Magic or Math? How to Turn Your Brand’s Drive-Thru into an Incremental Revenue Machine

Math Over Magic:

Every day, quick-service and fast casual restaurant brands across the country all do the same magic trick. At hundreds of thousands of drive-thru locations, they turn cars, and the hungry people in them, into cash. Pretty incredible, right?

This magically convenient channel isn’t new; drive-thru restaurants have been around for over 100 years , but fundamental changes in post-pandemic guest behavior have made getting it right more important than ever for enterprise restaurant brands. In a world where drive-thru can account for more than 50% of total revenue at some QSR and fast casual concepts, feeding guests in their cars isn’t just a neat trick, it’s the whole show.?

So what’s the catch? Brands can just install some drive-thru windows, outdoor menu boards, and well-designed lanes at their locations and presto! you grow same-store sales (SSS), right?

Not so fast. Not having the right scalable tech strategy, siloed operations across customer channels, potential bottlenecks in process during peak times, and lack of alignment between marketing, tech, and operational functions are a few factors that should be considered when building and growing a successful drive-thru channel.?

When it comes to drive-thru ops, the best-performing enterprise organizations know that making real, sustainable revenue gains from drive-thru takes more than magic. It takes math.?

Ready to stop hoping for magical solutions to drive-thru revenue woes and do some cold, hard calculations? Keep reading to learn:

• Why enterprise brands struggle to drive real incremental revenue with drive-thru
• Why your team may be thinking about revenue all wrong
• Battle-tested frameworks that may help your drive-thru operations better? generate? incremental revenue

Why Enterprise Brands Struggle at the Drive-Thru Window

When it comes to growing revenue, most enterprise restaurant leaders keep two questions in mind: how to find new customers and how to drive more frequent, larger transactions from existing guests.?

Add drive-thru to the mix, however, and QSR and fast casual brands face an additional challenge. Instead of simply finding new and repeat customers, organizations with major drive-thru operations must also ensure that they have the front- and back-of-house capacity, and more importantly, the technical and operational ability, to accommodate the influx of orders during peak times. (There’s nothing worse than paying to acquire a new customer only for them to abandon your drive-thru line or leave having had a terrible, slow experience.)?

In other words, increasing drive-thru revenue starts with increasing throughput (# of orders/unit of time). Throughput model is illustrated below in figure 1.?

What often gets in the way of industry-leading drive-thru throughput for even the best brands? Our research suggests it can often be traced back to not having the right goal alignment, disjointed tech stacks,? lack of integrations across channels, and/or lack of scalability.???

Solving the drive-thru throughput problem across locations is one of the keys to driving sustainable, incremental revenue over time. But before we get into solutions to help maximize throughput, it’s important to define what “incremental revenue” actually means in the first place.?

Figure 1: Enterprise Restaurant Throughput Model.

Here is a quick deep dive into the model above. At a high level, this model argues that top line sales growth in a digital-first market tends to correlate with (1) higher customer loyalty, (2) a digital first operating model, and (3) increasing bottlenecks due to channel saturation. Hence, according to this model, as brands push to add SSS growth year over year, they need to find ways to maximize throughput (remove bottlenecks) across core channels. This requires alignment across core functional leaders, as well as a scalable and micro-services tech stack that allows brands to serve customers and grow.?

Why Incremental Revenue Matters

Incremental revenue can be defined as new revenue that accelerates a business’ top line growth, when measured over a defined time period. For example, if sales grew from $100 last year to $101 this year, $1 increase can be attributed to incremental revenue. (Though we hope you’re doing a bit more than that…)

Note: It's important to keep in mind that incremental revenue is not the same as profitability growth. Profitability, in simple terms, is revenue minus expenses. A business can have incremental revenue but profitability may not improve if expenses also grow. Similarly, a store may improve profitability without any increase in overall revenue.

When it comes to an enterprise restaurant brand’s performance in the market, that incremental dollar (and the timeframe in which you earn it) is what separates market leaders from laggards.?

In basic restaurant operations, additional revenue can be broken down into the following equation:

# of Transactions x Avg. Check Size

Increasing overall revenue means finding levers that will allow your brand to:

1. Increase number of transactions, and/or
2. Increase check size per transaction

Successful examples include increasing the number of in-store transactions through higher foot traffic, increasing drive-thru traffic, driving higher check size via new offers, and increasing incremental digital (app/web) orders.

Pulling one of these levers successfully is a win. Pulling these levers without incurring higher costs is a strategy. Pulling these levers without higher costs in a way that’s hard for competitors to follow is how iconic brands are built.

So what does it take to boost incremental revenue via drive-thru?

Understanding Drive-Thru Throughput?

In order to identify and prioritize strategies to grow drive-thru as a revenue channel, we believe that brands need to holistically solve for one thing: eliminating constraints on throughput.?

Ultimately, that means:?

1. Increasing drive-thru revenue (number of transactions and/or check size), while
2. Decreasing time (or maintaining time) per transaction

Throughput = Drive-Thru Revenue (output)? /? Unit Time (input)

Any solution designed to improve your drive-thru operations and solve for throughput must target one or both of these areas. (At the end of the day, you want cars moving faster and the people in them spending more.)

