This column was originally published in Franchise Times, sister publication to Food On Demand.
I love stock market analysts. These maniacs listen to every earnings call and pour over every release. Then folks like me can read a report packed with charts and data and feel like we aren’t gambling away our hard-earned money in the great international slot machine.
Economists, on the other hand, ugh. Gazing down on human behavior as if it were an untidy mess that must be reduced to the lowest common denominator. Where the analyst dives into the complexity and examines every basis point, the economist compacts whole industries into some oracular tidbit.
Still, one of these economists caught my attention with a paper titled “The Curious Surge of Productivity in U.S. Restaurants.” Curious? Surge? Has this tweed-jacketed number cruncher uncovered some arcane knowledge? And at the same time, William Blair, an investment banking firm, released its quarterly summary of the restaurant industry, “The Dining Download,” which showed a record high for both restaurant interactions and off-premises dining.
Between the examinations, there is a spotlight on two facts: Off-premises is better for restaurant productivity, and it’s here to stay.
Economists at the University of Chicago looked at productivity, which shot up in the restaurant space by 15 percent during the pandemic. And while there are all sorts of charts with a disconcerting drop and bounce across every facet of life in the pandemic era, “This surge has persisted even as many conditions have returned to pre-pandemic levels,” wrote the study’s authors.
“Anytime you see productivity growth is good news all around,” study author Chad Syverson told FT sibling publication Food On Demand. “We’re seeing more meals served for every worker hour. It’s a true efficiency gain.”
The key correlation was pulled from cell phone location data, during and after the pandemic. The authors saw a spike and an ongoing plateau of very short-term visits, i.e., people who spent 10 minutes or less in a restaurant. Those visits, the economists assumed, represented pickup and delivery orders. These “dwell times” spiked along with productivity, remained plateaued and “did not go back up to pre-pandemic levels even when other economic conditions re-normalized.”
Across 100,000 restaurants in the study, this correlation between shorter dwell times is so strong that the authors wrote it’s “large enough to explain virtually the entire surge in restaurant productivity.”
The sage wisdom of our economist oracles: more off-premises dining means vastly higher productivity per restaurant employee.
As they are wont, the equity analysts at William Blair added a slew of detailed context around that nugget.
Can’t ignore the tech
In “The Dining Download,” analysts showed diners were interacting with restaurants about 13 times per month, a 30 percent increase from June 2024 and the highest level in the survey’s three-year history.
Analysts said this shows restaurant activity remains healthy despite whatever is going on in the world today. Perhaps going to a restaurant or just not cooking offers a bit of an escape. Sixty percent of survey respondents said they were utilizing a restaurant at least a few times per week. That’s up from 57 percent in the prior survey.
Spending, however, was a mixed bag. The overall average dipped 9 percent this quarter, with “sharply lower spending for consumers with annual household incomes between $50,000 and $100,000, partly offset by increases across other household income cohorts.”
Another survey high: delivery. The average respondent to the survey of more than 500 diners showed 2.6 delivery days per month. Drive-thru represented 3.6 occasions, and takeout represented 3.1 occasions. But the most frequent occasion was still in-person dining with four occasions per month.
William Blair analysts shined a light on what it takes to unlock and maintain a high level of productivity through delivery and takeout. While the word “technology” was used exactly once in the economic paper, it’s clear productivity gains required a lot of technology and a hearty handful of software fees.
First, the use of loyalty programs made an incredible jump year over year. In the latest data, 78 percent of respondents said they actively participate in loyalty programs, up from 52 percent in June 2024. For those under 60 years old, that number rises to 82 percent of diners actively (that’s the key word there) participating in a loyalty program. These programs were “at least somewhat influential on their restaurant decisions.”
It’s patently obvious that a strong loyalty program drives visits and spending (and hopefully profit). But for this relatively new portion of highly productive off-premises visits, it’s even more powerful.
At this point, much of the data and sentiment shows the pandemic trained people to utilize these channels as something new and as a replacement for cooking at home. But with a strong loyalty program, even if a diner isn’t going out, they are engaged in their email, in their notifications and texts.
The incredible investment in loyalty via technology and staff hours leads to another shocking bit of data.
According to William Blair analysts, “the most prevalent ordering method this quarter was directly through a restaurant’s website or digital app.” That should be in all caps, followed by several exclamation points. In all, 43 percent of respondents said they usually ordered directly from the restaurant’s website. That’s followed by delivery apps (with 36 percent of orders for delivery and 15 percent for takeout).
That is astonishing, and it’s an ongoing trend that will be interesting to track as every restaurant executive continues to highlight technology spending as a top priority. Back when delivery exploded, it was logical to assume the Silicon Valley gazillionaires would maintain a stranglehold on delivery. But here we are. The loyalty and first-party portal flywheel is driving more people to this highly productive occasion with a less painful margin hit.
Between our dear analysts and their stodgy counterparts in academia, there is consensus that the historically high portion of off-premises is here to stay, and it means a vastly higher rate of productivity. That rare confluence shows, yet again, that restaurant leaders should continue investing in an incredible off-premises experience and point their marketing and loyalty dollars in that direction.
Nicholas Upton has reported on retail and restaurant technology for more than a decade. His Tech Stack column aims to distill complex ideas into actionable insights. Send interesting tech topics to [email protected].
