Unpacking DoorDash's Tipping Policy & Exploring Tech Advances in Wingstop and Starbucks

In this week's episode of The Digital Restaurant podcast, Carl and Meredith cover three main topics. First, DoorDash is testing a feature that reminds users to tip their drivers, addressing the challenge of high delivery costs. Wingstop is making a big investment in technology, creating a platform called "My Wingstop" to personalize customer experiences in-store and online, aiming to boost digital sales. Starbucks plans to add 20,000 locations and implement a $3 billion cost-cutting strategy using tech efficiencies, emphasizing an omni-channel approach.

John Legend has entered the restaurant tech world with a platform focused on positive recommendations and influencer-driven suggestions. This unique approach to reviews and recommendations could prove successful. Additionally, Toast conducted a survey of restaurant operators, revealing trends and challenges in the industry. They've also introduced a new app, ToastNow, allowing owners to access real-time data and communicate with on-site staff.

Overall, this episode provides insights into the latest trends in the digital restaurant industry, offering thoughtful analysis and predictions for the future.

Transcript

Speaker 1: 0:00

hyper personalisation at Wingstop, doordash reminds us all to tip and John Legend joins the restaurant tech world. That's all ahead on this week's Digital Restaurant. The Digital Restaurant works like this we're going to ask each other five questions about headlines that affect the worlds of restaurants, off-premise and technology, but in some way tie back to art, books, series. Delivering the Digital Restaurant. Are you ready? Let's go.

Speaker 2: 0:40

Good morning, Carl how are you doing? Today I'm very good, happy, belated Halloween.

Speaker 1: 0:46

Happy, belated Halloween. Do you know how many trick or treaters came around to the Osborne residence?

Speaker 2: 0:50

Oh, how many.

Speaker 1: 0:51

None what? Yeah, I didn't have one. I saw the lovely photos of what happens over in Newport Beach, but clearly Irvine is not the place to come.

Speaker 2: 0:59

I think it's because you live on that fancy street that only has houses on one side, and every kid knows that is a waste of time if there's only houses on one side.

Speaker 1: 1:07

That, and I switch off all the lights.

Speaker 2: 1:09

Yes, but I would guess actually, Carl, that you have an amazing Halloween costume.

Speaker 1: 1:15

I did, but unfortunately no one was there to see it. So there we go Until next year. Anyway, on to question one, You've got the first one. This week. Meredith so Doorash have been in the news not only for their Q3 results, but also sounds like they're trying to remind a few of us to tip their drivers.

Speaker 2: 1:32

But they're testing putting a reminder in the app that says that if you have chosen to not tip a driver, that maybe your delivery is going to take a little longer. This has long been the case for low check orders. Often drivers don't want to pick them up because they know if it's a low check, the odds that the tip is low also very high. Drivers are rational people. They work for a reason and they want to try to maximize the earnings that they're getting per delivery. So totally makes sense that this would be a thing, but I think it lays bare the problem that we have in delivery, which is that this whole third-party system is extremely expensive. These drivers only do one to two deliveries an hour and at one to two deliveries an hour they need pretty big tips to make that make sense financially for them. So Dordosh, trying to guilt consumers into putting the bill for them rather than paying the drivers more. There is still this challenge here where delivery cost is very expensive and if you would, carl, bring up a graph for us. We've talked about this before, but Peter Bachmann put out this week the difference between doing takeout yourself and the menu price that you pay versus what you're likely to pay on a third-party app. He assorts the difference in prices 40 to 70 percent I think we've said previously 50 to 75 percent, even as high as 100 percent for a really low value item. That comes in the form of menu markups, service fees, delivery fees, and it also comes in the form of that tip which is an important part of the overall equation of how these platforms make delivery work. So when you take that and you say, gosh, the consumers are paying an awful lot for delivery, you could see why some of them would say a tip is going too far. I'm already paying quite a bit for this service and I get that. It's convenient and I'm willing to pay for convenience, but man, that's like one step too far. It also tells us that, just overall, this model is extremely costly and as you compare it to what's going on in DoorDash's earnings reports, it really makes you wonder can a model this costly continue to carry on and will consumers continue to value it? Now?

Speaker 2: 3:54

Doordash said many great things in their report that their overall usage was up. Their orders were up tremendously. Of course, as always, they didn't differentiate between restaurant orders and other orders, so it's hard to say exactly what's going on. I predicted that in this quarter Q3, their orders in restaurant US restaurants specifically would be flat to down, and instead what they say, and I will read the exact wording for you in our US marketplace, your over. Your growth in total orders accelerated in Q3 compared to Q2 in both our restaurant and non-restaurant categories.

