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Chains shift their focus to operations

As customers increasingly demand convenience, companies such as Wendy’s, McDonald’s, Dunkin' and Starbucks are focusing on operations to drive sales, says RB’s The Bottom Line.
Photograph courtesy of Starbucks Corp

the bottom line

Restaurant chains are looking to put the “fast” back into fast food.

Numerous companies in recent quarters have acknowledged broad efforts to improve operations inside their stores to increase speed as well as accuracy and customer service. They are removing tasks, adding technology, bolstering training and holding competitions.

The idea is simple: Better operations can win over customers. That’s not particularly new, but amid persistently weak industry traffic, and as technology takes a greater hold inside kitchens and dining rooms, more executives have come to the conclusion their restaurants need a service makeover.

That represents a major shift in thinking. In recent years, many fast-food companies have put their attention on marketing and product innovation, believing the next new product is key to driving sales.

They haven’t exactly abandoned that idea—McDonald’s, which is intently focused on speed, continues to test new products, while Wendy’s has spent the year adding sandwiches to its new Made to Crave menu.

But restaurants are also more likely to remove menu items now while working to simplify operations inside stores.

There is some evidence it is working. Many chains’ same-store sales growth has improved this year, and executives are giving some credit to their operational efforts. Company executives also say various customer satisfaction scores are on the upswing.

Starbucks’ same-store sales rose 7% in the U.S. in the company’s fiscal third quarter, with traffic up 3%. The company credited in part its efforts to “simplify work” inside of its coffee shops. The company reduced hours of tasks inside the shops and shifted workers’ focus to customers.

Roz Brewer, Starbucks’ chief operating officer, said the company had record “customer connection” scores in the period.

“We’re so much more personal with our customer base, not only from a digital perspective,” Brewer said on the company’s earnings call last month. “By freeing up these hours, we are having much better eye contact, handoff, just the whole relationship between the [employee] and the customer.”

Rival Dunkin’, meanwhile, has had an operations focus of its own. The company simplified its menu last year, and its new store design is also meant to help improve operations. It also instituted soft launches of new menu items to help with training and execution.

The chain’s customer satisfaction scores rose in the second quarter. “We’re seeing a nice improvement in accuracy and speed,” said Scott Murphy, chief operating officer for Dunkin’, on the company’s second quarter earnings call this month.

Maybe nowhere is this effort more intense, however, than in the burger business, where fast-food giants hope that improved speed can win over customers.

So while they’ve continued to add new burgers, many are now working to get speed and consistency right, too.

 “We’ve been our own worst enemy when it comes to speed of service as the breadth of our ever-changing menu has added complexity in prep times in our kitchen,” Jack in the Box CEO Lenny Comma said in May, according to a transcript on financial services site Sentieo.

The company is reducing ingredients and eliminating some low-volume items and improving back-of-house operations.

On Thursday, Comma said the company has identified some products that cause bottlenecks in the kitchen and is testing new operations methods to eliminate those problems. He also said the company is looking to reduce “disappointments,” in which customers get frustrated and leave, which is “strongly correlated” to weak sales and transactions.

Wendy’s this week said it is focused on speed. It is training employees, eliminating some tasks and “building a culture within our restaurants that make them fun and energizing places to work,” CEO Todd Penegor said.

“Speed and consistency of experience matter most in delivering our brand promise, and they are getting our full attention,” he said.

McDonald’s has been investing the most money in its effort, spending $300 million to buy Dynamic Yield and testing more automation, including automated drive-thru order taking. It also held competitions and deployed other strategies to increase speed.

“We want to get incremental improvement week to week to week, so each time a customer comes back, they notice a few seconds difference,” CEO Steve Easterbrook said last month.

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