How late should a fast food restaurant stay open?

How long is long enough? That effectively is the question asked in a recent Wall Street Journal article with regard to quick service restaurant hours of operations (Will Longer Hours Boost Sales?, Apr 29). Here is the issue:

With a lean economy squeezing their sales, thousands of restaurants are extending their hours to try to get more people through the door. But franchisees are learning that it can take a lot of work to get the most out of off-hours snackers.

The basic problem: Restaurants need to shoulder more expenses to keep the lights on longer—but the crowds usually aren’t that big at odd hours, and customers don’t end up spending very much. In fact, franchisees and industry experts say, some markets may not have enough all-night types to make the concept work at all.

The drop off in traffic in the wee hours of the morning is illustrated here.

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Fallen Arches: Fixing service at McDonald’s

What counts as good service at a fast food restaurant? Speed obviously matters but what about staff interactions? No expects a quick service restaurant to have a Zagat’s rating (although some Chicago hot dog stands are graded) but can fast food service slip so much that customers notice?

Apparently the answer is yes, and furthermore McDonald’s hasn’t been doing so well in delivering service (McDonald’s Tackles Repair of ‘Broken’ Service, Apr 10).

But achieving speed and friendliness of service across the chain has been a particularly elusive goal, at least in part because about 90% of McDonald’s restaurants in the U.S. are owned by independent operators.

In QSR Magazine’s annual Drive-Thru Study, the only comprehensive industry comparison of customer service at fast-food chains, other restaurants have consistently outperformed McDonald’s in those areas. In last year’s study, the average service time at the McDonald’s drive-through studied was 188.83 seconds, compared with 129.75 for industry leader Wendy’s Co.  Chick-fil-A had the top friendliness ratings. Out of the seven major chains in the study, McDonald’s was second to last in the “very friendly” ranking, just above Burger King.

So what are the root causes of the problem and what can they do about it?

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Managing multisite services

How do you grow a service business when growing means adding locations? That’s always been one of my favorite topics in service operations. It poses interesting challenges on what must be standardized and where flexibility should be maintained. The Globe and Mail has an interesting profile of  Toronto entrepreneur who has had to grapple with these issues as he has expanded his takeout restaurant from one location to four (Restaurateur creates winning recipe to manage multiple locations, Mar 8). They’ve gone the emphasize-standardization route.

Over the next seven years, Mr. Ross opened up three more Veda locations, two in buildings on the main University of Toronto campus, in 2007 and 2009, and one this past summer at University and Dundas, close to a group of hospitals. To manage across these locations, he pays close attention to as much standardizing as possible.

Since Mr. Ross believes food consistency to be critical, all the cooking is done in a central location. This means not only that food in all of Veda restaurants is cooked using the same recipes, but that it all comes from the same batch. The cooking takes place in the original, flagship Yorkville location and is distributed to the other locations each morning.

To ensure that the right food is at the right place at the right time, Mr. Ross needs to be able to estimate demand at each location on each day of the week. He has systems in place that allow him to predict that, and to tweak the prediction if there are events, such as large conferences, in the area. As well, he has a driver on call at all times who can deliver food to a location within 10 minutes if there is unexpected demand and something is running out.

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Domino’s in India: Meeting deadlines by turning away business

My colleague Sunil pointed me a neat article on Domino’s Pizza’s Indian operations.  While the chain long ago gave up on an explicit delivery time guarantee, their Indian franchisee Jubilant Foodworks still promises 30 minutes or the pie is free. That is not an easy promise to keep in, for example, an old neighborhood with streets running every which way and no really good maps. Still they manage to hit the thirty minute target remarkably often despite not having a whole of lot time for the actual delivery part of the process (Domino’s deadline to deliver, Financial Times, Jan 17).

With preparation, baking and boxing of pizzas taking 12-13 minutes, Indian deliverymen have 8-10 minutes to ferry their piping hot cargo to its destination – leaving a margin of just a few minutes. Riders cannot race to their destinations either: their motorbikes are modified to restrict their maximum speed to 45kph. That means riders must know every street, pothole, traffic light, choke point, construction site and police roadblock in their sectors of fast-changing, densely populated cities. …

Of all Domino’s deliveries in India, less than 0.5 per cent take more than 30 minutes to reach the consumer. Top managers monitor every store’s late rate closely. Rising pizza giveaways are seen as an indicator that a store is being overwhelmed by rapidly growing business – and that the area may be ripe for an additional outlet – or that local congestion is worsening considerably. “We watch that number like hawks,” Mr Kaul says.

