Restaurant Readiness Index - December 2018

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RESTAURANT INDEX™ READINESS

DECEMBER 2018
80%
Approximate share of both
customers and managers who have
a positive view of loyalty programs

88% 97%
Share of customers who
said features that ensure
Share of small
QSR managers who
36%
the accuracy of their are satisfied with Share of QSR chains that
orders will encourage in-store pickup at have implemented kitchen
them to return to a QSR the same location automation systems (KAS)

3% 52%
Portion of small QSR chains that
Portion of QSR managers don’t want to implement KAS
who say self-service kiosk is the most because they’re satisfied
common method for placing orders with their current operations
2

RESTAURANT INDEX™ READINESS

ACKNOWLEDGMENT
The Restaurant Readiness Index™ was done in collaboration with Bypass and Bank of America Merchant Services, and PYMNTS is grateful for their support
and insights. Bank of America Merchant Services was not involved in the selection or research of any merchants in this study. PYMNTS.com retains full
editorial control over the findings presented, as well as the methodology and data analysis.

© 2018 PYMNTS.com All Rights Reserved


3

TABLE OF CONTENTS

Key findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The big picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The digital divide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Matters of size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

The promise of loyalty programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Deep Dive: kitchen automation systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

© 2018 PYMNTS.com All Rights Reserved


4

RESTAURANT KEY FINDINGS


READINESS
INDEX™ 2018
38.7 Average restaurant Index score
(on a scale of 0 to 100)

82.5% Share of customers who say being


able to order with an employee
in-store is a positive experience

77.4% Portion of QSR managers who would


adopt innovations to boost
the speed of ordering

100% Share of QSR customers who say


ordering with a third-party app
is a positive payment experience

QSR APP
EXPERIENCES

65% Portion of QSR managers who


believe that using apps to place
orders provides a positive experience

92% Share of customers who say


using apps to place QSR orders
provides a positive experience

63% Portion of merchants that believe using


a QSR app to pay for orders offers
a positive experience

© 2018 PYMNTS.com All Rights Reserved


5

EXECUTIVE SUMMARY

K
now thy customer. If there were a Ten
Commandments for business success, this
adage might top the list. But what happens
when business owners don’t know their customers
as well as they think they do?

This is the situation many quick-service restaurant


(QSR) managers face when it comes to their
customers’ feelings about digital innovation. For
more than a year, PYMNTS, in collaboration with
Bypass and Bank of America Merchant Services, has
been tracking QSRs' adoption of new technologies,
such as self-service kiosks and mobile apps for
ordering and paying.

For all the buzz around such technologies, PYMNTS’


research has revealed that they haven’t made much
progress in the U.S. When measuring how well Only 65 percent of managers at QSRs that offer
QSRs implement technology on a scale from zero apps for placing orders believe they provide a
to 100, we determined that the average restaurant's positive experience, making them one of the least
score is just 38.7. And yet, QSR customers had popular order methods by their estimates. However,
overwhelmingly positive experiences with many nearly 92 percent of customers who order through
digital innovations — for instance, 62 percent of QSR apps say they provide a positive experience,
them said such features would make them more making them the most popular option for them.
likely to visit QSRs in the future. This is especially
true for younger customers — those who hold the This digital divide can be found at each stage of
future of the industry in their hands. the dining experience, from ordering, to paying,
to picking up orders. In the case of paying with
In this report, the fourth in this series, we peeked mobile apps — both QSR-based and third-party
into the minds of restaurant managers to better ones, such as Uber Eats and Grubhub — managers
understand their decisions and attitudes when underestimate customers’ satisfaction by 26.9
it comes to investing in innovative technologies. percent to 31.8 percent.
We surveyed and analyzed the responses of 400
managers, out of more than 3,500 respondents, This divide is all the more striking when we consider
and what we discovered is that managers greatly that managers cite pleasing their customers as
underestimate their patrons’ appetites for their primary reason to implement new technology
technological innovation. — they want to make their customers happy. The

© 2018 PYMNTS.com All Rights Reserved


6

EXECUTIVE SUMMARY

most common reason managers don’t like features 42 percent and 31 percent of medium and small
like self-service kiosks and online ordering is that chains, respectively. Additionally, we will take a
they believe customers don’t like them — which is closer look at loyalty programs, which stand out as
contrary to customers’ own sentiments. services that are popular with both customers and
managers.
Despite this divide, there are areas where managers'
and customers' perspectives converge. Around 90 Finally, in this report’s Deep Dive, we look at the
percent of both groups report positive experiences adoption of technology behind the counter: kitchen
when paying with credit cards, and nearly 80 percent automation systems (KAS), which allow tablets
of both groups like loyalty programs, which we will to display orders to kitchen staff in real time,
examine in greater depth. This suggests that if pain among other things. As with many aspects of QSR
points can be addressed, QSR innovation could innovation, KAS adoption varies greatly between
reward managers and customers alike. chains and QSRs of different sizes. When compared
to small chains, large chains are more likely to have
In this report, we also examine how the size of a implemented KAS and view it as important to their
QSR chain — how many locations it has — relates to success. In the case of Burger King, 64 percent of
its adoption of new technology. Larger chains, such its locations have the technology, making it the
as McDonald’s, are more likely than smaller ones to leader in this area by far. In contrast, Wendy’s has
have in-store kiosks: 21 percent of large ones have adopted KAS at only 21 percent of its outlets.
them versus 5 percent of small ones. Large chains
are also more likely to have QSR-based mobile apps: For these and other insights into the state of QSR
65 percent of large chains have them, compared to innovation, it’s “order up.”

© 2018 PYMNTS.com All Rights Reserved


7

THE BIG PICTURE

T
wo main motives drive QSR managers
to employ new innovations at their
establishments: speed and improving their
customers’ experiences. More than 70 percent of
QSR managers view these as primary benefits of
implementing technology, followed by convenience
and reduced order errors.

