorporate AI technology, Flippy, the robot that flips burgers, was debuted last year , generating considerable talk in the industry.
- This trend has created a further sub-trend that focuses on the takeaway consumer. Chipotle has utilized dedicated pickup areas to optimize the consumer’s digital experience . Other companies , like Starbucks, have gone a step further with dedicated pick-up only stores.
- Chipotle has woven digital technology throughout its experience, and has reaped the benefits, with nearly $1 billion in sales, as at November 2019. The automation of the cooking process and the utilization AI technology is evidence of technology driving this trend, especially in the dine in and rake away model of operation,
- While technology must take some credit for the growth of delivery services in the restaurant industry, it has been largely limited to the over saturated platforms provided by third parties, although, it fails to exhibit the innovation of the dine in and takeaway model of operation.
The Experience: Consistency, Convenience, and Quality
- The appeal of the dine in model to the consumer is driven by the experience it provides. Consumers are increasingly looking for the complete experience. which is driving the behavior of restaurants. A Salesforce survey found 67% of consumers reporting their standards relating to experience as being higher than ever confirms this,
- Quality contributes to the experience, and is a determinative factor when selecting a restaurant, but is not alone. Consistency goes hand in hand with quality, both contributing the experience. The role the experience plays in the consumer journey should not be underestimated. The recent success of experience focused restaurants, like Main Event and Cooper Hawk is testament to this.
- Matt Brown, Chief Revenue Officer, Vixxo., explains what the data says, “Whether they dine in or carry out, guests notice when the quality of the food, from the temperature to the taste, are inconsistent. In fact, quality impacts the entire dining experience, including how well equipment functions and ultimately supports the staff’s ability to efficiently serve its guests.”
- Convenience has largely been associated with the delivery model, however, dine in restaurants, using many of the strategies discussed in this report, is staking its claim , and looking has explored a range of options.
- Previously, convenience and experience have, to a degree, been mutually exclusive, however, the dine in model is currently evolving, and recent variations seem to have a newfound harmony, with dine in restaurants looking to capitalize, with multiple consumer contact points to create this experience giving the model a clear edge.
- Chic Fil-a provides a perfect illustration of this new harmony in practice, with dine in mobile ordering, theme nights, and mum’s valet service.
- For the most part, the research in this area focuses largely on the dine in and delivery operational models. Takeaway is treated as a peripheral part of the dine in model, although has potential to become more defined in the future, with the advent of pick-up only restaurants. Technology is driving trends in the restaurant industry, and to date the dine in model has embraced it, using it to provide model-specific innovations that are revolutionizing the industry. While the third party delivery model is popular, the majority of Americans prefers to dine in.
- As with any current research of this nature, COVID-19 should also be at least noted, as being a market disruptor. With lock downs and social distancing not even a blip on the radar at the time of the aforementioned surveys, having since impacted significantly on the American psyche, future research could address this issue.
Benefits of using a third-party partnership for restaurants and venues
- A third party service partnership can help restaurants with operational assessment, financial analysis, and culinary development.
- Using a third-party service provider can also bring strong changes in several key areas that are ultimately responsible for the success of any restaurant business by minimizing costs, encouraging customer loyalty, etc.
- A third party service partnership can also use restaurant data analytics to help restaurants improve menus, restaurant policies, and marketing campaigns and generate incremental revenues.
How is the business model better than delivery apps
- Restaurants partnering with third-party delivery services have to bear the high cost of using delivery services, which can ultimately eat into restaurants already thin margins. Some third-party delivery service providers charge restaurants 15-30% commission fees on each order.
- A bad customer experience with a third-party delivery service provider can damage the loyalty of a customer to a restaurant, as customers are likely to blame the restaurant for cold food and incorrect orders and not the delivery service. The cost of retaining an existing customer is 5%, which can help increase profits by 25-95% while; restaurants may have to spend five times more to attract a new customer.
- According to a Technomic study, about 76% of consumers hold the restaurant at least partially responsible for any errors during the delivery process as customers using delivery services have high expectations for reliability and speed.
- Restaurants partnering with a third-party delivery app have limited customer data as all the customer data is managed through those third-party delivery platforms.
- Restaurants partnering with delivery services are vulnerable to competition, as the restaurant name is displayed next to its competitors’ giving customers a choice which they may make based on various attributes like location, price, ratings, and photos of food, etc.
- Hiring a third-party delivery service leads to a lack of control over the customer service and affects the brand reputation. Reports also suggest that an estimated 80% of customers blame the restaurant for poor delivery services.
Third-party service case studies
- Colorado-based fast food-restaurant Quiznos Sub used Apex Restaurant, a third-party service provider for restaurants, and improved its sales by +2%, a trend change of approximately 8 points.
- With the help of Apex Restaurant, Semolina Restaurant, a premier farm-to-table eatery, increased 60% in consolidated free cash.
- Using restaurant data analytics, NY-based Fig & Olive was able to track its customers’ ordering habits and designed a targeted email campaign. The restaurant was able to generate around 300 visits and $36,000 in revenue from its campaign.
Customer service trends in the restaurant industry
Trend 1: Self-service technology
- Restaurants are starting to integrate technology into their processes, and as a reason, about 85% of all customer interactions will be done through digital companions by 2020.
- Self-ordering kiosks are simplifying the customer experience, and restaurants can process orders faster and reduce additional staff and help improve revenue and efficiency.
Trend 2: Personalized experience in dining
- Consumers expect highly personalized dining experiences from restaurants and are willing to spend more money when restaurants provide immersive experiences.
- According to research reports, about 71% of consumers get frustrated if their experience with restaurants isn’t personalized.
Trend 3: Healthy eating and environmental consciousness
- Customers are increasingly concerned about the environment and climate change, and hence are making efforts to lessen their environmental imprint to purchase food products with as minimal packaging as possible. Restaurants should take efforts to allow customers to live a sustainable lifestyle and minimize carbon footprint by creating a zero-waste kitchen.
- Customers are increasingly concerned about climate change, animal suffering, and health benefits from an animal-free diet, and hence are opting to be meat-free due to ethical concerns and health-related reasons.
Our research team began searching through industry reports on websites like Market Watch, Euromonitor, among others, however no such industry reports were available covering information on the benefits of third-party service partnerships with restaurants and venues. The research team then began scouring through multiple articles, press releases, etc. and found relevant information which helped in gaining some useful insights. Further, the research team scoured through multiple publications and industry organizations such as smart brief, fit small business, QSR Magazine, among others which covered information on limitations of using third-party delivery apps. The research team also looked out for some case studies of restaurants using third-party services for their restaurants, which included managed services and restaurant data analytics platforms. At last, the research team scoured through industry reports and articles to provide trends in the restaurant service industry.