Danny Klein is gonna know he's director of digital content for QSR magazine and FSR magazine, which are a couple of magazines I read all the time to monitor the world of restaurants, Danny, before we get into it, decode QSR and FSR what are those stands for?
QSR stands for Quick Service Restaurants.
So that's your, Fast food restaurants like McDonald's and subway and it's also your fast casual restaurants like Chipotle, a and Shake Shack.
So basically any restaurant where you don't order off a menu that they bring to the table and they serve you, that's a quick service restaurant.
Okay, yeah, full service when you actually have a regular sit down menu and all that.
Okay, so what brought my attention to a recent piece of your work was An incredible amount of the what we call as average people fast food restaurants are announcing changes in their future design, how their restaurants are going to look.
I've never seen this many announcements in one time what's going on out there?
Well, what you said is spot on.
I mean, I've been doing this for six years now or so.
And I've never seen more than maybe, two or three of these a year.
[LAUGH] And so now, we've had this happen basically, in the course of, I would say two months where they just come frequently, and especially in about the last three weeks, and I don't know why that is exactly, but What it is, is it's just an acceleration of a model that everyone is rushing toward, which is a focus on off premise business instead of dying in.
And of course, you're seeing that with COVID most dining rooms and a lot of markets aren't even open.
Some restaurants like chick fil a, even though they could open them chose not too so what you're now seeing as restaurants.
You know, the bigger chains the fast food giants really start to move a model in that direction.
And so you know at first the first time we heard about this it was okay, here's a restaurant.
That's only a drive thru no dining room.
That sounds crazy and it was this huge headline and now Business outside the way that we kind of put it is that you know dining out no longer means dining in for people all across the country and that might mean curbside you know pull up into a designated spot and have someone bring it straight from the kitchen to your car or my mean delivery.
Or in a lot of cases it's just drive-thru.
But where this is kinda headed is trying to synchronize that drive-thru experience with mobile technology.
That's really the big change that we're seeing is where you can go on an app and then just pull in to it separately and then drive through and pickup your food at a designated time.
I mean that's a really novelty idea that was not here just It's a year ago.
We're seeing the these restaurants and say yeah, people are still gonna arrive in their car to pick up food, but the entire ordering and browsing and consideration experience has been pushed or is starting to be pushed out to the phone instead of that board With the speaker and the microphone.
And part of that, and the reason why they're they're making this acceleration in that direction is that one of the biggest issues with mobile ordering using an app even third party delivery in the past was just awareness and adoption among consumers, especially older consumers.
But one thing that COVID did is it really erased that gap or narrowed it, very, very, significantly in a very short period of time.
So, the situation today i mean is that there really are not a lot of consumers throughout the pandemic who have not given that process a shot.
One thing about digital ordering, is that it's very sticky.
It's the type of thing that, once you do once, studies out there show that people will continue to order that way because you asked yourself, if I could take a jersey Mike's app and I could order my sub show up and it's ready and just I grab it and go without waiting in that line.
Why would I not do that in the future?
But there was definitely a segment of people who just did things because that was their habit.
And so COVID really changed that habit in the course of we would say maybe it's six months it took and so now you have a guest who is much more likely to order ahead and show up and do all of their Kind of ordering that way and also on the restaurant side, one reason that that's so vital and the reason they're pushing so much resources into it is that that data and that information that you submit to them when you sign up for an app or review or mobily through their website or on your phone You know, that's something that's become really the most valuable currency there is because third party delivery really, you know, one of the knocks on is that it hoards the data from the restaurant.
Right for restaurants to retake that customer experience and have that one on one relationship so they could do things like.
So that when they announced that last year as a $300 million investment in this startup called dynamic yield, and how it was positioned at the time is at the drive thru so they rolled it out to 8000 restaurants in a hurry.
And how it worked was that you would show up, you know, and they would know based on different things, like what's trending in the area, the weather, even, you know, things that they can up sell to you, you know, based on that kind of stuff.