FIGURE 1:
HOW NEW INNOVATIONS APPEAL TO QSRs
Percentage of managers citing various incentives

BOOST SPEED
77.4% 7900000000

IMPROVE CUSTOMERS' EXPERIENCES


74.4% 7200000000

ADD CONVENIENCE
62.4% 7000000000

ELIMINATE PURCHASING ERRORS


55.4% 6400000000

ELIMINATE DELIVERY ERRORS


37.8% 6100000000

SECURE PAYMENTS DATA


29.3% 5500000000

SECURE CUSTOMERS' INFORMATION


25.3% 4600000000

REDUCE NUMBER OF EMPLOYEES NEEDED


25.3% 5500000000

PREVENT FRAUD
22.6% 4600000000

© 2018 PYMNTS.com All Rights Reserved


8

THE BIG PICTURE

While most managers see certain technological FIGURE 2:


features — such as those that ensure order FEATURES' IMPORTANCE TO
QSRs' FUTURE SUCCESS
accuracy and enable order pickup without
Managers' versus customers' perceptions,
making the customer stand in a line — as by percentage
important to their restaurants’ future success,
they’re less enthusiastic about high-profile
IMPROVED ORDER ACCURACY
innovations, such as kiosks and mobile apps.
80.3% 6000000000

Yet these are the features that will lead many 88.1% 1700000000

customers to patronize QSRs more in the


IN-STORE FAST PICKUP
future. There is a 44.4 percent gap between
71.0% 5300000000

managers and customers in the extent to 84.1% 1500000000

which they believe kiosks will positively affect


AUTO-UPDATED MENU
their future success and visits, with customers
71.0% 4500000000

being much more bullish. In the case of online 81.3% 1700000000

or app ordering, there’s a nearly 20 percent gap.


IN-STOCK ITEMS UPDATE
70.3% 5400000000

77.1% 1100000000

DRIVE-THROUGH PICKUP
65.3% 4000000000

84.3% 0800000000

80.3%
ONLINE/APP ORDERING
64.5% 3600000000

83.6% 1200000000

WALLET ACCEPTANCE
50.8% 6000000000

of QSR managers 83.0% 1700000000

say features that


LOYALTY PROGRAMS
47.5% 5300000000

79.5% 1500000000

ensure the accuracy KITCHEN AUTOMATION

of customers' orders 46.8%


0.0%
4500000000

170

will bring them CURBSIDE PICKUP


32.8% 5400000000

more success. 76.8% 1100000000

SELF-SERVICE KIOSKS
29.5% 4000000000

73.9% 0800000000

QSR managers QSR customers

© 2018 PYMNTS.com All Rights Reserved


9

THE BIG PICTURE

FIGURE 3:
NEW INNOVATIONS' EFFECTS ON
FUTURE SUCCESS
Gap between managers' and customers'
perceptions, by percentage

SELF-SERVICE KIOSKS
44.4% 7900000000

CURBSIDE PICKUP
44.1% 7200000000

WALLET ACCEPTANCE
32.2% 7000000000

LOYALTY PROGRAMS
32.0% 6400000000

ONLINE/APP ORDERING
19.1% 6100000000

DRIVE-THROUGH PICKUP
19.1% 5500000000

IN-STORE FAST PICKUP


13.1% 4600000000

AUTO-UPDATED MENU
10.3% 7900000000

IMPROVED ORDER ACCURACY


7.8% 7200000000

IN-STOCK ITEMS UPDATE


6.9% 7000000000

The differing perspectives of QSR managers


and customers will come into clearer view as
we take a closer look at the three phases of
the QSR experience — placing, paying for and
picking up orders.

© 2018 PYMNTS.com All Rights Reserved


10

THE DIGITAL DIVIDE

W
hen it comes to the ordering FIGURE 4:
methods that are most satisfying to SATISFACTION AND ORDER METHODS
Percentage of managers versus customers who
customers, managers tend to have
positively view certain ordering systems
an old-school outlook. More than 90 percent
of them view the counter and drive-through as WITH EMPLOYEE IN-STORE
satisfying and positive, while they have much 96.6% 6000000000

82.5%
less enthusiasm for in-store kiosks and apps,
1700000000

which only 62.5 percent and 65.0 percent of WITH DRIVE-THROUGH EMPLOYEE
managers, respectively, view positively. 91.1% 5300000000

78.2% 1500000000

Customers have a very different view of these


AT DRIVE-THROUGH KIOSK
technologies. In fact, QSR apps are viewed 75.0% 4500000000

favorably by nearly 92 percent of customers, 73.3% 1700000000

making them the highest-ranked ordering


VIA QSR's MOBILE APP
method, followed by third-party apps. Managers 65.0% 5400000000

underestimate customers' satisfaction with 91.9% 1100000000

QSR apps by nearly 27 percent and by 31.8


VIA QSR's WEBSITE
percent for third-party apps. It bears noting 63.7% 4000000000

that customers had a positive outlook on 79.2% 0800000000

all ordering methods, although support was


AT KIOSK IN-STORE
lukewarm for the drive-through and ordering 62.5% 3600000000

at the counter, especially when compared to 72.3% 1200000000

managers’ perceptions.
VIA THIRD-PARTY APP
53.9% 6000000000

85.7% 1700000000

QSR managers QSR customers

© 2018 PYMNTS.com All Rights Reserved


11

THE DIGITAL DIVIDE

FIGURE 5:
PERCEIVED MOST-COMMON
ORDERING METHOD

44.5%
For managers versus customers

WITH DRIVE-THROUGH EMPLOYEE


39.3% 6000000000

25.6% 1700000000

of customers WITH EMPLOYEE IN-STORE

prefer to place 36.5% 5300000000

44.5% 1500000000

an order with 6.3%


VIA QSR'S WEBSITE
4500000000

an employee in-store. 4.8% 1700000000

AT DRIVE-THROUGH KIOSK
2.8% 5400000000

13.0% 1100000000

VIA QSR'S MOBILE APP


2.5% 4000000000

6.2% 0800000000

AT KIOSK IN-STORE
1.8% 3600000000

As the saying goes, perception is reality. The 4.5% 1200000000

gap between managers and customers in how


VIA THIRD-PARTY APP
favorably they view different ordering methods 0.0% 60

seems to correspond with their perception 0.7% 170 0 0 0

of how often such methods are used. QSR


managers believe that orders are most often QSR managers QSR customers

made at the store counter or the drive-through,


with less than 3 percent of managers believing
drive-through are used the most. Customers,
on the other hand, report using drive-through
kiosks 13.0 percent of the time.