Now there are obviously several steps in making these deliveries happen — from making sure that the kitchen staff is well-trained to scheduling enough delivery drivers. The most interesting part to my mind is the last thing hinted at in the quote above: How does Domino’s think about locating stores — and defining their service areas — so they can hit their delivery window?

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The rise of the part-time workforce

So how is this for effective workforce scheduling (A Part-Time Life, as Hours Shrink and Shift, New York Times, Oct 28):

At the Jamba Juice shop at 53rd Street and Lexington Avenue in Manhattan, along with the juice oranges and whirring blenders is another tool vital to the business: the Weather Channel.

The shop’s managers frequently look at the channel’s Web site and plug the temperature and rain forecast into the software they use to schedule employees.

“Weather has a big effect on our business,” said Nicole Rosser, Jamba’s New York district manager.

If the mercury is going to hit 95 the next day, for instance, the software will suggest scheduling more employees based on the historic increase in store traffic in hot weather. At the 53rd Street store, Ms. Rosser said, that can mean seven employees on the busy 11-to-2 shift, rather than the typical four or five.

Such powerful scheduling software, developed by companies like Dayforce and Kronos over the last decade, has been widely adopted by retail and restaurant chains. The Kronos program that Jamba bought in 2009 breaks down schedules into 15-minute increments. So if the lunchtime rush at a particular shop slows down at 1:45, the software may suggest cutting 15 minutes from the shift of an employee normally scheduled from 9 a.m. to 2 p.m.

This seems like every managers dream: Turn employees into on demand resources and pay for what is needed as opposed to what might be needed. The downside of this, of course, is that it shifts risk to employees who end up with both fewer hours per week and more unpredictable schedules.

“Over the past two decades, many major retailers went from a quotient of 70 to 80 percent full-time to at least 70 percent part-time across the industry,” said Burt P. Flickinger III, managing director of the Strategic Resource Group, a retail consulting firm.

No one has collected detailed data on part-time workers at the nation’s major retailers. However, the Bureau of Labor Statistics has found that the retail and wholesale sector, with a total of 18.6 million jobs, has cut a million full-time jobs since 2006, while adding more than 500,000 part-time jobs. …

The widening use of part-timers has been a bane to many workers, pushing many into poverty and forcing some onto food stamps and Medicaid. And with work schedules that change week to week, workers can find it hard to arrange child care, attend college or hold a second job, according to interviews with more than 40 part-time workers.

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Revenue management and fine dining

So what’s a good setting for applying revenue management? That’s always a fun discussion to have in class. The answers usually revolve around having some variation in demand (so the service isn’t always in high or low demand) as well as having a limited shelf life (so if we don’t sell it today we can’t sell it tomorrow) and relatively low variable costs (so there is significant room to adjust prices). Air travel, of course, fits this model and airlines have long been big users of revenue management techniques.

Restaurants, however, have rarely used much in the way of revenue management outside of, perhaps, early bird specials and prix fixe offerings. This despite the fact that restaurants have some fairly steep fixed costs and so should welcome a way to add more diners on what would otherwise be a slow night. According to the New York Times, that is now starting to change (When It Comes to Reservations, Time Is Money, Sep 5).

Mr. Mantica’s problem is one that all restaurants puzzle over. Costs (the staff, the food, the flowers, electricity) are pretty much the same whether there is a single diner or a full house.

While airlines and hotels have figured out how to vary prices to fill flights and rooms, restaurants’ methods have largely remained in the icebox age. Now, some restaurants are borrowing a tactic from other hospitality businesses and charging different prices for meals at different times.

The restaurants’ premise is that a dinner at 8 p.m. on Saturday should simply cost more than one at 5:30 on a Monday. “Restaurants are catching up,” said Sheryl E. Kimes, professor of operations management at Cornell’s school of hotel administration. They are betting that consumers, used to paying extra for holiday-weekend flights, V.I.P. seats at the theater or umbrellas on the street after the first raindrop hits, will also pay more for their Friday-night dinners out.

So how can firms do this without offending customers?

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Making fast food faster

How does a quick service chain increase sales when it’s tough to raise price or open new outlets? Process improvements! Or at least that is what the Wall Street Journal says (Restaurant Chains Feel the Need for Speed, Aug 29). The argument is that long lines scare off customers — especially at peak times — so faster  fast food means more sales.

Here’s what they say about Chipotle:

For Chipotle, it’s a top priority. “We’ve come a long way, but there’s still a long line, and there’s people turning away at the end,” said Co-Chief Executive Monty Moran.

Chipotle processed an average of six more transactions during the lunch hour last quarter, beating its 2007 record. The Colorado-based burrito chain is training its staff to be more prepared for the lunch rush, with extra trays of ingredients ready on the sideline, and to be attentive to customers so they don’t have to repeat themselves.