Instead of a you know someone at the drive thru window saying hey would you like fries with that as the famous thing you know now you'd have this video board that said you know you order chicken nuggets.
You also want to make flurries since it's the summer you know and it's 100 degrees outside kind of deal.
Something like that can up sell consistently to a consumer and it could do it the same way every time you know, however McDonald's wants to control that right.
So you don't have to really wonder is the employee actually doing it or not part of their new restaurant the future design is this automated ordering and payment through identification.
So you're taking it a step further now where As your car pulls up, they'll know who you are this is something through a license plate identification.
So a little bit, a little bit big brother, but this is something that you're gonna see throughout a lot of restaurants and through that they're able to then.
You know, ask, you know, maybe he wants this or he ordered this or I could get started on it and that kind of stuff too.
And either even set it up further down the line where you could pay that way, you know, it's all about one word really right now, which is contactless and that's what, we're all.
That's what we're all striving for.
So a lot of that is COVID era contactless concern.
But in the long term, there's also a enduring appetite for a frictionless experience for consumers, right?>> The difference between contactless and frictionless is really not that why?
I mean, because frictionless can apply to a lot of different things.
It can apply to something as simple as how many clicks does it take you to get from when you open an app to actually pay for the item And that was kind of what we heard that around most of before COVID.
Now without frictionless I mean it's a way to pay for you to order food and get food delivered to you or pick it up or however you may want to go access it without We're just talking about convenience, which has always been where that sector, has rained and now it's becoming more important.
So that experience, you really can't get much more convenient and take out your phone ordering paying, showing up in the food flying through a conveyor belt.>> That's the ultimate sort of right to me as easy as possible.
Let me ask you about this idea of locations in general You're talking about all the ways that locations are being made more compact, less friction.
And then we get to this idea of delivery or the location almost just becomes a kitchen and delivery services are pulling from it.
And if you really take it to its ultimate degree, Fast food or quick serve restaurant almost becomes a b2b thing.
They're supplying delivery services that supply me the common version of that.
So we call it base kitchen, our cloud kitchen, or dark kitchen ever a lot of names, but, you know, basically it's this idea of do consumers actually care where their food came from the order from third party delivery and I'm not talking about brand, necessarily, Although that's a different conversation, but just does it really matter that where the hub is located, right?
They just want food to be, you know, hopefully hot, fresh and things like that.
So, you know, then the question becomes Can you put it in a central location so you're almost creating a handoff between these two different elements of a ghost kitchen and maybe a restaurant spot.
So you know, one thing I saw recently You know from this consulting company, the lawyer to a big player to space it's just this idea of there being kind of a hub of lockers, you know, heated so you would get delivery drivers would go to McDonald's, pick up 10 orders and drop them in these lockers and then you can go pick them up as a customer You know or that can be a hub for delivery drivers to come flock to as a central spot.
There are a lot of logistical questions I have about that security being one of them, you know whether or not someone could open your locker but you see that in retail and the adoption is how.
So for consumers, are they willing to kind of take that odd step?
And you know, I don't really see why they would you know, there's even a question of whether or not they would understand what was happening.
But I'll throw one statistic at you that Deloitte Actually asked their consumers whether or not they'd be okay for this handoff in the middle type of, deal and 65% of them said they'd be willing to actually go pick it up there.
If it was less than 10 minutes away or on the way home.
It almost becomes just a food brand that I pick up at a location that works for me.
I think about And I really all I care about, I think, is the food and the experience.
I don't really necessarily value the dining room or the building, do I?
It's so these are two very different conversations between fast food and table service.
You know, after waiting in line off the board, you know, and talking to, you know, someone and going and sitting down and waiting for my food in the corner, you know, whatever it might be or, you know, they're bringing it to your table or you're just sort of stand off to the left.
You know, that's not really a huge attractant of the fast food dining experience.
Once we get past the current crisis,
I think this is actually a pretty easy question to answer and to figure it out, you really just have to go back to, you know, a pre- COVID world which is hard to imagine feels, you know, years ago but you know, labor was far and away the number one concern for all restaurants.