This suggests that managers perceive


downsides to digital ordering methods that
aren’t apparent to customers, such as the
costs associated with operating them. The
most common reason managers view various
ordering methods positively is that customers
like them, however. Managers list business-
oriented reasons, such as saving time or
money, as secondary.

© 2018 PYMNTS.com All Rights Reserved


12

THE DIGITAL DIVIDE

TABLE 1:
REASONS MANAGERS VALUE DIFFERENT ORDERING METHODS
Percentage of QSR managers who prefer ordering methods, by reason

REASONS
NUMBER
Customers' Complete Reduce Save Easy to
preference order quickly costs time place order

ORDERING METHODS

With drive-through employee 234 45.7% 42.3% 3.4% 4.7% 3.8%

With employee in-store 342 63.7% 21.9% 1.8% 1.2% 11.4%

Via QSR's website 135 24.4% 26.7% 11.9% 25.2% 11.9%

At kiosk in-store 35 20.0% 31.4% 11.4% 37.1% 0.0%

Via QSR's mobile app 132 28.8% 20.5% 12.1% 25.8% 12.9%

At drive-through kiosk 18 27.8% 27.8% 5.6% 33.3% 5.6%

Via third-party app 62 30.6% 12.9% 3.2% 29.0% 24.2%

By phone 177 35.6% 16.9% 6.8% 22.0% 18.6%

AVERAGE 43.2% 25.6% 5.7% 14.0% 11.5%

© 2018 PYMNTS.com All Rights Reserved


13

THE DIGITAL DIVIDE

FIGURE 6:
POSITIVE EXPERIENCE WITH
PAYMENT METHOD

92.8%
Managers versus customers

DEBIT CARD
92.8% 6000000000

81.6% 1700000000

of QSR managers CASH

had a positive 92.5% 5300000000

79.6% 1500000000

experience with 90.5%


CREDIT CARD
4500000000

orders that were 87.0% 1700000000

paid by debit card. 84.7%


GIFT CARD
5400000000

72.2% 1100000000

QSR PREPAID CARD


83.0% 4000000000

77.8% 0800000000

AMAZON PAY
75.0% 3600000000
The digital divide between managers and 50.0% 1200000000

patrons can also be found in their views toward


more innovative payment methods. Managers APPLE PAY
70.1% 6000000000
consider traditional forms of payment — cash 94.1% 1700000000

and cards — to be the most positive and


satisfying, and view digital forms of payments GOOGLE PAY
69.7% 5300000000
less positively, whether they're made via an app 73.3% 1500000000

or online. More than 92 percent of managers


view debit cards favorably, while only 62.5 SAMSUNG PAY
66.1% 4500000000
percent feel the same about QSR apps. 50.0% 1700000000

By contrast, customers report a much more THIRD-PARTY APP


positive experience with app and mobile 64.9% 5400000000

100.0% 1100000000

payments. In the case of a chain-specific


app, managers underestimate customer QSR APP

satisfaction by 28.4 percent. Interestingly, when 62.5% 4000000000

90.9% 0800000000

it comes to mobile payments, managers seem


to prefer Samsung services, while customers
QSR managers QSR customers
favor Apple Pay by a 24 percent margin over
managers.

© 2018 PYMNTS.com All Rights Reserved


14

THE DIGITAL DIVIDE

FIGURE 7:
PAYMENT METHOD USE AND SATISFACTION GAP
Percentage difference between managers' and customers' expectations

40%
35.1%

30% 28.4%
24.0%

20%

10%
1.4% 1.5%

DEBIT CREDIT GIFT QSR APPLE GOOGLE AMAZON SAMSUNG QSR THIRD-PARTY
CASH
CARD CARD CARD APP PAY PAY PAY PAY PREPAID CARD APP

-6.3% -10%

-16.1% -20%

-25.0%
-30%

-40%

Gap in positive experience Gap in usage

© 2018 PYMNTS.com All Rights Reserved


15

THE DIGITAL DIVIDE

FIGURE 8:
MOST SATISFYING PAYMENT METHODS
Percentages as reported by managers versus customers

DEBIT CARD GOOGLE PAY


36.0% 6000000000 1.0% 60 0 0 0 0

36.4% 2800000000 1.5% 2800000000

94.0% 1700000000 29.8% 1700000000

CREDIT CARD AMAZON PAY


30.0% 5300000000 0.8% 530 0 0 0

23.7% 3300000000 1.2% 30000

97.3% 1500000000 9.0% 1500000000

CASH SAMSUNG PAY


26.0% 4500000000 0.5% 450

27.4% 2000000000 1.2% 20 0 0 0 0

93.3% 1700000000 28.8% 1700000000

GIFT CARD QSR PREPAID CARD


2.5% 5400000000 0.3% 540

1.8% 1700000000 1.8% 1700000000

83.5% 1100000000 23.5% 1100000000

QSR APP THIRD-PARTY APP


1.8% 4000000000 0.0% 40

3.3% 2100000000 0.1% 210

38.0% 0800000000 9.3% 0800000000

APPLE PAY
1.3% 360 0 0 0 QSR managers
1.7% 1900000000
QSR customers
46.0% 1200000000

Percentage of payment method accepted

Although customers who use mobile payments are overwhelmingly satisfied with them, it must be noted
that QSRs' use of them remains very limited — customers and managers largely agree on this. More than 40
percent of QSRs take mobile payments, with Apple Pay being the most commonly accepted, but less than
2 percent of QSR customers actually use them. In total, customers' mobile payment use at QSRs is only
5.5 percent. This mirrors trends in the larger retail world. Despite their hype and promise, mobile payments
have yet to gain traction in the U.S.1

This partly explains the relatively sour view QSR managers have of digital payments. They often feel that
digital payments are too complicated to process and that completing the transaction takes too long.

1
Webster, Karen. 2018: The year of the mobile wallet reset. PYMNTS.com. 2018. https://www.pymnts.com/news/mobile-commerce/2018/checkout-friction-mobile-wallet-
adoption-digital-identity-authentication/. Accessed December 2018.

