Legend has it that Alan Stillman launched the original T.G.I. Friday’s on Manhattan’s Upper West Side in 1965 in an effort to meet airline stewardesses. He aimed to create a lively environment within the four walls of the restaurant to encourage men and women to gather to consume food and drink and connect with one another. Promotions like Ladies’ Night did the trick and Stillman’s Friday’s became an institution that set the table for the rise of the casual dining segment. In the decades that followed, new casual dining competitors cropped up with less of a singles focus, but with the same drive to create a meeting place inside the four walls. Perhaps they became the original “third place,” to borrow Howard Schultz’s phrase, that was neither the home nor the workplace.
Over recent years, the restaurant industry has grown and stolen market share away from grocery, as both compete for what Hudson Riehle, Senior Vice President, Research & Knowledge Group for the National Restaurant Association calls “the food dollar.” That has led to less cooking at home and more depending upon the restaurants whose food we love to serve as our surrogate home kitchen, sparking new opportunities for restaurants in off-premise sales: food prepared in the restaurant kitchen, but not consumed by the guest in the restaurant dining room. Riehle notes that today 75% of restaurant industry transactions are consumed off-premise, meaning a major opportunity even for casual dining restaurants.
The rise of fast casual restaurants in the 1990’s through today, have led to a new competitive pressure on casual dining restaurants. Fast casual brands threaten casual dining by better serving a guest looking to consume the food off-premise and have a convenient experience. These fast casual operations are designed to prepare the food efficiently, made-to-order, and at minimal cost.
It’s no surprise that nearly 50% of fast casual operators have embraced the digital ordering shift, by letting guests order and pay from their computer or mobile phone. This further positions fast casual operators to steal market share from casual dining operators. Digital ordering provides many additional benefits: larger average order size (guests no longer feel rushed and are given suggestive selling recommendations through the digital ordering channel 100% of the time); higher visit frequency (loyal guests return more frequently when given the convenience of getting to “skip the line” at pickup); reduced food waste (some operators mandate that guests must pay in advance at the time of their order, eliminating the risk of no-show guests); and improved order accuracy (removing the human element and potential for misheard/misunderstood orders or misentered orders, because the order is going from the guests’ PC or mobile phone straight to the prep line printer).
Should casual dining operators explore digital ordering for their own operations? Some may scoff at the idea and think “it’s all about the lively environment within my four walls. Why would I want my guest to take my food elsewhere?” In a world in which 75% of restaurant industry transactions are consumed off-premise and 75% of guests are walking around with web-enabled, location-aware smartphones and their pockets and have come to expect the convenience of digital ordering, casual dining operators must capitalize on the opportunity to level the playing field with fast casual restaurants and quick service restaurants. As Riehle notes, off-premise is the only component of the casual dining segment that is growing: suggesting that the savvy casual dining operators are taking note.
Imagine if your casual restaurant had the potential to transcend the limitations of a fixed dining room and long table turn times by breaking into the limitless dining room of off-premise beyond the four walls. What if your only constraint to how many customers you could serve was your kitchen capacity? What if you could become an option for those three out of every four consumers who are simply saying “cook for me — I want to pick up my food at a restaurant and eat it somewhere else?” Casual dining brands must answer that call.
The shift to this digital ordering enabled future will be fast, but not easy. It will require the largest casual dining restaurant brands to change the way that they have been operating over the past fifty years. That will require leadership from casual dining restaurant executives to make holistic adaptations to their service models, which will necessitate both clear vision and strong communication with stakeholders (including shareholders). Those focused on incremental improvements to the inside-the-four-walls experience as it is and has been for the past fifty years will miss the boat, only to be overthrown by those who see the current moment in the restaurant industry for what it is: a digital revolution that demands a new casual dining restaurant service model with new focus and excellence in off-premise.
Noah Glass is the Founder & CEO of Olo. Since 2005, Olo has helped restaurant brands increase revenue per square foot by delivering faster, more accurate, and more personal service through digital ordering. Today, over 12.5 million consumers use the Olo platform to order ahead and Skip the Line at the restaurants they love.
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