QSR April 2023

MENU INNOVATION

a member of the restaurant’s loyalty program or be using a tar geted promotion.

tionally, kiosks are popular with consumers. Paytronix says 79 percent of customers prefer to order from kiosks or online rather than from staff. It’s not just for fast food, either. About half of customers prefer this for casual dining and about 20 percent prefer it for fine dining. REVENUE STREAMS We asked a similar question about which revenue streams held the most potential for dynamic pricing. Again, not surprisingly, delivery was top (86 percent) followed by curbside and drive thru (62 percent each). This makes sense since the majority of delivery orders are made digitally. In addition, delivery customers tend to be driven by their desire for convenience and as a result are often less price sensitive. But, other than for the pizza segment, delivery is not the dominant revenue stream for most restaurants. In fact, it only accounts for about 10 percent of the overall restaurant mar ket. Still, it’s a great place to start. It’s not surprising that many of the dynamic pricing providers have focused in on this area. Curbside and drive-thru were also considered to be prom ising channels. Interestingly, of the 33 percent of orders that were digital, over half were for takeout as opposed to delivery and curbside. THE TOP THREE We also asked respondents to rank the areas they felt had the most potential for dynamic pricing. Delivery was No. 1 (42 per cent of respondents ranked it first), followed closely by digital (40 percent) and menuboards (12 percent). Digital ordering is definitely not limited to delivery. In fact, in much of Europa and Asia, digital menus are quite common place, even in full-service restaurants. Are digital menus likely to be more widely adopted in the U.S.? Well, according to recent studies, the trend has already started. While I’m talking about digital menus, I want to emphasize that given some customers prefer paper menus, it’s important to give them a choice. For those customers who don’t want to order digitally, have tradi tional menus available. Digital menus not only allow you to vary prices, but also give you the opportunity to dynamically change your menu. Think about this. During busy periods, you might be able to reduce the menu size so that you are better able to leverage your kitchen capacity and also use some simple menu design tools to help drive customers to your more profitable items. DynamEat does just this. During busy periods, an operator can choose to offer a reduced menu with an emphasis on high margin items and on menu items that don’t take too long to prepare. The net result of this is not only one of increased profit, but also allowing the restaurant to more effectively leverage their availability capacity. In sum, there’s a lot to consider in regard to dynamic pric ing. It’s complexity, however, shouldn’t limit its potential. But there is a thoughtful place to begin and no one way to go about it. You just have to get started. q Sherri Kimes is an Emeritus Professor at Hotel School at Cornell and specializes in pricing and revenue management. She is passionate about helping restaurants increase profitability.

BACK TO THE WHY? So, why should restaurants adopt dynamic pricing? The sur vey respondents have spoken: one, so you can increase revenue and two, so you can better spread demand to your off-peak periods. By doing so, you will be able to increase revenue and profit for your restaurant. THE WHERE OF DYNAMIC PRICING I wanted to know which ordering channels respondents thought had the most potential for dynamic pricing as well as which rev enue streams they considered to be the most likely. ORDERING CHANNELS Not surprisingly, digital orders led the way for ordering methods (89 percent of respondents), followed by kiosks (51 percent), and menuboards (42 percent). Why do I say not surprisingly? Well, according to the Square 2022 Future of Restaurants report, 88 percent of operators would consider exchanging physical menus for digital and according to The National Restaurant Associa tion, operators in all six segments think digital and QR menus will become more common in the future. Why the interest in digital? The answer is pretty straightfor ward. Depending on the POS system used, it can be relatively straightforward for a restaurant to change prices. But, it’s more than that. By having the wealth of data digital menus can provide, operators can more clearly understand demand variations and be able to quickly react to these variations by changing prices. As mentioned before, it’s not always just about raising prices, but lowering prices may attract customers to slower periods. This coupled with an effective loyalty program and/or messaging platform can make it even more successful. Another interesting trend is the growth in digital orders. During the pandemic, digital orders more than doubled until they accounted for about a third of all orders. Lest you think that was a short-term phenomenon, digital orders still account for about a third of all orders. I saw a similar trend in Singapore. Would digital menus work for all segments? Well, it depends. According to the Association, two-thirds of consum ers prefer paper menus in a table-service menu. But, in Europe, a large percentage of menus in full-service restaurants are digital. Yet what about consumers and digital menus? What do cus tomers think of digital menus? Per the Association study, 58 percent of consumers said they would access a menu with a QR code and 64 percent would order using an app. Not surpris ingly, younger people are even more open to this tech-driven approach. And, according to Square, 11 percent of consumers would avoid a restaurant without a digital menu. Based on all of this, it makes sense digital would be con sidered the most likely ordering channel for dynamic pricing. Kiosks and menuboards were also commonly mentioned areas. Again, depending upon the POS system, it’s possible to change prices on kiosks and electronic menuboards. Addi

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APRIL 2023 | QSR | www.qsrmagazine.com