© 2018 PYMNTS.com All Rights Reserved


16

THE DIGITAL DIVIDE

TABLE 2:
REASONS MANAGERS DISLIKE CERTAIN PAYMENT METHODS
Percentage of QSR managers who were disatisfied with payment methods, by reason

REASONS
NUMBER
Too complicated Too long Dislike the Cost is Transaction takes
to process to complete method too high too long

PAYMENT METHODS

Debit card 6 33.3% 66.7% 0.0% 0.0% 0.0%

Credit card 8 37.5% 37.5% 25.0% 0.0% 0.0%

Cash 5 0.0% 0.0% 80.0% 20.0% 0.0%

Gift card 3 66.7% 0.0% 33.3% 0.0% 0.0%

QSR app 10 60.0% 30.0% 10.0% 0.0% 0.0%

Apple Pay 18 33.3% 27.8% 22.2% 16.7% 0.0%

Google Pay 10 40.0% 40.0% 10.0% 10.0% 0.0%

Amazon Pay 4 75.0% 0.0% 0.0% 25.0% 0.0%

Samsung Pay 6 50.0% 16.7% 16.7% 16.7% 0.0%

QSR prepaid card 4 50.0% 0.0% 0.0% 50.0% 0.0%

Third-party app 0 — — — — —

AVERAGE 41.9% 27.0% 18.9% 12.2% 0.0%

Keeping consistent with the larger pattern, managers underestimate their customers’ appetites for payment
method innovation. When explaining what appeals to them about mobile payments, fewer than half of
managers cite customer preferences. As we have seen, however, a far greater proportion of customers view
these payment methods positively.

© 2018 PYMNTS.com All Rights Reserved


17

THE DIGITAL DIVIDE

TABLE 3:
REASONS MANAGERS LIKE CERTAIN PAYMENT METHODS
Percentage of QSR managers who were satisfied with payment methods, by reason

REASONS
NUMBER
Customers' Complete Reduce Save Easy to
preference order quickly costs time place order

PAYMENT METHODS

Debit card 349 42.7% 50.1% 4.0% 0.6% 2.6%

Credit card 352 41.8% 50.0% 5.4% 1.1% 1.7%

Cash 345 58.8% 24.3% 3.8% 10.7% 2.3%

Gift card 283 38.5% 45.9% 5.7% 7.1% 2.8%

QSR app 95 37.9% 34.7% 20.0% 2.1% 5.3%

Apple Pay 129 41.9% 38.8% 12.4% 1.6% 5.4%

Google Pay 83 36.1% 41.0% 10.8% 4.8% 7.2%

Amazon Pay 27 40.7% 37.0% 7.4% 0.0% 14.8%

Samsung Pay 76 48.7% 35.5% 9.2% 0.0% 6.6%

QSR prepaid card 78 39.7% 43.6% 9.0% 2.6% 5.1%

Third-party app 24 41.7% 20.8% 29.2% 4.2% 4.2%

AVERAGE 44.4% 41.2% 7.0% 4.0% 3.4%

At the order pickup stage of the QSR experience, there is greater consensus between managers and their
patrons. Of course, this area is somewhat less amenable to digital innovation than ordering and paying.
Approximately 85 percent of both customers and managers view in-store and drive-through pickups as the
most common ways to receive orders.

© 2018 PYMNTS.com All Rights Reserved


18

THE DIGITAL DIVIDE

FIGURE 9:
MOST COMMON METHOD FOR
PICKING UP ORDERS
Out of all methods, Managers versus customers

both QSR managers 53.3%


IN-STORE, SAME LOCATION
6000000000

and customers prefer 53.9% 1700000000

to pick up orders 31.5%


DRIVE-THROUGH
5300000000

31.3%
IN-STORE AT THE
1500000000

IN-STORE FAST PICKUP


SAME LOCATION 8.8%
10.4%
4500000000

1700000000

WHERE THEY CURBSIDE PICKUP

WERE PLACED. 1.0%


4.4%
540 0 0 0

1100000000

QSR managers QSR customers

FIGURE 10:
POSITIVE EXPERIENCE WITH DIFFERENT
METHODS OF ORDER PICKUP
Managers versus customers

On the whole, managers have rosier views of


IN-STORE, SAME LOCATION
all order pickup methods compared to their
91.9% 6000000000

patrons. More than 90 percent of managers 83.6% 1700000000

view in-store pickup positively, compared to


DRIVE-THROUGH
83.6 percent of customers, while 89 percent
89.0% 5300000000

of managers see the drive-through experience 74.8% 1500000000

as positive, compared to 74.8 percent of


IN-STORE FAST PICKUP
customers. This might have to do with
87.7% 4500000000

managers’ sense of control. With these pickup 66.0% 1700000000

methods, managers are directly responsible for


CURBSIDE PICKUP
serving up orders, whereas other technology- 63.1% 5400000000

enabled features, such as app ordering, are 77.3% 1100000000

imposed on them.
QSR managers QSR customers

© 2018 PYMNTS.com All Rights Reserved


19

THE DIGITAL DIVIDE

The one exception to this pattern is curbside


pickup, which customers regard more favorably
than managers. QSR managers underestimate the
usage and positive experience of curbside pickup
by 3.4 percent and 14.2 percent, respectively.

This misperception of customer preferences,


especially when it comes to digital technology, is
not a trivial matter. As we’ve seen, QSR customers
don’t regard these features as novelties, but as
services that could lead them to visit QSRs more
often.

