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Impact of Portion Size

  • What is an operator with limited pricing power to do when costs are rising? 
  • Some operators might be tempted to reduce portion sizes, but how is this practice perceived by consumers? 
  • According to our survey, ~29% of consumers perceive that operators are currently serving smaller portions in a difficult operating environment.
  • While some consumers prefer smaller portion sizes, it is notable that ~16% of consumers are unhappy with smaller portion sizes. We believe this must have negative traffic implications.


Little Caesars' Revolutionary Pizza Portal

We think that Little Caesars is on to something big...

The pizza chain is currently testing a new Reserve-N-Ready platform that allows customers to order and pay via mobile app and pick up their pizzas from an automated, heated self-service station (Pizza Portal). The app notifies the customer when the order is ready & guests can skip the line & enter a three-digit PIN or QR code to open the door on the customers’ secured compartments.

This could redefine convenience in today's world in the same way the drive-thru revolutionized fast food all those decades ago.



McDonald's Kiosk Review

Research visit to a recently renovated McDonald's with a kiosk shows that there remains some bugs to work out with this platform. Navigation could have been easier and credit card payment didn't work. Lots of staff there to help with the process and it was notable that many patrons were using the kiosks. Guests place their order, enter in the number from the top of the stacked table markers & bring the markers to their tables. Orders are carried to the tables in quick order.



Call notes on delivery

According to operators that we recently spoke with:

  • There is a problem with fraud associated with delivery. Dishonest consumers take delivery & then call their banks to say that they never ordered the food & initiate a charge back that the operators must eat (charge-backs were something like 3x the normal rate). Also, delivery customer is totally different than core with 1AM business very strong & also a possible explanation for higher fraud frequencies.
  • The pizza segment maybe losing share in delivery. For instance, a consumer travelling on business & staying at a hotel (& who does not want to go out for dinner) used to have limited delivery options with pizza being the most prominent. But now the consumer can choose breakfast or casual dinner options as well. This would also be true of the Millennial late night crowd.
  • Operators must figure out whether their servers should get a tip for assembling off-premise orders. They currently do not get paid, but this could be an issue and potentially raise the cost of these orders.
  • QSR players may not require mobile apps because you can pick-up your order in 3-4 minutes after placing it at the drive-thru & there is no wait. Apps may be more relevant to chains with longer wait times.
  • Delivery may have limited demand from inebriated late-night customers who don't want to drive.

Goodbye to traditional TV advertising

The vast majority of restaurant marketing is spent on traditional TV advertising. But this model is growing less relevant as consumers spend more time online where they are hard to reach. We believe this over-looked factor maybe contributing to the restaurant industry's soft traffic trends. 

Most consumers are unaware that when they land on a webpage, watch a video, use a mobile app or watch an Internet-connected TV, there is often an auction for ad inventory being run in about 1/10th of one second behind the scenes as the content loads.

A company called Trade Desk provides access to 4.7MM ad spots on average every second for its clients to bid on across millions of different scaled media sources—websites, shows, channels, stations and streams.

If Trade Desk's stock performance (below) is any indication, the restaurant chains may want to reconsider how they allocate their marketing dollars.