Speaker 2: 4:32

So first of all, it was wrong, but second of all, it still doesn't tell us that much. Remember, last quarter they told us they had stable growth in US restaurant, which we were like, okay, if it was higher than five, you'd probably tell us, so that's probably like two or three percent. And Now growth is accelerated from a low point. So what is that? Like three or four percent? And then how is that happening? They also don't really tell you that.

Speaker 2: 4:56

So the take rate is looking really healthy. That's the amount of revenue that they have versus the GOV that they're bringing in. Their take rate is actually better this year than last year's, coming in at 12.9 percent versus 12.6, but at the same time they've been growing their advertising business, and advertising is in that revenue line. So if you were to back out the advertising which of course we can't do because they don't break it out that way, maybe the take rates actually going down and that would imply that maybe they're using discounts in order to grow those orders. So there's just to me more mystery in the door-to-door rings release than there is help. And when you couple that with I'm saying, hey, consumers, can you please foot the bill for our drivers, you're like, hmm, doesn't feel great. So I don't know, I might be over interpreting. I will say I was wrong. I thought orders were going to be flat-to-down and they were not. But I'm still not sure that I'm as optimistic as the news media and the market have been in reaction to their earnings.

Speaker 1: 5:59

Well, I think we can only put it to the test right and see whether our efforts to improve the tip will perhaps get our deliveries arrive in a little sooner.

Speaker 2: 6:06

All right, carl, for you We've got both Wingstops and Starbucks talking tech investment and Specifically using their tech investment to drive better engagement with their consumers, or talk a little bit about what they're doing and how.

Speaker 1: 6:21

Yeah, I'm gonna slide into Wingstops rather meaty investment. Three years ago they talked about it 50 million dollars into technology and that's really been putting that to work with this thing called my wingstop, which is what they call a proprietary platform. That's all about personalizing the way it interacts with customers, and so the way I kind of imagine this is that you walk in to a wingstop and you're greeted by some form of digital system that knows your last order, suggest new flavors that are basing your taste preferences, perhaps remembers your birthday, that type of hyper personalization that we've talked about a lot. And, of course, they're also saying that's not just for in-store, it's also tech that will perhaps help enhance online orders. So anyone that's engaging with the, the app or anywhere where they can engage with Wingstop outside of the store. Now, why is that important? So, as you remember, wingstop do an incredible amount of business digitally. I think it's something like 67% of their transactions are digital, which is up about 7% from 60% a couple years ago. So they're in line with the other big players in the space like dominoes that, I think, also around that number. So I think with this my wingstop thing there, they're going to be able to keep that they're alive. They're gonna be able to stoke this kind of fire a little bit further because they've got 35 million users. That's 8 million more than two years ago. So it's amazing, just in two years They've been able to understand more about their user base by that amount and obviously use that data to build better customer relationships. Now, the only thing that did surprise me a bit about this was the technology isn't launching right now. In the next week or two, it's actually scheduled to launch in the second quarter of next year. So let's see how it plays out and what actually materializes.

Speaker 1: 7:59

But I do want to give them some credit. At the time, the CEO, charlie Morrison, really was under a lot of pressure, right. The the business at that time reported a six point four million dollar loss. There were nine percent down in terms of their share price year-on-year. Is 2021, where we know restaurants are struggling, and they said no, we're gonna throw two feet into investing into technology. We realize that we want to be a hundred percent digital business and they recognize it's important to be able to draw that Kind of connection between marketing and technology capabilities.

Speaker 1: 8:29

Now, if we turn over to your question about Starbucks, you know Starbucks have also been talking about a vision to add 20,000 domestic locations, and they're also referencing a three billion dollar cost-cutting strategy that is leaning very heavily on tech efficiencies and I think the goal from that is really to streamline operations and enhance the overall Starbucks experience. And again, the omnichannel approach, I think, is very much central to this. Now, you thought Wingstop had a lot of members, while Starbucks has 75 million members and they aim to double that number in five years. So we should put a little pin into this. It can come back five years from now to be able to see whether they're doing dig at 150. I have marked my calendar.

Speaker 2: 9:11

Did you also see in that article? They talked about having more delivery. Only locations Totally.

Speaker 1: 9:18

Yeah, exactly, I think that's all about this idea of having flexible approaches to be able to service your customers, no matter where they are. The new app is certainly building on the things that Wingstop will refer into in terms of having personalized AI recommendations, things like, when your favorite item is out of stock, what would be the best alternative? So, look, I think it's always worthwhile following the likes of Wingstop and Starbucks, because there's some folks including the person that cut my hair this week who is going to be tuning in as a new listener to the digital restaurant. She said she doesn't like AI, knowing too much about her. You're really good, though. She did a very good job. She did a very good job, thank you, but the piece about it that struck me was like well, do you buy from Amazon? And she said yes, and I said, where do you buy your groceries from? And I helped to see that, actually, amazon do it. Today, when you buy your groceries, they're looking at the customer segment you come from and your shopping habits. All of this is very much central to the way in which retail has done this for years and years and years, but we're just getting closer to this one-to-one relationship and look, the debate is out there.