FIGURE 11:
ORDER PICKUP METHODS' USE AND SATISFACTION GAP
Percentage difference between managers and customers

25%

20%

15% 14.2%

10%

5%
0.7% 1.6%
3.4%
IN-STORE, IN-STORE
DRIVE-THROUGH CURBSIDE PICKUP
SAME LOCATION FAST PICKUP
-0.3%

-5%

-8.4% -10%

-15%
-14.2%

-20%
-21.6%
-25%

Gap in positive experience Gap in usage

© 2018 PYMNTS.com All Rights Reserved


20

MATTERS OF SIZE

O
ne of the central findings of our earlier FIGURE 12:
research is that QSR innovation varies AVAILABILITY OF ORDERING METHODS,
BY QSR SIZE
across the U.S. The availability of
Percentage of most preferred ordering methods
certain features, like self-service kiosks, differs
considerably between geographic locations, WITH EMPLOYEE IN-STORE
and even within restaurant chains. In this 92.2% 6000000000

80.6%
report, we’re taking a closer look at how the
2800000000

88.1% 1700000000

size of a chain — how many locations it has


— relates to the availability of technology and WITH DRIVE-THROUGH EMPLOYEE
76.2%
the managers’ attitudes toward technological
5300000000

67.7% 3300000000

implementations.2 39.6% 1500000000

There is a technology gap between larger VIA QSR'S MOBILE APP


64.6% 4500000000

chains and smaller ones — although it’s not as 41.9% 2000000000

30.7%
wide as one might expect, despite the fact that
1700000000

that larger brands, such as McDonald’s, have VIA QSR'S WEBSITE


greater means to invest in new technologies or 53.9% 5400000000

incentivize franchises to do so. Larger chains 51.6% 1700000000

53.5% 1100000000

are also more likely to have in-store kiosks


than smaller ones, at 21 percent compared BY PHONE

to 5 percent. The same goes for QSR-based 43.2% 4000000000

63.4% 2100000000

apps: 65 percent of large chains offer them, 82.2% 0800000000

compared to 42 percent and 31 percent of


VIA THIRD-PARTY APP
medium and small chains, respectively. 29.6% 3600000000

23.7% 1900000000

31.7% 1200000000

AT KIOSK IN-STORE
20.9% 6000000000

9.7% 2800000000

5.0% 1700000000

AT DRIVE-THROUGH KIOSK
5.8% 5300000000

8.6% 3300000000

4.0% 1500000000

Large QSR Medium QSR Small QSR


2
Small QSR: fewer than 2,000 locations; medium QSR: between 2,000 and
5,000 locations; large QSR: more than 5,000 locations.

© 2018 PYMNTS.com All Rights Reserved


21

MATTERS OF SIZE

In other areas, smaller chains defy this pattern. In the case of third-party apps, a slightly greater number
of small chains offer them than large ones (32 percent versus 30 percent). This likely reflects the fact that
smaller chains are less apt to build their own apps, while also suggesting that third-party developers could
be helping smaller chains stay technologically relevant.

Moving to payment methods, a similar pattern prevails. When it comes to mobile wallets, Apple Pay is now
accepted at nearly 60 percent of large chains, compared to 41 percent and 26 percent of medium and small
chains, respectively. Using a third-party app for payment, on the other hand, is accepted to a slightly greater
degree at small chains. Cash and cards are widely accepted at chains of all sizes.

FIGURE 13:
PAYMENT METHOD ACCEPTANCE BY QSR CHAIN SIZE
By percentage

CREDIT CARD GOOGLE PAY


98.1% 6000000000 36.4% 6000000000

94.6% 2800000000 28.0% 2800000000

98.0% 1700000000 17.8% 1700000000

DEBIT CARD SAMSUNG PAY


95.1% 5300000000 33.5% 5300000000

93.5% 3300000000 25.8% 3300000000

92.1% 1500000000 21.8% 1500000000

CASH QSR PREPAID CARD


92.2% 4500000000 29.1% 4500000000

92.5% 2000000000 17.2% 2000000000

96.0% 1700000000 17.8% 1700000000

GIFT CARD AMAZON PAY


85.9% 5400000000 11.7% 5400000000

74.2% 1700000000 6.5% 1700000000

87.1% 1100000000 5.9% 1100000000

APPLE PAY THIRD-PARTY APP


58.3% 4000000000 9.7% 4000000000

40.9% 2100000000 6.5% 2100000000

25.7% 0800000000 10.9% 0800000000

QSR APP
49.0% 3600000000 Large QSR Medium QSR Small QSR
31.2% 1900000000

21.8% 1200000000

© 2018 PYMNTS.com All Rights Reserved


22

MATTERS OF SIZE

When it comes to order pickup, it’s the drive-


through that most distinguishes large chains
from their smaller counterparts. Managers at
40 percent of large QSRs say drive-throughs
are the most used pickup method. This number
is only 18 percent for small chains, where
managers report that orders are retrieved in-
store about 66 percent of the time. Notably,
medium-sized chains lead the pack in more
innovative — if less common — order pickup
methods, such as delivery and curbside pickup.

FIGURE 14:
MOST-COMMON ORDER PICKUP OPTIONS
By QSR chain size

IN-STORE, SAME LOCATION


47.6% 6000000000

51.6% 2800000000

66.3% 1700000000

DRIVE-THROUGH
40.3% 5300000000

26.9% 3300000000

17.8% 1500000000

IN-STORE FAST PICKUP


7.8% 4500000000

10.8% 2000000000

8.9% 1700000000

QSR DELIVERY
3.4% 5400000000

7.5% 1700000000

4.0% 1100000000

CURBSIDE PICKUP
0.5% 40 0 0 0 0

2.2% 2100000000

1.0% 080 0 0 0

THIRD-PARTY DELIVERY
0.5% 360 0 0 0

0.0% 190

2.0% 1200000000

Large QSR Medium QSR Small QSR

© 2018 PYMNTS.com All Rights Reserved


23

MATTERS OF SIZE

FIGURE 15:
SATISFACTION WITH DIFFERENT
PICKUP METHODS

96.7%
Small QSR managers versus customers

IN-STORE, SAME LOCATION


96.7% 6000000000

94.2% 1700000000

of small QSR DRIVE-THROUGH

managers are 91.9% 5300000000

77.8% 1500000000

satisfied with 91.4%


IN-STORE FAST PICKUP
4500000000

in-store pickup 46.2% 1700000000

at the same location. 60.0%


CURBSIDE PICKUP
5400000000

71.4% 1100000000

QSR managers QSR customers

FIGURE 16:
SATISFACTION WITH DIFFERENT
PICKUP METHODS
Large QSR managers versus customers

