A tale of two burgers - digital transformation at Wendy's and Red Robin Gourmet Burgers

Profile picture for user slauchlan By Stuart Lauchlan November 12, 2018
Summary:
Wendy's and Red Robin both see a digitally-enabled future, but not necessarily with the same speed...

burgers
During our recent update on McDonald’s digital transformation progress, I commented of the burger firm :

You have to speculate to accumulate. Or put it another way, you have to invest a lot – circa $1.6 billion this year – if you’re McDonald’s and you want to accelerate your transition to a digital and delivery-based model. In our ongoing analysis of digital transformation in the food and hospitality sectors, McDonald’s has emerged ahead of the pack at the Quick Service Restaurant (QSR) – that’s fast food, to you and me – end of the market…At a time when other more ‘upmarket’ burger operations, such as Gourmet Burger Kitchen, appear to be struggling and closing stores, McDonald’s is heading in the opposite direction and digital spend is fuelling that.

Two competitors in this market sector have subsequently provided further food for thought - one doing relatively well on the digital-and-delivery front, albeit far behind McDonald’s; the other sticking to its on premises approach to the market as its main selling point.

Wendy's

Wendy’s is the former, where CEO Wendy Todd Penegor notes that what happens in the burger sector matters, particularly as consumer expectations change:

If you look at the hamburger category, it's still by far the biggest, right? Almost 30% of all QSR businesses are in the hamburger category…The consumer continues to have an appetite for convenience, and we have seen this through our delivery economics. Average check sizes have been 1.5 to 2 times higher on delivery orders, and we continue to see solid customer repeat. In addition, our strongest customer satisfaction scores are coming from delivery, which is encouraging.

Against those stats, digitally-enabled delivery is a priority for Penegor, with Wendy’s partnering to provide expanded services on this front:

Expansion of our delivery footprint with DoorDash and SkipTheDishes is pacing ahead of our expectations. We are now at approximately 50% coverage and targeting approximately 60% of the North America system by the end of 2018. Our partnership with DoorDash in the US remains strong as we both continue to make investments in raising awareness, which is leading to increased transactions and sales through delivery.

These investments have included national ad campaigns as well as special promotions on the part of the partners, such as DoorDash offering free delivery. Penegor says:

We have seen a significant increase in weekly delivery sales compared to the second quarter, driven by the free-delivery offers with a purchase of a Dave's Single and the NCAA promotional offer. We are encouraged that delivery sales are sustaining at the higher levels post-promotion, which continues to increase the overall watermark on delivery. Lastly, we continue to work with DoorDash on integrating delivery into our mobile app, to provide another point of access to all of our customers.

Tech investment is important, says Penegor, but it’s important not to take a short term view and chase the latest ‘shiny thing’:

We talk a lot about the investments that we're making in technology, and when you think about what it's going to take to really win in the long-run, technology is going to have to be one of those things that connect to the next generation of consumer as a big enabler…We need to drive a more consistent experience across all of our restaurants, including our speed of service, which is a big initiative for us, and technology can play a role in that.

We are pleased with the progress we are making on the mobile front as we continue taking steps to bring our technology programs to life. In an effort to drive more active users into our app, we [have] focused on an acquisition strategy to entice customers to download and use The Wendy's app with a free Dave's Single offer.

Our mobile offers, which are available for use in all of our US restaurants, will continue to drive mobile app usage and will set us up for a successful roll-out of mobile ordering, which has now begun across North America. To go along with the roll-out of mobile ordering, we have been making a lot of improvements to our mobile app, which customers are giving us great feedback on. This, coupled with increased downloads from our mobile offer strategy is providing more access to the brand and more importantly, one that is seamless and easy to navigate.

Red Robin

So all good progress and an update delivered with relish. It’s not quite the same story over at Red Robin Gourmet Burgers however, where the focus remains on the restaurant experience and getting consumers through the doors to sit down to eat. It’s a differentiators, argues CEO Denny Marie Post:

Red Robin is all about customizable gourmet burgers, great service and bottomless abundance at affordable prices. That combination draws a unique multi-generational family guest base who expect to be seated and served promptly.

But the story at Red Robin of late has been one of decline in the performance of those restaurants and in guest numbers. It’s an issue acknowledged by Post, who’s set in progress a turnaround strategy to bolster the consumer experience, although it’s scarcely on the scale of the McDonald’s Experience of the Future program which is built around digitising the stores.

The Red Robin upgrades do have some tech aspects, but they start with a more human element, says Post:

The first place that we delved deep was on our service standards. In our race to bill-to-go we lost some focus on what made Red Robin Red Robin. While we seek to serve the growing demand for carry out, we also must turn tables at peak times for those guests who choose to dine-in with us...We increased in-store training using our new learning management system. Our servers were trained on the basics of greeting, one-stop ordering and three level bussing. Our hosts are being trained via the new system on dine-in seating and to-go standards. To be both a preferred destination and a source of customizable gourmet burgers, we must be great at dine-in and off-premise service.

Digital will play a part in that, says Post, citing the rollout of Robin, an “electronic dining companion” that allows guests to pay-and-go, as well as letting kids play computer games. That’s a starting point and there will be more to come, but what, how and when is left frustratingly vague. Post says:

Over time, we expect to put even more of the dining experience in the guests' control through innovative new digital offerings on the development roadmap. Looking ahead to 2019, we have completed the in-depth value research and are testing several new tactics as well as working to reposition the brand to align ourselves more closely with our guests' needs as we knock-down barriers to frequency, be they price, speed of service or digital accessibility for off-premise orders. We expect these new approaches to bring them to life in the first half of the year.

My take

A tale of two burgers - with digital on the menu at both, but with different levels of apparent enthusiasm. The gourmet burger experience is one that’s obviously different to popping in for fast food, but it’s one that’s going to have get its digital transformation strategies in place.