Making World Class Drive-Thru Throughput a Reality: Pitfalls & Opportunities

Common Pitfalls to Avoid

Before we dive into some levers a brand can pull to drive internal drive-thru revenue, here are a few pitfalls that leaders should avoid:

1. People: Thinking that simply training your staff to take orders faster will drive more transactions - given the fast pace of quick service operations to meet increasing customer demands, even the best trained staff lose efficiency over the course of a shift and are limited by the drive-thru technology in their hands and kitchen behind them.?
2. Process: Solving for ideal drive-thru operations, but not addressing the peak time rush? - bottlenecks are the worst and systems often break down when demand is the highest.?
3. Tech: Using technology for the sake of technology, versus solving a problem - new tech is rarely a silver bullet and is only as good as the people and processes around it.?

These pitfalls all have the same core issue in common: believing that solving for people, process, or tech alone can solve for drive-thru throughput. Our observations suggest that many brands spend time, effort, and capital in the hopes that a single silver bullet can solve for drive-thru inefficiencies.?

As we’ll see below, our research suggests that the best opportunities to boost drive-thru throughput and incremental revenue don’t just focus on people, process, or tech individually. Instead, the most effective solutions are based on all three working together.?

Key Opportunities to Leverage: People, Process & Tech?

For many brands that avoid the drive-thru pitfalls above, the combination of people, process, and tech should create a series of key opportunities to increase the number of transactions and ticket sizes across your brand’s drive-thru operations.?

Revenue Goal: Increase number of transactions

Lever #1: Increase the number of cars that can get through location drive-thru.?

Solutions

• Tech: Adding additional order intake points, for example, higher app orders
• Process: Adding additional drive-thru lanes
• People & Tech: Tech-enabled line busting (with handheld devices), where a team member takes the order by walking up to a car while in drive thru

Lever #2: Speed up drive-thru journey.?

Solutions

• Tech: Adding a KDS to remove time from order input to prep station
• Tech: Adding a Voice AI solution to a multiple drive thru lane solution, so that simultaneous orders can be placed
• Process & Tech: Eliminating order intake or check-in at the drive-thru for digital orders via geofencing technology etc.?
• People & Tech: Removing friction across ordering journey by optimizing the menu, or adding conversational ordering, ultimately reducing team member POS input time?

Revenue Goal: Maximize check size per transaction

Lever: Increase upsells per transaction.?

Solutions

• Tech: Suggesting upsell items on digital drive-thru menu boards, app/order ahead channels
• Process: Menu structure that provides more value for the price
• Process & Tech: Adding a voice AI solution to the drive thru ordering experience, which will suggest an upsell
• Process & Tech:? Upsell prompts at checkout
• People: Training and incentivizing staff in drive-thru to always suggest an upsell item

Next Steps: Where Should Your Brand Start?

We’ve thrown a lot at you, so let’s review.?

We know drive-thru is a critical channel for enterprise QSR and fast casual brands to drive growth and serve the needs of today’s guests. We know that it’s not enough simply to boost growth, but that brands need to focus on driving incremental revenue via drive-thru without massive cost increases or cannibalizing existing order channels. And finally, we know that, while enterprise QSR brands face serious pitfalls, there are significant opportunities for those that bring people, process, and tech together to increase the number of drive-thru transactions and average check size.?

We also explained our belief? that abrand’s journey towards drive-thru revenue nirvana was about frameworks and math, not magic, so, if you agree with our hypotheses,? where might you start?

Here’s a quick checklist to get your team started:

• Align on strategic business goals and key metrics for your drive-thru business
• Identify major operational bottlenecks and areas to improve drive-thru throughput
• Measure potential ROI of solutions to key drive-thru bottlenecks (tech, people, process)
• Prioritize solutions based on Effort and Return using ROI Matrix below

• Lay out Throughput Improvement Roadmap based on internal capabilities and investment
• Employ rapid Test & Learn methodology to track solution progress and throughput improvement at initial locations

As you can see, turning a brand’s drive-thru operations into a money machine takes a lot more math than magic. Think of the tips and frameworks above as a starting point and a jumping off point on your brand’s journey up the Enterprise Throughput Model we discussed above.? Execute correctly, and maybe your drive-thru operations will feel a bit more magical after all.?

Tanvir Bhangoo:

Tanvir Bhangoo is VP of Enterprise Solutions at Toast where he leads solutions and consulting teams that help enterprise brands make the right strategic and tech stack decisions for their businesses. Prior to Toast, Tanvir led technology and digital teams at multiple leading restaurant brands including as VP of Tech at Freshii and Director at Restaurant Brands International (Burger King, Popeyes, Tim Hortons).?

About Toast

Toast [NYSE: TOST] is a cloud-based? digital technology platform purpose-built for restaurants of all sizes. Toast provides a single platform of software as a service (SaaS) products and financial technology solutions that give restaurants everything they need to run their business across point of sale, operations, digital ordering and delivery, marketing and loyalty, and team management. Delphi by Toast provides state-of-the-art drive-thru and digital menu board solutions to leading QSR brands at tens of thousands of sites globally. By serving as the restaurant operating system across dine-in, drive-thru, takeout, and delivery channels, Toast helps restaurants streamline operations, increase revenue, and deliver amazing guest experiences.

Interested in sharing your thoughts or learning more??

Drop us a note at:?

[email protected] / Tanvir Bhangoo, VP Enterprise Solutions

[email protected] / Kelly Esten, SVP & GM Enterprise?

For more information, visit www.toasttab.com .

This information is provided for general informational purposes only. Toast does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Toast does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation. Individual results will vary.?