There’s one innovation that is especially IN-STORE, SAME LOCATION


90.9% 6000000000
appealing to small QSRs: in-store pickup 79.9% 1700000000

without waiting in line. More than 91 percent of


managers at small locations like this method, DRIVE-THROUGH
88.2% 5300000000
compared to 85 percent of those at large ones. 73.4% 1500000000

Bucking the trend, pickup without waiting


in line is considerably more popular with IN-STORE FAST PICKUP
85.1% 4500000000
managers than customers at small QSRs. This 78.6% 1700000000

likely stems from the fact that smaller QSRs


are more sensitive to the strain long lines place CURBSIDE PICKUP
66.1% 5400000000
on limited resources. 89.5% 1100000000

QSR managers QSR customers

© 2018 PYMNTS.com All Rights Reserved


24

THE PROMISE OF
LOYALTY PROGRAMS

L
oyalty programs provide common ground between customers and managers: Nearly 80 percent of
both groups report having positive experiences with them. According to our previous research, loyalty
programs are compelling incentives for customers to increase their visits to QSRs.

But, as is the case with other innovations, the degree to which loyalty programs are offered and used varies
considerably, and they are especially dependent upon chains' sizes. Smaller brands are more likely to offer
loyalty programs than larger ones, although large percentages of both small and large brands — 40 percent
and 46 percent, respectively — don’t offer them.

Third-party loyalty programs, such as those offered by LevelUp and Square, have made limited inroads
at this stage. As with third-party ordering apps, loyalty services like these are considerably more likely to

FIGURE 17:
TYPES OF LOYALTY PROGRAMS OFFERED
BY QSRs
Large versus small QSRs

NO LOYALTY PROGRAM
40.0% 6000000000

45.5% 1700000000

STOREWIDE LOYALTY PROGRAM


41.0% 5300000000

36.1% 1500000000

IN-STORE ONLY
8.0% 4500000000

4.5% 1700000000

IN-STORE AND ONLINE


5.0% 5400000000

7.4% 1100000000

ONLINE ONLY
3.0% 4000000000

5.0% 0800000000

THIRD-PARTY LOYALTY PROGRAM


3.0% 3600000000

1.5% 1200000000

Small QSR Large QSR

© 2018 PYMNTS.com All Rights Reserved


25

THE PROMISE OF LOYALTY PROGRAMS

be used by smaller chains — 3 percent of small


QSRs offer them, compared to 1.5 percent of
larger ones.

While managers do have a positive outlook


when it comes to loyalty programs, they do
pose challenges, especially for smaller chains.
Compared to larger QSRs, managers at smaller
chains were slightly more likely to have negative
perspectives on loyalty programs.

FIGURE 18:
GAP IN QSRs' EXPERIENCE WITH LOYALTY PROGRAMS
Large versus small QSRs

10%

5.6%
5%

1.9%

0.4%

IN-STORE, IN-STORE
DRIVE-THROUGH
SAME LOCATION FAST PICKUP

-2.3%
-1.6%

-4.0% -5%

-10%

Small QSR Large QSR

© 2018 PYMNTS.com All Rights Reserved


26

THE PROMISE OF LOYALTY PROGRAMS

FIGURE 19:
CHALLENGES OF LOYALTY PROGRAMS
LISTED BY QSRS
Large versus small QSRs

HURTS PROFITS
From managers’ perspectives, costs and 30.5% 6000000000

35.2% 1700000000

complications are loyalty programs' main


drawbacks. More than 35 percent of large CUSTOMERS PREFER NOT TO PROVIDE INFO
chains say loyalty programs hurt profits, as 35.6% 5300000000

22.2% 1500000000

do more than 30 percent of smaller outlets.


The larger concern for smaller-scale brands is TAKES TIME TO MANAGE
that customers are reluctant to provide their 20.3% 4500000000

21.3% 1700000000

personal information — nearly 36 percent of


managers say this is a barrier. EXPENSIVE TO MAINTAIN
15.3% 5400000000

20.4%
All of this suggests that managers would be
1100000000

well-served by overcoming these pain points, EMPLOYEES NEEDED


given how popular loyalty programs are with 3.4% 4000000000

12.0%
customers and the wealth of customer data
0800000000

they could provide. TECHNICAL DIFFICULTIES


6.8% 3600000000

8.3% 1200000000

Small QSR Large QSR

© 2018 PYMNTS.com All Rights Reserved


27

Deep Dive:
KITCHEN
AUTOMATION
SYSTEMS

© 2018 PYMNTS.com All Rights Reserved


28

KITCHEN AUTOMATION SYSTEMS

S
o far, our discussion of digital innovation at QSRs has centered on customer-facing services, such
as self-service kiosks and mobile apps. But the heart of any restaurant is, of course, the kitchen —
and technology offers much promise in this realm.

KAS streamline the order-fulfillment process by, among other things, providing a kitchen display that shows
orders on a mobile tablet or other device. We examined the degree to which QSRs have adopted these
systems, impediments to adoption and managers’ attitudes toward them. When compared to other digital
innovations, KAS already have a significant presence at restaurants. More than one-third of QSRs already
have KAS, and another 16 percent are very or extremely interested in investing in them.

FIGURE 20:
QSRs' INTEREST LEVELS IN KAS INVESTMENT
By percentage

ALREADY IMPLEMENTED
36.0% 7900000000

EXTREMELY INTERESTED
8.3% 7200000000

VERY INTERESTED
7.3% 7000000000

SOMEWHAT INTERESTED
10.3% 6400000000

SLIGHTLY INTERESTED
10.5% 6100000000

NOT AT ALL INTERESTED


27.8% 5500000000

© 2018 PYMNTS.com All Rights Reserved


29

DEEP DIVE

The appeal of kitchen automation is clear — FIGURE 21:


