What Investors Need to Know About the Fastest and Most Accurate of the Fast-Food Drive-Thrus
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
by Stephanie Taylor Christensen, Minyanville staff writer
Though A.J. Fox, director of sales and marketing at Insula Research explains that drive-thru window performance is only a part of a brand's overall success, there’s no denying that what happens in the drive-thru impacts a quick-service restaurant’s financial performance. QSR Magazine estimates that a fast food restaurant’s drive-thru accounts for 50 and 70% of sales.
“Two seconds [of drive-thru time] will not be perceivable to a consumer, but if the brand can do that 50 or 60 times, they may add an extra order to their daily take, assuming there is a steady stream of consumers to be served. In the same respect, a slower window can result in missed opportunities when customers drive away,” says Fox.
Considering the importance the drive-thru has on overall financial performance, understanding the customer experience at fast food stocks you’ve invested in can be one of many ways to decipher who stands to improve, and who, is quite literally, driving customers away. Here are some of the key findings revealed in the 2012 Drive-Thru Performance Study based on 4,000 timing studies conducted at more than 2,000 fast-food restaurant locations.
Though the company’s stock performance has been rocky in 2012, the fast food chain has invested millions in store improvements, introduced new menu offerings, and reintroduced Emil Brolick to its ranks in 2011, as CEO. (Formerly the COO of Yum(NYSE: YUM), Brolick previously worked at Wendy’s for more than 12 years and is credited as one of the “primary architects” of Wendy’s turnaround in 1988.) Earlier this year, Wendy’s overtook Burger King as the number-two fast food restaurant in the United States. Based on the 2012 Drive-Thru Performance Study, it’s the clear front-runner in speed of service. Having boasted the fastest drive-thru times in the industry since 2003, Wendy’s shaved 16 seconds off of last year's time, clocking in at 129.75 seconds. Though it improved over last year’s accuracy score as well (88.9%), Wendy’s still lags behind national competitors like Chick-fil-A, McDonald’s, and Taco Bell in its ability to get the right food to the right customers.
The chain scored big this year with the March introduction of the Doritos Locos taco, the most successful new product launched in its 50-year history. Taco Bell also began testing breakfast offerings (the “FirstMeal”) in 815 participating restaurants. Assuming it can mesh further product innovations with its drive-thru operations, the chain could be poised for more success: Taco Bell ranked second behind Wendy’s for speed of service, and second behind Chick-fil-A for order accuracy, and “very friendly” employees.
Despite leveraging two-lane style drive-thru aisles and order confirmation board technologies to enhance drive-thru performance, McDonald’s, which has fallen short on earnings for the past couple of quarters, ranked behind Wendy’s and Taco Bell in service times and accuracy in the study. However, it’s worth noting that the chain deals with nearly twice the drive-thru volume than the other six national brands studied, aside from Chick-fil-A. (In this particular study, McDonald’s averaged four cars to service, versus less than two at both Wendy’s and Taco Bell).
Though Chick-fil-A CEO Dan Cathy generated plenty of attention this year for stating his opposition to marriage equality, the media firestorm that ensued doesn’t appear to have deflated the appetites customers or employees have for the fast food restaurant. The study ranked drive-thru employees as “very friendly” or “pleasant,” 92% of the time. Of all the brands studied, Chick-fil-A also had the greatest number of vehicles in its drive-thru, averaging 5.37 cars. Though it fared only better than one other major chain (Burger King) in speed of service, it ranked high for accuracy, at 97%.
Burger King, which re-entered public trading in June after 18 months of private ownership, recently introduced the “BK Delivers” program in markets like South Florida, Washington, DC, Turkey, Mexico, Colombia, Peru, and Brazil, providing delivery for orders of at least $10. Though such innovations may fare well for the company’s future, the study findings indicate that the customer drive-thru experience has room for improvement. Burger King finished dead last in several categories, including time of service, order accuracy, and customer service, with the lowest percentages of researcher encounters with a “very friendly” drive-thru operator, and the highest percentage of encounters with a “rude” one.
Service times at this fast food restaurant, which has more than 380 locations, got about 20 seconds longer since last year's study; it came in fourth place for order accuracy. The chain’s CEO Douglas Pendergast, former chief franchising & development officer for CraftWorks Restaurants & Breweries (which includes brands like Rock Bottom and Gordon Biersch), told QSR that Krystal “is actively retooling its strategies to improve its average service time,” hinting at the possibility of mobile ordering innovations via a smartphone application, or call-ahead process that would improve convenience, and wait times.
Though it ranked third among the chains studied when it came to service time, this regional chain specializing in “downhome” fare like Cajun-style fried chicken and made-from-scratch biscuits placed just above Burger King in order accuracy. However, because it is a regional chain with less brand recognition and product familiarity than its national counterparts, average service times increased nearly 30 seconds when “pre-sell boards” (intended to familiarize the customer with product choices) were introduced into the drive-thru experience.
More from Minyanville:
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Posted in: Trading Ideas