Online Ordering: The Point of Sale Has Left the Building

Real estate brokers and franchise consultants have repeated the phrase "location, location, location" for nearly 100 years. Last century, the phrase meant the corner of Main and Main, the well-anchored strip mall, the most affluent ZIP Code. This century, the definition of "location" is less distinct. Thanks to the Internet, the coveted address has moved from 1234 Main Street to ".com."

Restaurants by their very nature are bound to a physical location, but smart restaurateurs are expanding the boundaries of their ordering systems beyond their four walls into the computers and smartphones of customers, through self-service ordering. The larger trend to self-service already has fundamentally altered customer and consumer behavior: ATM banking, pay-at-the-pump gas, airline self check-in, and online movie tickets, for example.

What makes self-service at restaurants unique is that mobile phones allow self-service ordering to "place-shift" the customer to the benefit of both the customer and the restaurant - resulting in faster, more accurate service and improved throughput capacity. Also called online ordering, self-service ordering allows customers to view a menu, select a convenient location, custom-build their order, prepay with a credit card or gift card, and schedule their own pickup time - all from their smartphone or computer.

The idea is simple and the results are powerful. If you - or your restaurant system - are considering new ways to grow your top line, consider the following benefits of self-service ordering:

1. Better throughput

Through self-service ordering, a restaurant's POS system becomes ubiquitous: it is on a potential customer's desk, in their pocket or purse when they walk down the street, even in the lobby of the restaurant. Further, self-service ordering opens up more channels for order entry without requiring additional employees. Instead, iPhones, Androids, BlackBerries, and laptops act as hundreds of cashiers - without labor costs - sending orders efficiently to the back of the house.

After an order is placed through an online system, it enters the POS system - but is held until the exact time necessary for the customer's pick-up time to be honored. If a customer wants to pick up their burger at 11 p.m., and it takes 7 minutes to prepare it, the online order will enter the POS system at 10:53 p.m., and the back-of-the-house employees can have it prepared and ready for the customer at their desired pick-up time. This limits any burden on management or the kitchen staff to remember the order. And because the order is prepaid, it means that the restaurant manager does not have to worry about losing money in the form of wastage - food that has to be chucked because no one came to pick it up and pay for it.

2. Increased average check size

When customers order from their smartphone or computer, they can go at their own pace. If dining in, they are not pressured by a long line or an impatient cashier. If calling in, they are not left waiting on hold or struggling to communicate order details to a busy employee.

In OLO's experience, this extra time leads to extra sales. Most clients have seen a 25 percent jump in average check size after implementing self-service ordering, an increase attributed to the ease of ordering, broader marketing, and, with some systems, suggestive selling logic built into the software. In a recent study by Cornell University's School of Hotel Administration on the state of online ordering, restaurant respondents also reported "considerable increase in order frequency" (The Current State of Online Food Ordering in the U.S. Restaurant Industry, Sept. 2011).

Finally, self-service ordering makes group ordering a snap. For example, Bullritos, a burrito chain based near Houston, uses a platform that allows customers to order with a group using Facebook. Customers invite friends or co-workers to order as a group through a status update. The invitees click on the link posted in the status update and check off their favorite lunch items from the restaurant's menu. The invitees items are then added to a group order, the order is submitted online and - voila! - lunch for the office.

3. Increased marketing ROI

A recent study by BIA/Kelsey found that 97 percent of customers use the Internet when researching local buying decisions. Restaurateurs are faced with nearly infinite ways to grab this customer: SEO, SEM, Google AdWords, Facebook Ads, Citysearch, Foursquare, Twitter, etc. But that customer is still far away from dining in the restaurant. They will need to peruse reviews, view locations and hours, read through the menu - and then do the same for the competitors. Online ordering cuts out the browsing. When customers click on a restaurant's branded ordering site they are transported from on-the-couch-searching-the-web to first-in-line-at-the-register, ready to order up their lunch, dinner, or late-night snack.

Online ordering can also assist restaurants with customer loyalty campaigns. When a customer places an order through the self-service ordering platform, they are offered a chance to "opt in" to the restaurant's email database program. Since most customers choose this option, and since they will love the ease of online ordering, they become loyal customers willing to listen to emailed offers and promotions. On average, OLO's customers add 250 to 500 new email users per location. Further, the online ordering platform keeps a detailed account history of online orders for each customer, so savvy marketers can target customers with just-right promotions.

4. Integrated POS systems

Franchise organizations often struggle with implementation of promotions or new systems because POS systems are not uniform across all restaurants. Here, too, online ordering can help. Since most online ordering systems "sit on top" of the POS, they easily integrate multiple POS providers to provide a unified consumer-facing platform - perfect for franchised restaurant chains with a heterogeneous POS landscape. Nearly any Windows-based machine can run the self-service order software needed to get started, and many online ordering providers are compatible with widely used POS providers that support self-service ordering integration.

In the end, the most important benefit to any restaurateur's decision is ROI. Will the return substantially outweigh the cost? Here, too, online ordering delivers. In the Cornell study, half of respondents said that the ROI of online ordering was exceeding their expectations, and another 45.5 percent said that it had met their expectations for ROI. Add it up? Nearly 100 percent of restaurants polled believed online ordering was worth it. Your customers are coming to expect the convenience and control of self-service ordering. Which means it's high time to adopt self-service ordering, lest your customers choose competitors who already have.

Noah Glass is founder and CEO of OLO Online Ordering, which provides self-service ordering software to the foodservice industry. Clients include Five Guys Burgers and Fries, Cold Stone Creamery, Sonic Drive-In, and more than 150 other restaurant brands. OLO recently became the exclusive way for large restaurant chains to join GrubHub, the nation's top consumer ordering service in more than 75 major cities and on 300 college campuses. Before founding OLO in 2005, Glass spent more than 15 years in foodservice, as a cashier, server, bartender, and delivery driver. Contact him at 646-723-4335 or noah@olo.com