KAS help QSR managers accomplish their QSRs' TOP REASONS FOR INVESTING IN KAS
By percentage
fundamental mission: to serve up orders
as quickly and accurately as possible. The
REDUCES TIME TO DELIVER ORDERS
top reasons for implementing KAS are, in 37.4% 7900000000

descending order, reducing time to deliver


orders (37.4 percent), keeping track of orders KEEPS TRACK OF ORDERS
31.1%
(31.1 percent) and avoiding human error (16.5
7200000000

percent). AVOIDS HUMAN ERROR


16.5% 7000000000

Kitchen automation is by no means ubiquitous


at QSRs, and its adoption varies considerably COST-EFFECTIVE

by chain and size. Burger King wears the KAS 6.8% 6400000000

crown with the highest rate of implementation


REDUCES NUMBER OF EMPLOYEES NEEDED
(64 percent), followed by Pizza Hut at 57 3.9% 6100000000

percent. Wendy’s has shown itself to be very


resistant to KAS, implementing them at only 21 MATERIALS' COST
2.9% 5500000000
percent of its locations, and 29 percent of its
locations are not at all interested in KAS. OTHER
1.5% 4600000000

For some types of QSRs, particularly those at


which order takers and food peparers are in

© 2018 PYMNTS.com All Rights Reserved


30

DEEP DIVE

TABLE 4:
QSR CHAINS' INTEREST IN IMPLEMENTING KAS
Percentage of QSR chains' interest, by levels

INTEREST
NUMBER
Already Extremely Somewhat Slightly Not at all
Very interested
implemented interested interested interested interested

McDonald's 75 37.3% 10.7% 10.7% 5.3% 12.0% 24.0%

Taco Bell 27 48.1% 7.4% 7.4% 14.8% 3.7% 18.5%

Burger King 25 64.0% 4.0% 4.0% 4.0% 12.0% 12.0%

Subway 20 10.0% 0.0% 10.0% 15.0% 20.0% 45.0%

Starbucks 16 37.5% 6.3% 12.5% 6.3% 0.0% 37.5%

Pizza Hut 14 57.1% 7.1% 0.0% 14.3% 14.3% 7.1%

Wendy's 14 21.4% 14.3% 14.3% 14.3% 7.1% 28.6%

close proximity — or the same employees, such FIGURE 22:


as at Subway — KAS may not be a good fit. INTEREST IN KAS
Percentage by QSR chain size
The size of a restaurant chain correlates with
KAS adoption, with nearly 50 percent of large ALREADY IMPLEMENTED
33.7% 6000000000

chains viewing KAS as important to their 31.2% 2800000000

success. Large chains are also more likely than 39.3% 1700000000

smaller ones to have implemented the systems EXTREMELY, VERY OR ALREADY IMPLEMENTED
or be very interested in doing so. 47.5% 5300000000

48.4% 3300000000

54.9% 1500000000
Different-sized QSR chains tend to perceive
different benefits to implementing KAS.
Large QSR Medium QSR Small QSR
Reducing order time is a priority for QSRs of
all sizes when it comes to integrating kitchen
automation, but smaller chains view avoiding
human error as a much greater benefit than
their larger counterparts.

© 2018 PYMNTS.com All Rights Reserved


31

DEEP DIVE

FIGURE 23:
REASONS FOR IMPLEMENTING KAS
Percentage by QSR chain size

REDUCES DELIVERY TIME


41.7% 6000000000

44.4% 2800000000

32.7% 1700000000

KEEPS TRACK OF ORDERS


20.8% 5300000000

31.1% 3300000000

35.4% 1500000000

AVOIDS HUMAN ERRORS


22.9% 4500000000

8.9% 2000000000

16.8% 1700000000

LOWERS COSTS
4.2% 5400000000

11.1% 1700000000

6.2% 1100000000

REDUCES NUMBER OF EMPLOYEES NEEDED


6.3% 4000000000

2.2% 2100000000

3.5% 0800000000

REDUCES RAW MATERIALS' COST


2.1% 3600000000

2.2% 1900000000

3.5% 1200000000

OTHER
2.1% 6000000000

0.0% 280

1.8% 1700000000

Large QSR Medium QSR Small QSR

© 2018 PYMNTS.com All Rights Reserved


32

DEEP DIVE

FIGURE 24:
TOP REASONS QSRs ARE AVOIDING
KAS IMPLEMENTATION

51.9%
Percentage by QSR chain size

SATISFIED WITH CURRENT OPERATIONS


51.9% 6000000000

37.0% 2800000000

of large QSRs
37.6% 1700000000

TOO EXPENSIVE
are satisfied 28.8%
43.5%
5300000000

3300000000

with their current 32.3% 1500000000

KAS operations. 9.6%


DIFFICULT TO IMPLEMENT
4500000000

2.2% 2000000000

14.0% 1700000000

INCREASES TIME TO DELIVER


1.9% 5400000000

10.9% 1700000000

4.3% 1100000000

When it comes to barriers to KAS adoption, REQUIRES HIRING MORE EMPLOYEES


cost is a major impediment. This is especially 1.9% 4000000000

2.2%
true for mid-sized chains — more than 43
2100000000

6.5% 0800000000

percent cited it as factor. At the same time,


it’s clear that some chains simply don’t believe OTHER
5.8%
KAS offer the necessary return on investment
3600000000

4.3% 1900000000

(ROI). This is particularly the case with small 5.4% 1200000000

QSRs: 51.9 percent said they didn’t want to


implement KAS because they’re satisfied with Large QSR Medium QSR Small QSR
their current operations.

© 2018 PYMNTS.com All Rights Reserved


33

CONCLUSION

I
nnovation has long been the secret sauce of the QSR sector. After all, technology
and efficiency are what allowed McDonald’s to grow from a single outlet to a global
behemoth. Today, QSR managers face a whole new generation of digital innovations,
from self-service kiosks to menus that update automatically. Implementation of these
features, however, has proceeded slowly across the U.S., likely due to the fact that
customers have a greater appetite for these technologies than managers realize.

Customers are more enthusiastic than managers for nearly the whole gamut of new
services and technologies. Nearly 92 percent of them who use apps for ordering consider
it a positive experience, while only 65 percent of managers do. Managers underestimate
customers’ satisfaction with mobile apps — both QSR-based and third party — by 26.9
percent to 31.8 percent.

Additionally, the adoption of new technologies is related to the size of a restaurant chain.
Larger chains are more likely than smaller ones to have in-store kiosks, and they’re also
more likely to offer their own mobile apps. Smaller QSRs, meanwhile, are more likely to
rely on third-party apps, like Grubhub, that are helping them bridge the technology divide
between themselves and larger chains.

