Fast-casual chains around the country are finding themselves the subject of a bit of a riddle these days:
To stay competitive during the ongoing pandemic, fast casuals are well-served by adding drive-thrus. But are you still a fast casual if you start building drive-thrus? Isn’t that the domain of fast-food restaurants?
To solve the riddle, fast-casual chains are trying to figure out their own riffs on drive-thru lanes, from tech-enabled mobile pickup areas to advanced curbside pickup options and more, all to allow pandemic-weary diners to stay in their cars while picking up their food—while also avoiding those high fees from third-party delivery providers.
“That’s vital for fast casual,” Carl Bachmann, president of better-burger brand Smashburger said. “People expect an elevated experience. Maybe it’s time for fast-casual players, we have to create better access points. It doesn’t mean we have to sacrifice our standards and quality. It’s vital we don’t cross a certain line … We don’t want to do traditional drive-thrus with the squawk box, where you drive around the building and you wait. We make products fresh to order.”
To that end, 250-unit Smashburger, which currently has just a couple of traditional drive-thrus in its system, is exploring some new prototypes, eyeing virtual drive-thrus for mobile order pickup, advanced curbside pickup and even outdoor warming cubbies that could keep food hot until customers drive up to retrieve their meals.
“People learn to eat differently and order differently and they’ve learned they can order takeout and curbside products,” Bachmann said.
It took the coronavirus crisis and its many ripple effects to make many fast casuals realize they needed other order-pickup channels for their customers. The brands that had these in place pre-pandemic (such as Chipotle Mexican Grill) continue to thrive, while those that relied on more traditional means continue to struggle (such as Shake Shack).
Many others in the space are playing catch up.
The undisputed king of the fast-casual drive-thru is Chipotle Mexican Grill. Its order-ahead pickup Chipotlanes, introduced just last year, are now generating about 10% more in sales than stores without them. The company is planning on adding Chipotlanes at a majority of its units and is looking to retrofit existing locations to make room for the lucrative add-ons.
“We’re in the phase of proving the digital drive-thru of the future, and I’m glad we’re on the front end of it,” CEO Brian Niccol, previously CEO of quick-service Taco Bell, told analysts last month.
Chipotle and others are finding their drive-thrus even more essential during the pandemic’s off-premise push, as increased demand for delivery starts eating into margins for some chains.
Chipotle’s operating margin in Q3 was 19.5%, a decrease from 20.8% during the same period last year, driven largely by the higher costs of delivery sales.
Struggling without a drive-thru
Shake Shack has been a victim of its own real estate portfolio during the pandemic. The burger chain has traditionally focused on urban locations, eschewing drive-thrus for solid pedestrian traffic.
But the pandemic proved that is not a foolproof business strategy, with urban centers around the country silenced as people retreat to quarantine.
New York City-based Shake Shack plans to add its first drive-thru late next year and is planning to open five to eight drive-thrus over the next two years. The chain said its iteration would be a “modern version of the traditional,” featuring tech-enabled hospitality and innovative design. Pre-ordering will be part of the chain’s model.
Keeping with its fast-casual standards, Shake Shack CEO Randy Garutti said his chain’s drive-thrus will not mimic the big quick-service players.
“We’re not going to make our KPI the fastest drive-thru in the world, right?” Garutti told analysts last month. “We still cook things to order. We’re going to continue to do that. We’re not going for the fastest. We’re going for the highest quality, the most-premium burger that we’ve always done. So, we’ll likely have some really good digital technology involved in that.”