Will Mobile Ordering Really Work for All Restaurant Chains?

In recent months, fast food chains Burger King, Wendy's, Taco Bell, and McDonald's have made progress in creating mobile applications for either mobile coupons, mobile payments, mobile ordering, or a little of all three. Despite the success of mobile ordering for some restaurant chains, will it really work for every restaurant?

Apr 5, 2014 at 7:00AM

With 7.3 billion cell phones in existence, a number which now surpasses Earth's entire population, the ability of a company to connect to its customers through mobile means has never been more important.

Recently, fast food chains like Burger King (NYSE:BKW), Wendy's (NASDAQ:WEN), Taco Bell of Yum! Brands, and McDonald's (NYSE:MCD) have slowly jumped into mobile, while veterans Chipotle, Panera Bread, and Starbucks are improving on their existing mobile systems.

Even though mobile ordering has mostly been successful among current restaurant chains, will it really work for every restaurant?

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Does this scene look familiar? By Denali National Park and Preserve, via Wikimedia Commons

Where mobile apps have succeeded
Mobile ordering came as the natural progression for many national pizza delivery chains like Domino's Pizza, Yum! Brands' Pizza Hut, and Papa John's.

For decades, the pizza-delivery business model relied on customers calling ahead from their home phones and either picking up orders in person or having them delivered at a future time. The trend toward smartphones only foreshadowed the success that pizza chains could expect with mobile applications.

The iPhone app for Domino's Pizza debuted in June 2011 . Today the company has apps available for 95% of all smartphones. As a result, 40% of total sales last quarter took place digitally.

The current success of fast-casual chains like Chipotle and Panera Bread was less obvious. While a pizza typically takes 10-20 minutes to prepare and cook, you can usually order and receive what you want at either Chipotle or Panera Bread in far less time.

While it is just now making plans to test mobile ordering later this year, Starbucks is not new to mobile applications. The company introduced mobile payments in January 2011 . Today the coffee king says that 14% of all purchases come from mobile payments. In 2013, Starbucks generated $1 billion in mobile transactions.

Mobile debuts among popular fast food chains

 

Mobile Payments

Mobile Ordering Ahead

Burger King

April 2014

April 2014

Taco Bell

Mid-2014

Mid-2014

Wendy's

March 2014

TBD

Note: McDonald's is still testing an app that provides coupons, but not mobile payments or mobile ordering.

In the past couple of months, Burger King, Wendy's, Yum Brands' Taco Bell, and McDonald's have made strides into the mobile environment -- each with different mobile abilities thus far.

Burger King's app will allow customers to buy Whoppers with their smartphones. However, the rest of the menu, including drinks and side items, currently does not appear on the app.

Wendy's app will allow only mobile payments for now.

In contrast to both Burger King and Wendy's, Taco Bell's  app will allow customers to make payments and order from nearly the entire menu on their smartphones.

McDonald's is still in the testing phase of its app and it currently just focuses on offering discounts through the smartphone.

Will mobile apps really work for all chains?
Transitioning to mobile ordering may be difficult, not just for the restaurant chains, but also for their customers. For fast food chains, especially, there is little planning ahead among hungry customers. That is the entire idea of fast food, after all--customers expect to order food and have it quickly with little effort on their part.

Ordering speed is another issue as all those involved will need new training. Late last year a study showed that drive-thru times have changed for the worse. In fact, McDonald's experienced its slowest average drive-thru speed of service in the 15-year history of the study at 189 seconds . Burger King was the only chain that showed speed improvements over the previous year in the study.

Menu consistency should not be underestimated. Keeping menus up-to-date with current promotions and future sales comes at a cost. A restaurant could see a big backlash if it does not update its mobile system and its managers need to explain why a menu item is no longer available or why a mobile coupon has expired to angry customers. McDonald's and Wendy's have relied on frequent limited-time promotions to drive customer traffic.

Security is on the minds of all customers due to security breaches at retailers in recent years. Endless debates will take place on how well restaurant chains can protect customer information as chains find out more and more about when customers visit, what they eat, and how much they spend.

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Will this scene look less familiar over time? By Sardaka, via Wikimedia Commons

Probably most important is the overall investment. Does the benefit of mobile-ordering capability outweigh the costs involved? Panera Bread has technology upgrades under way which it calls Panera 2.0 . The chain is spending a total $42 million on the upgrades, which include $22.5 million on software, $8 million on security, and $700,000 on customer support.

If Panera Bread represents a model of what works in terms of mobile ordering, other restaurant chains should double check whether mobile systems truly fit within their budgets.

Bottom line
Mobile ordering is definitely a powerful asset in today's modern retail world. At first glance, the ability to order food from your smartphone seems like a win-win situation for both restaurants and customers.

However, it might be harder to implement for newcomers, especially the fast-food chains like Burger King, Wendy's, and McDonald's because they have less experience with call-ahead ordering.

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Michael Carter has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide, Chipotle Mexican Grill, McDonald's, Panera Bread, and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill, McDonald's, Panera Bread, Papa John's International, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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