Pei Wei Ceo: Fighting Delivery Is Like Fighting Gravity

Posted: Oct 05, 2017



Consumer Picks brands navigate competitive landscape with delivery, loyalty and new technologies

Restaurants are racing to meet the fast-increasing demands of the consumer, layering on new platforms such as delivery and loyalty as the customers bang their tables for more.

“The power has really shifted into the hands of the consumer,” said John Hedrick, CEO of Scottsdale, Ariz.-based Pei Wei Asian Kitchen Inc., at Tuesday’s “Consumer Picks” panel during MUFSO in Dallas. “The consumer is very demanding and has every right to be.”

Fueled by increased competition and new technologies, restaurant brands that rank high in Nation’s Restaurant News’ annual Consumer Picks rankings shared their strategies to maintain favorability among guests. Nation’s Restaurant News will release the full 2017 Consumer Picks report in late October.

In addition to Hedrick, the MUFSO Consumer Picks panel included:

-Richard Scheffler, Whataburger Restaurants LLC chief marketing officer
-Kim Lopdrup, Red Lobster Seafood Co. CEO
-Mark Hutchens, Papa Murphy’s Holdings Inc. chief operating officer and chief financial officer and
-Kelley Bailie Fechner, Datassential director of customer solutions.
-Jenna Telesca, editor-in-chief of Nation’s Restaurant News, moderated.

Panelists cited digital restaurant components are helping to put “frictionless” order, payments and loyalty in the hands of consumers with their smartphones. And more are demanding delivery via those devices as well, the executives said.

John Hedrick, CEO of Pei Wei Asian Kitchen Inc.
“We’re in the fast-casual business, and for us digital is table stakes,” Hedrick said. “Everybody in fast casual does it.”

The brand is now piloting third-party delivery in 22 of its restaurants, he said.

“The economics right now, to me, have not has been as attractive as we’d like to see,” Hedrick added. “In addition, we’ve gotten feedback from our consumers that it’s a varying satisfaction experience for them.”

Delivery times, especially through third-party services, can vary from 10 minutes to 55, he said, and the product quality when it gets to the home can vary.

But delivery for restaurants is inevitable, he said.

“Fighting delivery is kind of like fighting gravity,” Hedrick said. “You are going to lose. We have to figure out a way to make the economics and experience work for both the brand and the guests.”

Lopdrup said Orlando, Fla.-based Red Lobster is experimenting with delivery in a small number of restaurants. “The question is,” he said, “’Does seafood travel well enough?’”

Delivery makes up less than 3.5 percent of sales in the restaurants where it is offered, he noted.

Mark Hutchens, Papa Murphy’s Holdings Inc. chief operating officer and chief financial officer
“We’re testing it to make sure we are delivering the kind of food that people expect from Red Lobster,” he said. “We’ll see how the tests go.”

Fechner from the Datassential analytics firm added that delivery does not make sense for every restaurant concept. “They know what works with their brands.” Fechner said. “It’s knowing who your customers are and what your products are.”

Hutchens said Vancouver, Wash.-based Papa Murphy’s unveiled its delivery test in January in the Seattle market and is expanding it to Colorado.

The company recently transitioned its online ordering to the Olo platform, which makes they delivery component easier than in the past, Hutchens said.

“With that brings up the capability to drive delivery, which we think is a big opportunity in our business,” he said. “That closes the what we call the convenience cycle. It’s how do we make the product more convenient for customer by enabling technology.” Papa Murphy’s partners with Amazon, GrubHub and other third-party delivery providers.

Loyalty at Consumer Picks
In addition to delivery, new technologies also make loyalty programs easier for the brands, the executive said.

Red Lobster remains cautious of how the loyalty program are framed, Lopdrup said, because it can train regular guests to expect deep discounts.

Kim Lopdrup, Red Lobster Seafood Co. CEO
“There have been a couple of times in our brand’s history where we got on a deal treadmill and basically trained the guest to wait for the next deal,” he said. “That did not end well.”

Since becoming an independent company in July 2015 in a spin off from Darden Restaurants Inc., Lopdrup said, “We’ve probably done less dealing than at any time in our history.

At the end of October, Red Lobster plans to test a loyalty program that offers rewards but no discounts. That, Lopdrup said, is aimed at “building both frequency and check.”

Pei Wei has deployed a loyalty program over the past 14 months, Hedrick said, and it allows customers to gather points for a free entrée.

Richard Scheffler, Whataburger Restaurants LLC chief marketing officer
“We’re still trying to figure out if it should be a surprise and delight program or remain a strict points program,” Hedrick said. “If you only talk to you loyalty customers you loose share to everyone else.”

Pei Wei has gathering emails of loyal guests and can offer items like a free salad or 15 percent discounts for military veterans or first responder, Hedrick said.

“We’re glad we have it. It’s a tool in our tool box, but it had better not be the only tool in the tool box,” Hedrick said.

Other of the Consumer Picks brands said they tried to avoid discounting as well.

“Obviously, it’s an incredibly competitive pizza environment out there right now,” said Hutchens of Papa Murphy’s “We’re really trying to make sure the customer understands value. It’s reminding the customer why we are better and avoid chasing the rest of the market on a deep discounting perspective.”

The Consumer Picks brands said consistency in products remained highly important, as well as how those products were serviced.

Scheffler of Whataburger said that is even more difficult for a 24-hour restaurant concept, where “we’re making sure we are delivering that great product at 2 in the morning, because it’s a lot harder than in the afternoon.”

Customers also want customization around the clock. “They want it how they want it,” Scheffler said. “That’s part of our DNA.”

By Ron Ruggless October 04, 2017 Source: Nationsrestaurantnews.com



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