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.
Other chains have taken different approaches. McDonald’s has relied more on technology and employee scheduling.
But restaurants have to make sure their kitchens can handle the faster flow. Some shift employees’ schedules from lull periods to busier times, while others add hours to their shifts, which costs more in labor, but often pays off.
McDonald’s is scheduling more workers during busy times and trying to maximize the use of its kitchen equipment, such as using both sides of the sandwich-preparation table.
“How many people we have on the floor during those peak hours and where are they positioned is very important to driving more transactions,” Chief Financial Officer Peter Bensen said on a conference call. The investments have helped McDonald’s increase sales in those stores by as much as 5% during lunch hour.
Two things to note here. First, this is a nice example of how process changes — in some cases relatively minor ones — can have a real impact on business. Second, for that nice example to make sense, one actually has to believe that sales at quick service restaurants are sensitive to waiting times. Intuitively that should be true, but there is also research to back this up. Gady has a paper that looks at this in the context of drive-thrus. He and his co-authors find that a seven second drop in the average waiting time can increase a chain’s market share by one percent. So speeding up the line even by a small amount can make a real difference.
UPDATE: Something from the New York Times suggesting that all tweaks to speed the line may not be welcomed by all customers (Is a Penny Rounded a Penny Lost? Ask Chipotle, Aug 28). Apparently, Chipotle has at times rounded customers tabs to the nearest nickle to help speed people through the line but this has not been uniformly appreciated.
I called a Chipotle spokesman, Chris Arnold, who said the chain uses rounding in a few “high volume” markets, including New York, New Jersey and some locations in Boston. The idea is to reduce the time cashiers spend doling out pennies, to keep the lines moving quickly. (In some locations, he said, “there are lines out the door as soon as we open.”) The total, he said, was previously rounded either up or down, to the “nearest nickel.” The result generally was a wash for the restaurant, he said. And for most customers, he said, “I think generally it’s been a nonissue.”
But a few penny-pinchers (my description, not Mr. Arnold’s) did object. So as of August, he said, the chain is only rounding down. (Also, receipts should now have a line showing the impact of the rounding math.) He said he didn’t know of other outlets that round receipts.