Delivery and online ordering now account for 39 percent of sales for restaurant franchises, and off-premise dining has become a key focus in 2020, according to the 2020 Restaurant Franchise Pulse survey conducted by TD Bank.
TD Bank conducted the study among a representative group of 250 restaurant franchise owners and operators across the U.S. from Sept. 3-16, 2020.
Capacity restrictions for social distancing, often mandated by local or state governments, and customer concerns about dine-in led to the prioritization of enhanced delivery and mobile-ordering capabilities to boost revenue, with 72% implementing this change, the study found.
Eighty-six percent of respondents reported offering delivery and online ordering prior to the pandemic, a 14% increase in delivery since 2019. But these offerings now account for a larger percentage of sales, climbing from 20% in 2019 to 39% in 2020.
While this spike could be seen solely as a product of the pandemic, restaurant owners see the value of these services long-term, the study revealed. In last year’s survey, only 12% of franchisees said they planned to invest in delivery and 25% in mobile ordering in 2020. Those figures jumped to 63% planning to invest in delivery and 69% in mobile ordering in 2021—a 51% increase in delivery and a 44% increase in mobile ordering.
“Franchises have invested a tremendous amount of time, money and creativity in delivery and mobile ordering, but not all restaurants have adapted to off-premise sales to the same degree as the QSR space,” said Mark Wasilefsky, Head of Restaurant Franchise Finance Group, TD Bank. “Providing off-premise sales, which is critical to cash flow, requires having a menu that is amendable to delivery and takeout, which may be more difficult for restaurants that are not QSRs. Fast casual and fine dining establishments need to modify their menus to tasty food that travels well. We expect the shift to off-premise sales to be long-lasting, and due to broad consumer acceptance of its added convenience, we believe it will likely become a permanent aspect of many franchises’ business models.”
To overcome pandemic-related restrictions, franchisees quickly pivoted, making multiple changes to their operations as federal, state and city guidelines evolved. Respondents noted shifting in the following ways to cater to customer preferences and government guidelines:
- Implemented enhanced delivery services/online and mobile ordering (72%)
- Limited hours of operation (50%)
- Pivoted to non-traditional payment methods (42%)
- Created a more limited menu (38%)
- Added drive-thru capabilities (38%)
“The consumer demand is clear as restaurants reopen nationwide,” Wasilefsky said. “People still want to go out, be social and are tired of cooking at home. However, franchisees’ survival will depend on their creativity. We’ve seen restaurants pivot during the warmer months and now they must confront the next challenge: how to attract and retain business during colder months.”
Additionally, many customers now expect a quick and seamless payment experience with limited physical interaction. To cater to evolving preferences, 42% of franchisees pivoted to non-traditional payment methods that eliminate shared devices, cards and the use of cash due to its propensity for germ accumulation.
According to the survey, franchisees now use traditional retail or cloud-based POS systems (36%), online payments (28%) and person-to-person payment apps (22%) as their primary payment method.
“COVID-19 transformed payment offerings such as contactless, mobile and online payments from ‘nice-to-haves’ to ‘must-haves’,” said Doug Mearkle, Head of U.S. Merchant Services Sales, TD Bank. “Although we have previously been behind other countries in the adoption of contactless payments and other merchant offerings, this may be the catalyst the U.S. needed to bring heightened awareness of the benefits of these products.”