Speaker 1: 10:22

Danny Myer was featured in Fast Company this week and one of the editors there said they didn't really seem convinced by hyper-personalization Does it really drive better hospitality?

Speaker 1: 10:32

But for me, the personal touch is often the thing that people say is missing when it comes to the digital age, and we are drowning in this sea of apps and screens and we're craving connection, for sure, but I don't think Wingstop and Starbucks Investment here is just about selling food. It's about selling an experience. It's about selling a better connection, something that we remember and return to. And if we can remember that, the data there, with the AI, is going to ultimately track every choice, track every preference and with every order, that is something that just becomes better and better and that's a powerful tool for retention and frequency. And what are restaurants talking about in 2023? They're saying transactions, and getting customers to come back is our biggest challenge. So I think we should hopefully see more and more hyper-personalization from other restaurant chains in the years ahead and follow to see where the Wingstop and Starbucks get to that 100% digital before anyone else.

Speaker 2: 11:25

These are two leaders in the digital restaurant space. We refer to them quite a lot and how much they have developed the category. The other thing I take away from this is that you're never done. You don't spend a bunch of money on technology and then go all right, we did it, we have great technology from now until forever. No, you have to update that technology, keep innovating that technology to keep pace with consumer expectations. You might have things that break on the back end as different APIs change and maybe the integrations don't work as well and you've got to update them. There's so, so much. I think we'll see ongoing continued spend in this space by restaurants as they make technology truly a part of their competitive differentiation.

Speaker 1: 12:11

Absolutely Okay. Well, before we go on to question three, I'm going to ask our listeners. If you have yet to subscribe to the digital restaurant, please do us a favor. Click on the subscribe button. If you're listening to us on YouTube, rate us five stars, while that really helps. If you're listening to us on one of your podcast channels or, of course, if you're on LinkedIn, then give us a like as well. It's really important to know that you're listening, enjoy what we're covering and, of course, the more subscribers we have, the more the restaurant folks out there are going to be able to hear from us as well. So thank you for that. Okay, meredith, we're not ordinary people, are we? You get where I'm going with this. John Legend is in the news this week, meredith. Supposedly he has decided to join the restaurant Tech World. Tell us more about this.

Speaker 2: 12:53

This was amazing to me. I guess I maybe don't follow John Legend enough to know, but I was really surprised to see any musician jump into the restaurant Tech World and say that they were going to be part of it. But he really brings a very unique aspect to it, because this platform is all about using influencers and celebrity to drive recommendations of what do people like. And the other thing I really loved about this is that it was all about positivity. The idea is you can only leave a good review. You can't complain and talk about what went wrong, because it's all about recommendations. So what are these influencers like and what do they think you should go use, as opposed to the average population? What were they grumpy about yesterday? I thought that was a very neat approach to kind of like an old school yelp model, but updated.

Speaker 1: 13:49

I agree. I think the idea of being able to tell your friends, your local digital community, what you like and what you enjoy, I think is something that is somewhat missing out there.

Speaker 2: 13:57

It literally called it's good, it's in the name. All right. Toast Restaurants Survey came out. You know we love our surveys. Tell us what tests found out when they talked to the restaurants. They also released a big new product this week Pretty exciting week for toast.

Speaker 1: 14:13

Yeah, let's cover the survey first and I'll bring it up so that we can go through some of the charts here. What I thought was interesting is that the restaurants are clearly starting to get a little bit more positive than where they were this time last year as to whether they're going to open up new locations, but it's still 22,. 29% of folks saying yes, I will in the next six to 12 months. So there's still a level of caution out there. I think it's fair to say.

Speaker 2: 14:35

Based on that, but so much better than last year Wow.

Speaker 1: 14:38

Not better, which is, I think, to be expected given where we were this time last year. There's still the kind of fragility to the industry. This was an interesting one about the way in which restaurants are looking at what's most difficult to manage, and there are some things here like online ordering 20%, website management 20% Things that being around for quite a while, I'd say, but still represent a problem. But managing multiple service channels is up there at 24% as the leading one there. And then, as we go to the next item here, this was a strange one. One in three restaurants wants to improve profitability in the next year. I thought three out of three restaurants want to improve profitability. What do you think? It seems a bit of a strange one. That I think the point is is that there's a theme of efficiency that I think is going through the industry this year, and restaurants are looking to do more with less, and I think that's probably what it was referring to on that one there.

