How Fast Food Chains Use Data to Test New Products and Drive Sales

In the days of Cheetos-mac and cheese mashups and boxes of chicken that double as phone chargers, it can seem as if fast food restaurants introduce new products on a whim. But there's actually an extensive decision-making process behind even some of the most mundane-seeming aspects of a fast food company's business — especially if it involves technology in any way.

Thanks to software testing and data analytics, fast food chains can test the financial impact of a menu item before it rolls out nationwide. Lately, though, drive-thru chains are utilizing software to test a more new-fangled concept: How tech can impact sales and, in some cases, replace human workers. Turns out, consumers seem to like the idea.

Take McDonald's menu boards, for instance.

Menu boards change automatically depending on the weather.

At a company shareholder meeting in May, CEO Steve Easterbrook touted the chain's ability to "merchandise different items in different day parts and according to the weather." That's because the menu boards are digital — in the morning, menus highlight breakfast items, while burgers and chicken sandwiches make their debut on the screen during lunch hours. But the menus can even change based on whether its rainy (because people tend to crave specific foods during bouts of bad weather) or sunny.

DIGITAL MENU BOARDS

Digital menu boards do more than just help sell hamburgers in the evening — their very existence actually sells more food, in general. "When a chain puts in a digital menu board, there's a lift in sales due to that," says Jonathan Marek, Senior Vice President of APT, a software and consulting company. "It makes the counter area look nicer so it's almost like a mini-remodel. Of course, restaurants can also use the digital menu boards to highlight certain items more than others. Basically, they can test menus much more quickly and more often."

APT helps retail and restaurant brands utilize data analytics in their businesses. The company works with a number of clients in the fast-food space, including Dunkin' Donuts, Starbucks, and McDonald's.

Data analytics has become integral to the success of drive-thru restaurants. Marek says it can be used in a number of ways — to test new menu items, to determine whether kiosks should be put on tabletops, to facilitate mobile ordering. In short, data can solve a lot of "what-ifs" — Does a new menu drive more lunch business? Is it profit positive? Am I stealing potential dinner profits? What types of items are being ordered?

Marek says APT has been testing high-tech digital menu boards for some time now. "Most of it is just traditional: What order should I list things in? How do I categorize it?" Though some chains have worked to target their menu boards to specific situations, Marek says it isn't quite a big as a trend as he thinks it can be. "There ought to be a lot more of it. Weather-driven stuff completely makes sense. Also localization: should I feature chicken items more in California, beef more in Iowa?"

Digital menu boards are part of a larger trend in fast food, says Marek: customization.

CUTTING COSTS

"It sounds jargony, but digitization enables customization. When a company uses a kiosk, or an app, it enables more customization." One of the companies to make the most notable use of kiosks is McDonald's, which has worked with APT in the past.

Automated systems allow restaurants to cut costs by relying less on human labor.

Marek says many of APT's clients are now testing kiosks on tables and even in drive-thrus. In addition to being trendy and allowing for customization, he acknowledges that automated systems allow restaurants to cut costs by relying less on human labor.

Though the notion of robots serving hamburgers might seem far-fetched, consumers aren't that turned off by technology at fast food restaurants. According to a study conducted by Tillster (the company behind both Burger King and Taco Bell's apps), the increased use of self-service kiosks in-store would lead to shorter lines and, in effect, more customer visits.

On average, when visiting fast food restaurants, customers spend nine minutes ordering and waiting in line for their food and 19 minutes enjoying the food. To put it another way, one-third of the fast food experience is spent waiting for food. But consumers aren't always willing to wait, especially at restaurants that claim to be "fast."

According to the Tillster study, "only 36 percent of people would wait in a line at counter longer than five people." The other 64 percent say they would simply leave. Kiosks, though, have the potential to alleviate lines. Many of the respondents in the study even said they'd choose to order from a kiosk instead of a human, if lines were long enough.

"80 percent of people would choose to order from a self-service kiosk if line length is up to five people or longer," says Hope Neiman, Tillster's chief marketing officer.

McDonald's has called its use of self-ordering, Create Your Taste kiosks "progress," with CEO Steve Easterbrook saying it's one of the ways the company wants to "reflect customers' changing demands."

Wendy's has made similar moves, and has announced it will begin offering self-serve kiosks to many of its franchisees later this year. The tech aspect is new and exciting, of course, but it's safe to say the implementation of kiosks is about more than just meeting the demands of customers.

OFFSETTING LABOR COSTS

Many argue that the use of kiosks is fast food's attempt to rely less on workers and more on technology. "When wages went up a year ago, the answer was to just take prices and hike them a bit," says Marek. "Now, it's become a big question. I think that's why you see this disproportionate interest in things like kiosks and robots and whatever."

But Tillster executives note that installing kiosks doesn't necessarily lead to less human workers. "None of our clients have seen a reduction in labor after implementing kiosks," says Perse Faily, Tillster's CEO. "When kiosks take orders, you then must work to move employees to other areas, like the front of the house."

Faily says there are a number of upsides to installing kiosks that have little to do with replacing a human workforce. Some kiosks, she notes, will even "remember" a customer.

Kiosks lead customers to spend more.

"This 'remember me' technology lends an element of personalization. If you log in, the system can track your identity and purchase history." So, if a customer orders a chicken sandwich, then visits the same fast-food restaurant the next week, the kiosk might present them with a larger variety of chicken options.

Faily notes that one fast-food brand she worked with turned to kiosks and almost immediately noticed that customers began customizing their orders in new and unique ways. "We started using kiosks and, suddenly, customers began to realize all the options they had. They hadn't realized the could put jalapeños and sour cream on a burger before that," says Faily.

Perhaps the most convincing data point behind Tillster's research is that technology — specifically kiosks — actually lead customers to spend more.

INCREASING PROFITS

"Across age groups, people are more comfortable with technology. There's been an evolution," says Perse Faily, Tillster's CEO. "If we were having this conversation five or six years ago, the level of comfort would be a lot different."

People are so comfortable, in fact, that they often order more food from a kiosk than they would from a human worker. "We worked with consumers in a focus group who said they were much more comfortable adding that shake, or ordering a larger size, if they didn't have to order it from a human," says Faily.

According to Tillster's research, kiosks can deliver a 30 percent larger check than is typical at most fast-food restaurants (i.e. those staffed strictly by humans). It might seem counterintuitive, but kiosks are surprisingly consistent salespeople.

"When you walk up to a kiosk and begin the ordering process, it will present additional up-sells," says Faily. "The person behind the counter may forget to ask whether you want a large soda instead of a small, or if you want to add dessert. The kiosk doesn't forget."

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