At each of its most efficient restaurants, Chipotle averages more than 350 transactions during the lunch hour—about one every 11 seconds.

A customer every 11 seconds is pretty impressive and certainly faster than I would have expected. Note that Chipotle’s approach makes sense since their service is very much human paced as orders are filled by scooping fillings and rolling burritos. The article reports that they have tried having a second register but found it generally made no difference. That they even tried that makes me wonder if whoever proposed that has ever eaten at a Chipotle since payment is clearly not the bottleneck.

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Texting to manage queues

A follow up to our last post on the ethics of jumping the queue when the queue is manged via a deli-style-take-a-number system. The problem there was that the ticket determining a customer’s position in the queue is not tied to a specific customer. If the ticket were only for a specific customer, then a customer abandoning the queue could not gift jumping the queue to one specific person (nor could she sell the ticket). Fast Company reports that there are firms selling solutions that tie a queue position to a particular person and they rely on something pretty much all of us have in our pockets, cell phones (So Long, Pagers: How WaitAway And Other Wait Apps Are Changing Restaurants, DMVs And More, Sept 2012).

alled WaitAway, it allows hostesses to input a customer’s name and number into an iPad or laptop, which then sends a text when a table is ready. Upon getting the message, the prospective diner can return to the restaurant or respond that she changed her mind. It was just what Chernow needed. He signed up, and within a month, walkaways were down by 30%.

WaitAway wasn’t the first wait app to hit the market; it wasn’t even the first Chernow looked into. More than a dozen exist, underscoring the extent to which a solid wait strategy is critical to building repeat business. “Americans equate waiting to wasting time,” says Richard Larson, an MIT professor whose study of waiting earned him the moniker Dr. Queue. Taking reservations is an ages-old wait-management strategy, and vibrating pagers became so popular after debuting in the 1990s that in 2005, restaurant point-of-sale system provider Micros acquired JTech, the largest producer of them, for an undisclosed sum. But app-based systems are arguably the best solution yet, because of their ability to keep businesses informed and in control while making the people waiting for service not feel like they’re actually waiting.

Having a list is a luxury for any restaurant, but as Chernow will attest, it’s not always a good thing. Mismanage waits and the crowd will disperse for keeps. Reservation policies are on the wane, because unless a restaurant takes a credit-card down payment, it can lose money if patrons flake. Pager systems help with organization but are pricey–units cost about $50 each, and people often leave with them–and have limited range.

And we once again see that no reporter can write an article on queuing and waits without checking in with Dick Larson.

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Mojitos and capacity

I always like fun stories about how shifting product mix affects capacity. Today’s example goes with another topic that interests me: rum-based cocktails! From the New York Post (No more mojitos!, Aug 7)

This summer, those behind the bar are taking a stand by deleting the cocktail — made with rum, muddled mint, sugar and lime juice — from the menu, or refusing to make it. The reason is twofold: The drink is simply too time-consuming to make, while at labor-intensive cocktail bars, it’s been deemed out of fashion.

“The [mojito] has always been the bane of bartenders, as it is a time-consuming drink to prepare well,” explains cocktail guru Eben Freeman, director of bar operations for chef Michael White’s Altamarea Group.

It’s a matter of basic economics, says Freddy Thomas, 41, a bartender at a bustling downtown spot where groups of tourists and high-heeled young women often order the drink en masse, much to his chagrin.

“Time is money. You can make six or seven other drinks in the same time [it takes to] make three mojitos,” he says.

So mojitos hammer capacity. But is simply refusing to make them the right answer?

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Fast food and brussels sprouts

It’s fast-food week here at the Ops Room. Today’s story comes from Wired looking at Lyfe Kitchen, a Palo Alto restaurant founded by ex-McDonald’s execs that they hope to expand nationwide (Former McDonald’s Honchos Take On Sustainable Cuisine, August). The twist is that rather than serving beef from industrial farms and deep-fried everything, they are aiming for higher end, sustainable fare.

Lyfe’s aim is not just to build a radically sustainable, healthy brand of fast food. The former Golden Archers hope to transform the way the world produces organic ingredients, doing for responsibly grown meat and veggies what McDonald’s did for factory-farmed beef. These days, the utopian vision of responsible agriculture is premised on a return to small and slow. If Roberts is right, though, we’ll have to swallow a paradox as preposterous as a vegan Whopper: The nirvana of eco-gastronomy may at long last be attained, but only thanks to the efficiencies of supply-chain management.

The following video gives an idea of what they are about.

So what does it take to pull this off?

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