Speaker 1: 15:32

And one of the challenges that continues to play out is around hiring. When you look at the amount of restaurant operates out of the 847 that responded to the survey, 39% of them are saying it's an extreme to moderate type of a challenge. And then, just to wrap up on these last two here, Toast decided to talk about Voice AI, which was down the list here in terms of what they're planning to implement in the next year and you'll see robotics at the bottom there as well but by far the biggest elements for handhelds mobile payments, mobile ordering which doesn't necessarily stand out as a particularly exciting thing, but I think that and then, similarly, employee training. Maybe this is a reaction to the labor crisis, that they are very much looking to place more importance to employee training in the coming 12 months. But look at this one at the bottom.

Speaker 1: 16:18

There it is up 10 spots here from the previous year. Reservation technology up to 46%. So again, it doesn't seem to be hugely cut in edge, but it does strike me that even some of the things that were around quite a while ago, it represents today a challenge for the Toast clientele. Now, the app that they've released is called Toast Now, and this allows the operators to see real-time sales, traffic and labor data and communicate directly with onsite staff. They could also throttle kitchen volume by toggling the delivery channels on and off if they need to. They're also going to be able to add 86 items on the fly if they need to as well, and it's really allowing certainly those restaurant owner operators that perhaps have a number of different units across numerous geographies to monitor their business even when they're not physically there, and supposedly that tool is one of the most requested features from restaurant operators.

Speaker 2: 17:09

I can see, even if you are an owner operator and you're in restaurant, to be talking to a customer at one moment or work in the line the next moment and then doing something on your phone the next moment and not having to go back to some office, to a computer. That's great.

Speaker 1: 17:23

I agree. I thought that it's not so much about them not being in the restaurant itself. It is about the ability to easily access information at any particular point in time. The app's only out on iOS right now, which is surprising, given Android accounts are about 54% of the users out there.

Speaker 2: 17:38

So sorry, meredith, you and your iOS, I will be able to use it.

Speaker 1: 17:42

That's why I'm thinking it'll work right now. But I'm good, so I get to use it. But it does tell me something that toast remains a system for the smaller operator. Yes, for sure they're a start to explore enterprise customers. But when this is launched at the same time as POS features such as server item fire, which allows servers to hold and send individual items on a check, giving them more control over meal pacing, when features like that are being rolled out now, it just goes to show that toast does what it does well.

Speaker 1: 18:13

But at the moment a restaurant wants to do something more advanced or certainly expands out into larger networks, it starts to creak a little bit. And so they're moving in the right way. But the survey and the results of the survey and their tech announcements, I think solidifies them more in that independent space than really gives them any additional credibility in the enterprise space. Ok, question five let's finish it up with Shake Shack. But they've been in the news quite a bit this year about their belief in kiosks, but now they're talking about redeploying new labor models.

Speaker 2: 18:41

We've said before that 2023 turned out to be the year of the kiosk.

Speaker 2: 18:45

I think this was the thing that got talked about most being deployed into restaurants, and initially, all the news coming out of Shake Shack was that they were increasing their consumer engagement, increasing their digital orders, getting more information about customers very marketing-related things and customer engagement-related things and this article highlighted that actually, consumers like it so much that they think they're going to be able to take some labor out of the restaurants and maybe need to do a fundamental rethink about the labor model for the restaurants.

Speaker 2: 19:16

So this makes all the sense in the world, right? If consumers are essentially punching their own orders in at some point, you don't need someone to stand there and punch orders in for them. I'm sure initially you need someone to stand there and make sure that consumers know how to do it and have someone to answer the questions and things like that. But as it becomes very commonplace, you will have fewer and fewer employees working that front of house, particularly in that order taking function, and I would go so far as to say, carl, that within five years, the job of a human taking an order at anything but a fine dining sit down will be gone. It'll either be voice, ai, kiosk, mobile order ahead, those types of things Even in the drive-through, that role gone.

Speaker 1: 20:06

So you don't even think there's a role for a little hologram server on your table to take your order.

Speaker 2: 20:12

I think if it's a dine-in, if it's a dine-in and there's a server and you're paying a table, you're not going up and collecting your items. I think those people will still exist maybe fewer of them and enabled by QR code pay a table and order a table and those kinds of things. But I think in the rest of the industry that job's going away.

Speaker 1: 20:37

So you've taken a note for when Starbucks gets to 150 million loyalty customers. I'm taking a note for November 3, 2028. Meredith is predicting You've heard it here first folks she's predicting that there will be far fewer servers in our restaurants, apart from those ones like the Casrodine and fine dining space. All right, meredith, we shall see. All right, well, look, that is it for today's bite-sized look at the news in our space. Join us next time for another fresh serving of the Digital Restaurant podcast. Until then, keep innovating, keep digitizing and keep delivering those delicious experiences. We'll see you next time. The Digital Restaurant podcast is available for you to follow and subscribe wherever you listen to your podcasts. Watch us, rate us and subscribe to the Digital Restaurant on YouTube and follow along on all our social media Digital Restaurant channels. Thanks for listening.