Why limited-service chains were better positioned for the pandemic than full-service restaurants

The restaurant industry is facing unsettling times.

Customer satisfaction with full-service and limited-service restaurants dropped 2.5% and 1.3% respectively this year, and the Accommodation and Food Services sector overall diminished 1.3% to a score of 77.9 (out of 100), per our most recent Restaurant Report.

This was all before COVID-19. Now, the situation is even more dire.

From March to May 2020, the industry lost $120 billion, according to the National Restaurant Association. This figure could double by the end of the year.

Yet, while sit-down chains remain slightly ahead of fast food restaurants (79 to 78) from a customer satisfaction standpoint, this might not be the case next year.

The delivery paradox

Since COVID-19, takeout and delivery options have become a full-blown necessity. But customers were turning to delivery even before the pandemic arrived, and full-service restaurants have been trying to adapt. By mid-2019, nearly four in five brands used an online ordering platform.

Unfortunately, online ordering from full-service restaurants hadn’t caught on before the pandemic hit.

According to our survey, completed between April 2019 and March 2020, 92% of respondents reported dining in at sit-down establishments, compared to 6% ordering carryout and 2% choosing delivery. Furthermore, customers are more satisfied when dining in (78) at full-service restaurants than getting takeout (75) or delivery (77).

When customers were forced to choose between takeout and delivery, full-service restaurants’ apps might not have lived up to expectations. While diners agree that overall quality of mobile apps from full-service restaurants is better than those of fast-food chains (85 to 81), the reliability of those apps tells a different story.

Although the segments share the same score for mobile app reliability (81), full-service chains plummeted 6% while fast-food chains improved. As our data consistently show, the more satisfied customers are, the more willing they are to increase their restaurant spending in the future.

Many fast food restaurants had the technology and the habits in place before the pandemic. Subway, whose overall score remained unchanged overall, had the top-rated mobile app for quality. This is good news in its efforts to adapt to consumer preferences, especially after the company closed more than 1,000 U.S. locations in 2019.

Domino’s is reaping the rewards of having its own digital platform for ordering and delivery. The new pizza segment leader, at an ACSI score of 79, earned 70% of its total U.S. sales in 2019 via digital. It also boasts a database of over 85 million customers.

If full-service restaurants can’t follow suit to fulfill customer’s delivery needs during the pandemic, they may struggle to regain trust down the road.

Takeout troubles

Takeout is the bread and butter for fast-food chains. Nearly 70% of their business comes from drive-thru lanes, which are built for quick, contactless meal distribution.

Without drive-thru in their arsenal, full-service restaurants have been trying alternative takeout methods. Unfortunately, save for Applebee’s, many full-service restaurants didn’t have designated curbside pickup programs in place prior to the pandemic.

Some were unprepared for the influx of orders. TGI Friday’s had to convert its headquarters into a call center because it lacked a sufficient number of phone lines to handle demand.

On top of that, many customers have been less satisfied with full-service restaurants in many of the customer experience benchmarks that apply to both dining in and takeout. The courtesy and helpfulness of staff was down 3.4% to 84, and the speed in which food is received was down 2.4% to 80.

Full-service has no time to waste

The full-service restaurant industry was having trouble before COVID-19. But the pandemic may have exacerbated the segment’s shortcomings, from its falling mobile app reliability to its relative lack of experience with takeout and delivery.

Customer satisfaction with limited-service chains was also deteriorating, but these chains are built for contactless delivery and pickup.

Even as restaurants open for in-person dining, the need to adhere to social distancing guidelines and other safety precautions will make it so the dining-in experience will never be the same. This will make efficient delivery and takeout even more critical.

The writing’s been on the wall for the restaurant industry for a while now. Those that truly embrace the power of digital for delivery and takeout are more likely to weather the storm.

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