We could be on the precipice of a major shift in the way we dine out, and most of America probably isn't even aware of it yet. Beginning last year, casual-dining restaurants began implementing consumer-facing tablets to aid servers and consumers with the ordering process in an effort to create a happier customer and to potentially turn tables faster. The more quickly restaurants can serve customers, yet still keep them happy, the more profitable they can become.
One of the more prominent casual-dining restaurants that's accepted consumer-facing tablets with open arms is DineEquity's (NYSE:DIN) Applebee's, the largest casual-dining chain in the country, with nearly 1,900 locations. Applebee's in December 2013 announced its intention to install a whopping 100,000 consumer-facing tablets in its restaurants by the end of 2015, through a deal with tablet provider E la Carte. Based on the company's latest conference call, it expects to be near halfway complete with the rollout by year's end.
The goal for Applebee's large investment is simple: reinvigorate stagnant sales; create a happier customer; promote higher-margin items like appetizers, drinks, and desserts; and allow consumers to pay at their convenience, which should lead to faster table turnover.
As I opined two months ago, restaurant tablets could afford diners three key improvements over their current dining experience. This includes saving them a lot of time in the ordering and paying process, providing content to keep children and families entertained at the dinner table, and giving customers the ability to offer on-the-spot feedback, which restaurants could use to make quick, actionable changes.
Discernible early benefits
At least that's what I surmised back in early June, before I had a chance to use one of these tablets firsthand.
However, vacationing on the East Coast last month gave me an opportunity to experience one of these tablets in person, as well as question some team members at an Applebee's about the device's strengths and weaknesses. Needless to say, the benefits of these tablets may be further out than I, and investors, had originally anticipated.
Without question there are notable positives from my experience with an Applebee's tablet. I was impressed by the simplicity of the screen in that even those people who aren't too familiar with touchscreen technology are going to be able to operate this device with relative ease. There aren't too many options when it comes to ordering, which lends to the simplicity in the company's early phase-in of the devices.
The "games" section was also pretty impressive, with all eight games accessible on an unlimited basis during your dining experience for one flat fee of $0.99. There were a variety of games for children and one directed at couples, implying E la Carte and Applebee's have done their homework, at least as it relates to the entertainment factor. Seeing as you can't purchase anything from a casual-dining restaurant for less than a dollar these days, this nominal fee works as a perfect way to add a little icing onto Applebee's and E la Carte's cakes, since they split all gaming revenue down the middle. http://www.technobuffalo.com/2013/12/04/applebees-is-putting-a-tablet-on-every-table-next-year
Of course, the big benefit, being a credit card user, was the expedited payment at my fingertips. I'm sure you've all had instances in a busy restaurant where you can wait upward of 10 minutes just to pay your bill. These tablets all but eliminate this scenario unless you're using cash.
Consumer-facing tablets: Not all they're cracked up to be?
I had the opportunity to speak with some of the long-tenured staff at one particular Applebee's near where I was staying and get firsthand feedback regarding the device. The general opinion I heard was that most servers believed their customers enjoyed the technological upgrade, but as my questioning progressed I discovered far more potential miscues with the device than I anticipated given the fact that DineEquity's rollout is so immense.
One of the give-and-take aspects of the device all servers I talked to noted was the need to explain how to use it to customers. Obviously as these devices become more prevalent and consumers more familiar with them, this long-winded explanation won't be needed. In the meantime, though, I noticed an actual slowdown in initial service during peak hours as servers were forced to trudge through their explanation of how the tablet worked to family after family -- exactly the opposite of what DineEquity's management would prefer to see.
However, it's also worth mentioning that explaining how E la Carte's Presto tablets worked gave servers an easy segue to interact with their diners and discover personal information, such as where they were coming from or if they were celebrating an occasion. This information is critical because it's the first step to creating an emotional bond between the consumer and the server that could lead to them becoming a loyal, lifelong customer.
More than the slight speed bump in explaining the tablets, I found the lack of two key functions to be glaring.
First, I expected that consumers would be able to order their own appetizers, desserts, and drinks with the push of a button. Most of this proved accurate, but not all. The reality is that servers still need to place your initial drink order, and only after it's placed does your personal tablet give you the option to reorder. With drinks standing at the top of the heap of margin-inflators for restaurant chains, having to wait for a server to take your drink order seems inefficient with a tablet right there -- and, for the customer, downright inconvenient. It's understandable for alcohol orders, as a server needs to verify a customer's age, but for basic drink orders the consumer is waiting just as long, or perhaps even longer than before, to place and receive their initial order.
The other "You've got to be kidding me" moment, and one echoed universally by the servers I spoke with, was the inability to provide customer feedback via tablet. Every server mentioned that consumers would prefer the ease of inputting their feedback immediately rather than by phone or over the Internet. In addition, the chances of receiving actionable feedback diminishes once diners leave the restaurant. For now, it would appear that Applebee's is sticking with its printed-receipt surveys and crossing its fingers that consumers offer feedback via their mobile device, PC, or phone.
Working out the kinks
In their early phase-in, it would appear that Applebee's tablets have delivered more misses than hits with potentially longer wait times to be initially served and the inability to provide actionable feedback to the restaurant.
Marketing research firm Datassential confirmed the potential for a dissociation earlier this year when it surveyed both restaurant operators and consumers about their usage of or excitement to use tablets. Datassential's findings showed 26% of restaurant operators were interested in implementing the technology, while just 16% of consumers expressed interest in ordering food via a tablet.
However, the data from E la Carte, would suggest that the benefits are clear. After having tested its device in 30 Applebee's locations prior to declaring a full rollout in December, E la Carte claimed that its tablets help restaurants boost sales by 10%, improve table turn by seven minutes, and improve customer loyalty by a factor of nine. This is one of the primary reasons that Applebee's has chosen to test a loyalty program, which it suspects will help build a sizable customer base and make its growth more predictable. Consumers will be able to enter their phone number, which links to their loyalty account, directly into the tablet, and in turn can receive perks like a free appetizer.
What did Applebee's have to say about its tablets during the latest conference call when asked for an update by a Longbow Research analyst? Not much more than we already know. In the words of CEO Julia Stewart:
I think what we're much more interested and what we are solving for is consumers told us it was their No. 1 pain point at an Applebee's was they didn't like the fact that the food server left with their credit card and they didn't like the fact that they would often have to wait for the check. So that goes away with this new technology. The longer-term implications for what it does for the tips, for what it does to the speed of service or what it does to the average check -- too soon to tell.
The tablet takeaway
It would appear that the takeaway here is that tablets have the opportunity to transform the casual-dining landscape, but that neither the pioneering restaurants behind this technology nor consumers are quite sure what to expect of them as of yet.
For Applebee's it's difficult to assess the early financial impact since the initial rollout has had a number of software glitches and pushed the bulk of its deployment until next year. The company's second-quarter results showed a 0.6% increase in same-store sales for the chain, but Stewart attributed this to higher average checks rather than any other specific benefit.
It's likely going to be a few more quarters before we have a measurable impact of these devices on Applebee's bottom line. Yet based on my personal experience, the experience of the staff I spoke with, and Datassential's survey, i'd suggest that the implementation of this technology could come with speed bumps that won't immediately translate into improved results for Applebee's and DineEquity.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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