Restaurants have been pushing hard to get consumers to order through digital channels, whether it’s the web, their mobile apps or third-party delivery, believing that to be the future of the restaurant industry.
That future has come a lot sooner than many operators thought it would.
“This three-month period we’re in right now is basically going to have three years’ worth of changes to our business,” David Gibbs, CEO of Louisville, Ky.-based chain operator Yum Brands, said Wednesday.
He was specifically talking about the company’s Pizza Hut brand, which has seen digital and delivery sales soar in recent weeks. But he could have spoken about his entire company—it also operates KFC, Taco Bell and The Habit Burger Grill—and the restaurant business as a whole.
In the early weeks of the shutdown, starting in mid-March, consumers rushed to grocery stores, and sales at restaurants across the board plunged. As those consumers have adjusted their habits in the past few weeks, they’ve returned to restaurants, though with only takeout and delivery at their disposal.
And they’ve increasingly favored digital orders. That has been a boon to large companies that have spent millions to add that functionality to their business models. For some, it could be a difference maker, fueling sales that might have otherwise not come.
“The recent investment in delivery, digital, drive-thru and takeout has been fortuitous,” said Mark Wasilefsky, head of restaurant franchise finance at TD Bank. “Those things have increased exponentially with the changing consumer. We’d be in a lot worse shape if those things hadn’t taken place. They’ve given a way for restaurants to stay open.”
The coronavirus shutdown appears to have accelerated that shift.
The Habit Burger Grill, which Yum acquired earlier this year, saw its digital ordering percentages soar in the wake of the COVID-19 pandemic. The burger chain now gets 40% of its orders through digital channels, four times the rate it did before the pandemic, Gibbs said.
Habit operates just 50 drive-thru units, forcing the company to think of new strategies to deliver takeout orders to consumers. “The Habit team adapted quickly to the new environment by rolling out many different order modes for carryout, such as park-and-order, pop-up drive-thrus and outdoor self-order kiosks,” Gibbs said.
The company has also been shifting its marketing to focus on value and family meal bundles through takeout and delivery. Combined, Gibbs said, “the operational and marketing adjustments have fueled our growth in digital ordering.”
At KFC, Yum believes that more than a quarter of its sales could come through digital channels by the end of the year. Digital now represents 10% of sales at Taco Bell.
Digital is a massive part of Pizza Hut’s comeback plan—a strategy that has been put into overdrive since the pandemic. The chain has struggled in recent years with its multiple operating models, including a number of dine-in locations, and Yum has been pushing a faster shift toward takeout and delivery only, with digital driving much of the business.
The pandemic has put its efforts into the spotlight. The company has changed its marketing tag line to “From Our Hut to Yours,” which Gibbs said “reinforces our credentials as a delivery player.”
The company has focused on contactless delivery and carryout. Its U.S. business recently set a digital sales record, getting more digital sales on a Friday than it did during each of the past two Super Bowls, traditionally strong days for pizza delivery.
“It’s accelerating the plan that we had for Pizza Hut in getting us to be this truly digital delivery and carryout business,” Gibbs said.
Yum has been intensely focused on digital sales throughout its business. Last year it hired former Walmart Chief Information Officer Clay Johnson to be its chief digital and technology officer, for instance.
“I really do think the few months that we’re in the middle of right now are accelerating a lot of trends in the business that would have taken years to take hold, like digital order and pay and things like delivery and technology,” Gibbs said.