Definitely for fast food restaurants,, you're talking turnover in 150 range for even the most well known brands.
So you're turning off staffs, you know, a turning over staffs, you know, one and a half times a year.
And one of the big culprits for that was the fact that for years and decades one of the biggest pools of labor for Quick service restaurants for teenagers.
And now that's no longer what they used to be.
And a lot of that stems just from the fact that they're more people gonna college and they're spending some of that free time working on an extra Curricular things, going and working at a restaurant when you're 16 just isn't what it used to be 10 years ago.
I mean, that's just the fact.
Everybody started to see it.
So they started to come up with creative ways.
Maybe go after, older people in the workforce, 55 and above and things like that.
And then of course, as we talked.
When you go to McDonald's, what do you see in, basically every McDonald's in America, it's a kiosk for them when you walk through the door, right?
So why were they doing that?
I mean, the reasons are more obvious and maybe some people make it out to be but, one of the things about the pandemic is that you might think kind of on the surface that this You have all the PP costs, the masks you know the gloves, etc, things of that nature.
And then you also you know in the in the heart of the pandemic had to actually compete with unemployment benefits.
Were You know, I was talking to a fast casual operator around this one time and, you know, this is a minimum wage business, you know, most of the time and you're talking about that $600 added on per week was turning into 270% above the minimum wage levels for certain states in America.
So how are you really going to compete with that when you were dangling?
A long term plan.
Maybe you say, Well, you come work here for a year.
But the truth of our restaurants is that the vet as we say, with that turnover numbers that the vast majority employees did not walk through that door for a long term career, right so that carrot does not hold the same kind of weight.
That's what you're seeing now.
You know, so I was talking to a CEO just yesterday really big growth plans you know that's an element of COVID to a lot of vacated real estate for some well capitalised brands to go flood like Domino's for example.
You know, they can go become as big as they really feel like being from a.
Real Estate standpoint, but the question is can you recruit enough employees to actually open all those restaurants?
I mean, that's what's gonna be a roadblock for the growth of a lot of fast food chains is finding the actual people to staff, the restaurants.
A lot of us read stories about robotic you know, hamburger makers and stuff to go out.
That's That's nuts.
But you tell me is that sound like a reasonable path in the foreseeable future for some of these operators?
I mean if you think that that's outlandish or unbelievable, all you have to do is take a look at these restaurant of the future designs they take less people to staff them in the kitchen.
In that I mean, why else are you talking about some of these automated, you know, up selling technologies at the drive thru and the ability to recognize your car and pay without any employee actually ever taking your car, right?
And even some of these mobile technologies, if you're ordering on your app, and you're paying and showing up and picking up your food, I mean, it's just a different labor model.
These restaurants are smaller, they're more efficient.
There's upgrades in the back, you know, to your robot question.
One of the things about that of course, it's just the investment on the half of a very large scale, you know, fast food chain would be enormous.
However, you know, White Castle is doing it currently as we speak.
You know, they started with what we call flippy roar, which is this Miso robotics especially like a giant arm that makes burgers and flies at the back of the house and allows the employees on some other different tests.
They started out with one of those and now they just recently, I think in October, expanded it more restaurants.
It's coming on some level.
We will ever look at restaurants where there are no employees?
They probably not on a broad scale.
I know there are some like local restaurants in New York City where you're you don't really even deal with anybody but, for the most part, it's gonna be just about how do I operate a efficient restaurant with fewer employees.
Last thing I wanna ask you, maybe the most interesting question is your line of work do you ever eat at home?
[LAUGH] Yeah, actually I eat at home all the time where I live.
I'm located in Chapel Hill, North Carolina and we have we definitely have quick service restaurants but we actually have a drive thru ordinance where you can't have one unless you're this one biscuit restaurant that's been there forever called sunrise.
So we actually do not have a ton of Fast casual and quick service restaurants in my you know where I live in the direct area which is very interesting.
I've been talking to Danny Klein he is director of digital content at QSR magazine and FSR magazine.