Want sales? Get your digital house in order

Wingstop and Chipotle both proved that online orders can move the needle in the fast-food business, says RB’s The Bottom Line.
Photograph courtesy of Chipotle Mexican Grill

The Bottom Line

Several restaurant chains reported impressive same-store sales last quarter. Popeyes Louisiana Kitchen, for instance, hit double digits for the first time in years thanks to its ridiculously popular chicken sandwich.

But it was bested during that period by two chains that didn’t come close to generating the social media fervor: Chipotle Mexican Grill and Wingstop.

Chipotle’s same-store sales rose rose 11%. Traffic increased 7.5%.

Wingstop’s same-store sales rose 12.3%, which came “primarily from transaction growth.”

In both cases, the chains have undertaken numerous efforts to generate sales, such as menu innovation and marketing. But they also represent big victories for technology, demonstrating again that digital strategies can generate more sales.

Both companies have put considerable energy behind their digital efforts.

Indeed, throughout the recent round of earnings reports are indications that digital can help companies generate more business.

Chipotle in particular has worked hard to make its ordering easier. The chain’s digital sales have nearly doubled this year, and more than 18% of its sales are coming from orders made on the phone or through the computer.

The company has taken steps such as adding pickup shelves in its restaurants for easy takeout. It has aggressively marketed delivery with DoorDash to generate sales. It is now adding drive-thru windows specifically for mobile orders. And it has a second make line for digital orders.

In dollar terms, Chipotle’s digital sales topped $250 million last quarter. “We’re knocking on the door of digital becoming a $1 billion business,” CEO Brian Niccol said last month, according to a transcript on financial services site Sentieo.

Similarly, Wingstop has worked to establish its digital bonafides and has used the tech-heavy pizza sector as a benchmark. It relaunched its online ordering and mobile app earlier this year. More than a third of the chain’s sales are now coming from its digital orders—up more than 10 percentage points over the past year.

Much of that is coming from delivery, which the company has been expanding for much of the past year. “We believe we’ll continue to see organic growth in digital,” CEO Charlie Morrison said on the company’s earnings call this week.

Digital strategies have become a key weapon in the restaurant industry’s ongoing competitive battle.

Big chains are investing heavily in these efforts, following the lead of chains such as Starbucks, Domino’s and Panera Bread, all of which have helped demonstrate that such strategies can generate sales growth.

Digital orders accomplish two things: They can improve efficiency because the orders aren’t taken by a human, and they can drive larger orders.

At Wingstop, for instance, digital orders are $5 higher on average than nondigital orders. “We think we can continue to drive digital sales without employing discounts or incentives like other brands do,” Morrison said.

Many brands argue that digital sales are also incremental, helping chains get sales they wouldn’t get otherwise.

For instance, KFC U.S. Chief Technology Officer Christopher Caldwell told me recently that the company’s online orders surged immediately after the company turned the capability on—with no marketing assistance.

That means customers are going online, looking for orders, and if they can’t make their order online, they’re likely going somewhere else.

None of this is to say that companies should focus on digital over, say, operations or menu innovation, as Popeyes’ chicken sandwich introduction demonstrated. But among large fast-food chains, online orders and delivery and other digital strategies are becoming a key differentiator.

Online orders aren’t growing the overall restaurant industry pie. So all of these “incremental” orders that Chipotle and Wingstop are generating are coming from other companies.

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