Delivery drivers wearing giant box backpacks and bicycle helmets mixed with the lunch crowd at a Sweetgreen location on Manhattan’s Upper East Side one recent afternoon. About 25 orders were stacked on shelves in front of the assembly line, where a group of seven employees worked furiously to assemble customers’ salads and grain bowls.
Customers were directed to order online, because of an electrical outage unique to the location. The combination of the outage, the delivery orders, online orders and inside customers resulted in a backlog that left diners waiting 20 minutes to get their orders.
This has been a common phenomenon. Around the country, restaurants are struggling to balance the needs of the takeout and delivery sales they’ve gained during the pandemic and the in-store customers that have come back in recent months.
The challenge is exacerbated by the labor shortage—or perhaps contributing to it—while forcing operators to decide which set of customers is more valuable at any given moment.
“During the pandemic there was this uptick in off-premise business,” said Juan Martinez, principal with the consulting firm Profitality. “Now customers are coming back inside. But operators want the off-premise business, and they want it on top of the on-premise business. That is a huge challenge everybody is facing right now.”
Restaurants have long grappled with the balance of takeout and dine-in business. Walk into any McDonald’s at dinner while the drive-thru is busy. Much of the focus of the employees is typically on that drive-thru, resulting in slower service for the inside customer.
Starbucks debuted its mobile order function in 2015. By 2017, the company was talking about “congestion” in some of its urban locations as customers waiting for their mobile orders filled restaurants, leading some walk-in customers to leave.
“It used to be, [customers] would look at the line at point-of-sale and if that line looked too long, they might decide not to do a transaction at that time and come back later,” Kevin Johnson, Starbucks CEO, said in 2017, according to a transcript on the financial services site Sentieo. “Now when customers walk into the store, we’ve alleviated the congestion at the point of sale line, [but] now we have congestion at the handoff plane.
“So they might look at the number of customers around the handoff plane and the number of beverages … and that might create the signal to them that they are going to wait.”
Many other restaurants are experiencing what Starbucks did then, thanks to soaring takeout sales. Three-quarters of fast-casual restaurant operators, and nearly two-thirds of fine dining operators, told the National Restaurant Association for its State of the Industry report earlier this year that they saw more takeout sales after the pandemic than before. And more than two-thirds of adults told the association that they were more likely to get takeout from a restaurant in the future.
Revenue at the third-party delivery company DoorDash, meanwhile, almost instantly doubled after quarantine began last spring and nearly tripled between the first quarter of 2020 and the first three months of this year.
To capture a greater number of customers demanding takeout, more restaurant chains began focusing on mobile orders while adding services like curbside.
Restaurant chains like mobile order customers, and for good reason. “You don’t have to take their order, you don’t have to make change. They just pick it up and leave. It’s beautiful,” Martinez said. “The off-premise customer is usually higher ticket and less labor.”
Yet keeping both sets of customers happy has proven to be a challenge.
John Gordon, a restaurant consultant out of San Diego, said he recently visited a Habit Burger in Southern California where the manager turned off inside orders to catch up on the digital business. “I go in and the place is packed,” he said. “People are lined up on stools or seats. They have slips in hand or they’re watching the counter where the bags will pop up. And there’s bunches of people standing in front of the POS registers. [The order taker] said they’ll take our order in about 10 minutes.”
It’s not just chains or limited-service concepts. Service was slow at a local Indian restaurant in Minneapolis, despite a mostly empty restaurant. Servers, however, were running around as if the place was overbooked thanks to a steady stream of delivery drivers and customers grabbing their takeout curry dishes.
“Everybody’s going through growing pains on this,” said Alice Crowder, chief marketing officer for Krystal. “The more quickly we can recognize and pivot, the more successful we can be.”
Damola Adamoluken, CEO of the Asian casual-dining chain P.F. Chang’s, said his company has teams that can flex between in-restaurant and takeout. He said the biggest solution is simply staffing. “Staff appropriately, first of all,” he said. “Have an idea of what to expect between online and on-premise. If there’s a spike you didn’t expect, we can deal with that.
“Be ready for both, be great at both. Being channel agnostic, is what we call it.”
Famous Dave’s gets about 50% of its sales through digital channels. But the restaurants will shut online orders off if they get 15 over a certain period of time. It will also throttle orders during busy periods. “There are times when to-go is off the charts and someone that comes in is probably going to have a longer ticket time, and then there’s the opposite,” CEO Jeff Crivello said. “We try to balance. Every order is the same. The quality is the first priority.”
Business has grown so busy on weekends at Darden Restaurants’ concepts, including Olive Garden, that the chains have to throttle back on orders. “Each restaurant can throttle differently,” Darden CEO Gene Lee told investors last month. “But on average, I’ll give you an idea is that we only take four orders to go every 15 minutes. And there are a lot more than that.
“We’ve got to be able to service the dining room and service the off-prem.”
Martinez, for his part, is working with several clients dealing with this challenge. His recommendation is to separate the preparation of meals for digital orders and in-restaurant orders the best they can—so one set of business doesn’t take away from the others. That can create some redundancy that could help restaurants deal with both sets of customers.
“You can let them live in the same kitchen, but you’re likely impacting the inside customer because of the off-premise customer,” he said. “The inside experience is going to get worse. Ten minutes becomes 20 minutes and then by the time you order you may as well order dinner at breakfast otherwise you’re not going to have it in time.”
Chipotle did this, creating a second makeline for its digital business that helped it become a major source of sales during the pandemic. Yet even that is not foolproof. Gordon said on a visit to Chipotle recently he was in a long line of customers, with one person at the front putting together burritos and bowls. Everyone else was in the back preparing digital orders.
The risk, Gordon said, is losing the loyal customers, who are more likely to come into the restaurant. “Early on when takeout became an issue, takeout was actually shut down during peak periods. That was before the pandemic. And the in-house dining customer was taken care of on a priority basis,” he said. “When the pandemic hit, that altered everyone’s perceptions. That may have altered psyches in terms of consciousness. And now the takeout customer is the priority.”
Nevertheless, Martinez said, these are good problems to have. A year ago, after all, this industry was begging for any kind of sales it could get. And now the restaurants are so busy they’re turning some customers away.