The Real Reason Why Tablets Will Make Restaurants More Profitable

"Customers have been telling us for some time... 'I don't like to wait for the check,'" said Julia Stewart, CEO of DineEquity  (NYSE: DIN  ) , in an interview on CNBC. DineEquity, the parent company of Applebee's, and other restaurants like Buffalo Wild Wings (NASDAQ: BWLD  ) and Chili's of Brinker International (NYSE: EAT  )  are in the process of rolling out pay-at-the-table computer tablets across the nation. While giving consumers a more convenient way to order and pay for their meal is a plus, there is an indirect motivator for the tablets that may lead to higher sales and profits.


Source:  Buffalo Wild Wings.

First, the more obvious reasons
For starters, there is convenience. The goal is to get you, if you so choose, to order from the full menu, and then pay, using just your fingers. Expect to see orange-and-red wing-sauce fingerprints on tablets at company-owned Buffalo Wild Wings everywhere by year-end and at franchisees by year-end 2015. Let's hope they sanitize the screens between table turnovers.

According to Buffalo Wild Wings' latest conference call, this will lead to reduced labor costs along with an improved guest experience. The accuracy of orders should definitely improve. Also, most of us can't stand being held hostage waiting for the check and then waiting to pay. Now we can leave on a happier note. Saving on restaurant costs and having more satisfied guests is a win for everybody.

Source: DineEquity.

The less obvious reasons
Likewise, DineEquity is installing tablets in all of its Applebee's restaurants by year-end 2015. In addition to the positives noted above, the company also pointed out on its most recent conference call that the devices act as suggestive electric billboards for appetizers, desserts, and additional drinks.

Throughout the dining experience, the tablets visually prompts guests, asking if they want additional items from the menu.  Stewart said, "It's literally a 100% guaranteed suggested selling at every aspect of the 40-, 50-minute experience."

Even if guests don't feel comfortable ordering a dessert or appetizer with the tablet, the devices still continually send their message and possibly tempt diners to place an additional order with the server. The result from tests so far has been an increase in the average check size.

According to Ziosk, the company behind the tablet technology used at Brinker's Chili's, at 70% of tables at any of its customer restaurants with tablets, guests used the tablets. In addition, among restaurants that use Ziosk tablets, appetizer sales popped 20% and dessert sales leaped 30% compared to restaurants that didn't use them.

Source: Brinker International.

Then there is the lunch crowd. Many of these diners have limited time for lunch; every minute counts. They don't have time to wait for the check. By putting the timing of payment into the guests' hands, customers may choose to pop into an Applebee's, Chili's, or Buffalo Wild Wings during their lunch break instead of a taking a risk at a mom-and-pop diner where there could be a delay in paying the check, resulting in customers coming back from lunch late.

We've already seen consumer reliance on technology help boost Domino's and Papa John's results. Both now receive 45% of their orders digitally, with Papa John's expecting to cross the 50% mark shortly.

This has caused sales to soar. The reason, according to both companies, is that digital ordering has shifted sales away from mom-and-pop pizza joints and toward national chains with advanced technology. While delivery and takeout services aren't the same as restaurant tablets, perhaps we could see similar trends happen among the lunch crowd.

The real, indirect reason
Consider that, according to Brinker International, the average table turnover time is 45 minutes. According to technology company Long Range Systems, the average restaurant wait time is nearly seven hours per week. The average wait time per table is 23 minutes.

Everybody has a varying tolerance for waiting. The longer the wait, the fewer the number of customers who are willing to wait. During these busy times, a restaurant's sales are limited by its capacity. However, by reducing order times, cutting down on mistakes, and speeding up the checkout process, tablets could probably save, say, five to 10 minutes on average per table.

Five to 10 minutes may not sound like much. But given the average wait time of seven hours per week, this should increase a restaurant's capacity by around 20% due to increased turnovers -- or the number of times new guests can be seated -- during these busy times.  It also reduces the average wait time for individual guests. For restaurant companies such as DineEquity and Brinker International, every little bit helps, especially since in this economy they'd be ecstatic with even an extra 1% in same-store sales gains. The ability to squeeze these extra tables in during long wait times should do the trick.

Foolish final thoughts
If history is any guide, you will need to wait until the question-and-answer period of the earnings conference calls for Buffalo Wild Wings, DineEquity, and Brinker International to get detailed updates on how the tablet rollouts are going. The prepared remarks in the earnings call tend to offer only a few tidbits.  Buffalo Wild Wings reports April 28, DineEquity on May 1, and Brinker International on April 23. Look for same-store sales to get a boost among all three chains over the coming quarters. If the rollouts are successful, look for other restaurant chains to quickly follow suit.

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