Playing digital catch-up at Wendy's and Papa John's

Profile picture for user slauchlan By Stuart Lauchlan May 9, 2018
Summary:
Wendy's and Papa John's are two firms in need of a digital boost, but can they get their acts together in a turbulent fast food market?

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We’ve flagged up McDonald’s and Domino’s Pizza as two leading exemplars of digital transformation in the fast food industry. Others however are playing catch-up, including Wendy’s and Papa John’s, both of which need a booster to kick start their businesses.

Both have struggled in recent times with Wendy’s missing revenue estimates, while Papa John’s tried to blame the NFL for its poor sales, a pitch that the most recent set of weak numbers belies. So both firms are looking to digital innovation to turn up the heat.

Over at Wendy’s, CEO Todd Penegor is looking to a combo of tech-enabled delivery and mobile ordering to pep things up. As of now only 25% of Wendy’s U.S. stores are able to offer delivery, although that number is up 5% since the start of the year. The firm is partnering with digital provider DoorDash to provide delivery channels, so its fate is tied to the other firm:

We continue to expand our footprint as DoorDash expands their coverage to more restaurants across the U.S. We continue to see incrementality, especially in the evening/day part, and higher average check sizes. We have also seen encouraging customer repeat, which speaks to the favorable customer experience, along with the appetite for convenience. All of this has led to a franchisee base that is very excited and one that continues to push us to expand as quickly as possible with delivery.

To meet that demand, expect to see additional partner toppings coming along, he says:

In addition to our DoorDash coverage in the U.S., we have been partnering with SkipTheDishes on delivery in Canada to capitalize on the growing segment of food delivery. The early results of our rollout have been very encouraging. We look forward to continuing to leverage these partnerships and drive awareness. We'll also look for additional partners in an effort to expand coverage across North America more rapidly.

On the delivery front, our biggest opportunity is still driving coverage and awareness. We've crept up the coverage from 20% to 25% of the system, but what we need to do is create awareness. And any time that we create some awareness, whether it's locally or nationally, we see a nice uptick.

That ties into the firm’s mobile initiatives with Penegor citing success in raising awareness via its mobile app. Since the launch of that towards the end of last year, average monthly app downloads have risen from 100,000 to 500,000.

While the apps has been most successful to date as a mechanism for promotional offers, the goal is to get transactional with mobile ordering. Penegor says:

We are working hard to ensure that our app and mobile ordering technology are working seamlessly together in order to support an effective national launch of mobile ordering across the Wendy's system in the future. We are continuing to pilot our rewards program and work through some of our early learnings from the test. Our objective with this program remains clear, drive more customers more often into our restaurants.

That means getting the restaurants ready to cope with a new pick-up audience of customers. Remember when Starbucks found that its own mobile order and pay app lead to massive backlogs in store when customers turned up to collect their beverages. Penegor seems to have learned from that:

What we do is continue to ready our restaurants. The technology is set, but what we really want to make sure is you have a great experience, especially when you come into the restaurants. So making sure that we've got order pay separated from pick-up within those restaurants. We want to make sure that we have all the elements really working to have a great mobile experience.

One other in-store development that has seen some success is self-service kiosks, he adds, with 300 of the company-owned, as opposed to franchised, restaurants now having these in place. The trick now is to get these rolled out across the franchise network and that means selling the idea, says Penegor:

The company is taking the lead on this initiative, with 60% of company-owned restaurants having kiosks installed. We continue to see increased throughput during peak day parts and higher average checks. This leadership will drive franchisee adoption behind confidence in the business case. In addition, we now provide various options of kiosks, with some lower investment countertop models that allows us to accept cash.

He adds:

We want to really make sure we create the confidence in the business case by having the company really lead the initiative. And we are seeing increased throughput. We're seeing higher average checks. We've got about 10% of the orders within the dine-in now happening off the kiosks. So we're really trying to make sure that the customer really understands how easy that experience is, to then really create that compelling business case for our franchisees. We think the economics stand on their own. It's less than a two year payback in what we're seeing so far.

Boosting the brand

Over at Papa John’s John Schnatter, founder and CEO, was removed from his post at the start of this year after getting into a public spat about the “poor leadership” of the NFL, which had named the firm as its official pizza sponsor.

That sponsor of choice is now Pizza Hut and it’s up to new CEO Steve Ritchie to pick up the pieces. Part of that is repairing the brand, he admits:

You've heard us say, 'Better Ingredients. Better Pizza.' Our brand was founded on this point of differentiation, yet we have discovered our slogan alone is not enough.

So what to do? Firstly, listen to the data, he says:

We clearly have a very robust set of data and analysis. We know that from a public relations standpoint, social reputation and doing the right things to move the brand forward, consumers will come back, and we know that we also need to make certain that we are appealing to the right target audiences.

Millennials and Gen Z is a very important audience for us. We know that we have to make certain, if you take a look at our new advertising, the new creative and approach there and our focus on digital efforts is clearly to make certain that we are appealing to younger audiences which will be the future of the overall business. I think we've got a multi-phased process on how we're going to move the overall brand forward. This brand reputational work is very, very critical to moving the overall comp sales forward while we're solving for differentiations in messaging and the value perception and the introduction of all the new technology pieces.

Ritchie says he’s ready to put Papa John’s money where his mouth is in terms of implementing tech implementation and advances:

We'll make the additional investments to improve our customer-facing and restaurant technology to support our continued growth in digital sales and create operational efficiencies. Currently, over 60% of our sales are through digital channels and we believe that those results can be significantly higher.

In pursuit of an even better customer experience that benefits both consumers and our business, our digital and tech teams have made significant progress in the first quarter of this year. We have greatly expanded the size and skill set of our tech teams and have made incredible progress on our stated technical objectives for the year.

That includes more analytics effort coming up, he adds:

We have created a number of new consumer insight and analytical capabilities and are beginning field trials of a significant expansion of our industry-leading Papa Rewards loyalty program this quarter. Further, we are nearing completion of a major rewrite of our geo-coding platform, which will allow us to reach more customers and serve them better than ever before.

We have launched several forward-facing tech innovation efforts, and we'll be using our highly articulated test and learn model to determine which of these solutions deserve additional focus and investment for the remainder of this year and beyond. All of these efforts are aligned to serve customers better, improving every interaction and every product so that our brand continues to deliver on our better promise to our customers, team members, and our stakeholders.

My take

Digital catch-up in action. Not everyone can be a leader of course. For every digital hare, there are a lot of tortoises out there.

As we’ve noted previously, the fast food sector is increasingly competitive and coming up with the right sort of differentiators is a big ask when you’re not the market leader in your space.

Ritchie has the advantage over Penegor of being the new boy and as such can sell himself as the new digital force inside Papa John’s. But both men have a big uphill struggle on their hands.