This size dynamic also comes into play with technology behind the counter, specifically
for KAS. Larger chains are more likely than smaller ones to have implemented KAS and
view them as important to their success, while more than half of small QSRs that aren’t
interested in KAS say they’re satisfied with their current operations.

Despite the divide between managers and customers, there are areas where the two
groups come together. Loyalty programs, for instance, are very popular with both groups,
and the same can be said about credit card payments. Large majorities of both groups
like seasonally updated menus and technologies that improve order accuracy and enable
customers to avoid waiting lines. We must also keep in mind the fundamental motivation
that unites QSR proprietors and patrons: speed. Faster orders mean greater profits for the
former and more convenience for the latter.

New technologies always come with their share of challenges and resistance, especially
when it comes to habits involving dining and eating out. What PYMNTS’ research shows is
that QSR customers have a much greater appetite for innovation than restaurant owners
may realize. As the industry grows ever more competitive, with younger generations hungry
for greater variety, convenience and technology-enhanced experiences, this is a lesson
that owners and managers would be wise to heed.

© 2018 PYMNTS.com All Rights Reserved


34

METHODOLOGY

R
estaurant Readiness Survey — Managers is This survey focuses on the view of QSRs, the
the second survey made for Bypass Mobile market's managers, and compares their vision with
to look up into the QSR market. Our first customers' to ascertain where their preferences
survey researched customers' perspectives on meet and where they diverge.
the market, what they value and how their outlook
could evolve.

METHODOLOGY
SUMMARY
There were originally 3,507 responses to this
survey, but we were very selective in terms of which
Total survey respondents
data qualified for this research. Only 11 percent of 3,507
those who completed the survey were qualified, Did not manage/own a QSR
leaving only 400 responses for this analysis. To 1,614
qualify, respondents had to either manage or own a Worked for more than one location*
835
QSR, work there for more than 30 hours a week and
Worked for less than 30 hours each week*
have at least one year of experience working at that 199
particular QSR. Worked as a QSR manager for less than a year*
395
One of the main goals of this report was to see if the
responses supplied by managers were consistent
with customers' perceptions of the QSR market. Number of completed responses
563
Did managers’ and customers' visions align, or was
Did not qualify as QSRs
there a discrepancy? To this end, information was 163
gathered from almost 100 different QSR chains. Final complete responses
400
Just 18.8 percent of the sample were McDonald’s
managers, while 20.5 percent of our sample
consisted of responses from managers or owners
of small QSRs with two or fewer locations.

*Note: Respondents could be disqualified for more than one of these reasons.

© 2018 PYMNTS.com All Rights Reserved


35

METHODOLOGY

QSR RESTAURANT CHAIN DISTRIBUTION

MCDONALD'S DAIRY QUEEN/ORANGE JULIUS


18.8% 7900000000 1.8% 7900000000

BURGER KING DUNKIN' DONUTS


6.3% 7200000000 1.8% 7200000000

SUBWAY HARDEE'S
5.0% 7000000000 1.5% 70 0 0 0 0

TACO BELL FIVE GUYS BURGERS AND FRIES


6.8% 6400000000 1.8% 6400000000

STARBUCKS JACK IN THE BOX


4.0% 6100000000 0.8% 610 0 0 0

WENDY'S PAPA JOHN'S


3.5% 5500000000 1.8% 5500000000

ARBY'S BASKIN-ROBBINS
3.3% 4600000000 0.8% 460 0 0 0

CHICK-FIL-A FIREHOUSE SUBS


3.0% 7900000000 0.5% 790

PIZZA HUT JIMMY JOHN'S GOURMET SANDWICHES


3.5% 7200000000 0.8% 720 0 0 0

S0NIC DRIVE-IN PAMDA EXPRESS


3.3% 7000000000 0.5% 70

CHIPOTLE MEXICAN GRILL POPEYES LOUISIANA CHICKEN


2.3% 6400000000 0.5% 640

KFC AUNTIE ANNE'S


3.3% 6100000000 0.5% 610

DOMINO'S CARL'S JR.


2.0% 5500000000 0.5% 50

LITTLE CAESARS OTHER


1.5% 460 0 0 0 20.5% 4600000000

© 2018 PYMNTS.com All Rights Reserved


36

ABOUT

The PYMNTS.com Restaurant Readiness Index™, in collaboration with Bypass and Bank of America Merchant Services,
analyzes how QSRs are doing when it comes to innovation. Namely, are they being innovative and are their features
adding to customers’ experiences? We studied 178 QSRs, including six large restaurant chains in 10 different segments
and two groups of restaurants. The bulk of the sample includes 172 chains that range from eight to 2,630 locations.

We are interested in your feedback on this report. Please send us your thoughts, comments, suggestions or questions
to RRI@pymnts.com.

PYMNTS.com is where the best minds and the best content meet on the web to learn about
“What’s Next” in payments and commerce. Our interactive platform is reinventing the way
in which companies in payments share relevant information about the initiatives that shape
the future of this dynamic sector and make news. Our data and analytics team includes
economists, data scientists and industry analysts who work with companies to measure and
quantify the innovation that is at the cutting edge of this new world.

Bypass is the leading innovator in enterprise POS systems, robust back office management
tools, and rich insights engines for the multi-site food & beverage industry. Its approach
helps over 300 professional & collegiate sports venues and national restaurant chains sell
more, faster and cheaper, scale their operations, and transform the customer experience.
The company has deployed 20,000+ devices at a cost, pace, and ease of integration never
before possible.

Bank of America Merchant Services is a global leader in payments, eCommerce and security
solutions. It helps clients of all sizes effectively manage and grow their businesses by
enabling them to deliver convenient, compelling commerce experiences for their customers.

Powerhouse brands Bank of America and First Data formed Bank of America Merchant
Services in 2009. Today the company processes 16.6 billion transactions at approximately
539,000 merchant locations throughout the United States, Canada and Europe.3

3
Based on bankcard, other credit, and PIN debit sales volume and transactions. Per the Nilson Report, March 2018, Issue #1127.

© 2018 PYMNTS.com All Rights Reserved


37

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