Chick-Fil-A Turns its attention to catering
Written by: Alicia Kelso
This story was originally published on Forbes.com.
Chick-fil-A has mastered the art of unit economics – nearly doubling McDonald’s average unit volumes despite being closed on Sundays. The chicken chain has no intention of resting on its laurels as it turns its attention to high-demand off-premise channels.
Chick-fil-A recently announced plans to open new, “first of its kind” prototypes in the Nashville and Louisville markets. Unlike the company’s traditional restaurants, these locations have no dining room and no drive-thru. They are the company’s first restaurants designed specifically for delivered meals – both for catering and small-order, on-demand delivery – and they will be staffed with owner/operators and hired team members, as well as catering delivery drivers.
Luke Pipkin, senior platform lead of innovation at Chick-fil-A, said the goal with these new units is simple: to provide the brand’s experience when and where people want it. Such is our way of life now – busy consumers are increasingly demanding hyperconvenience. Take, for instance, food delivery. As much of the restaurant industry has experienced flat or declining sales, the delivery channel has posted gains in both visits and sales throughout the past five years, according to The NPD Group. Warren Solochek, NPD’s senior vice president of industry relations, said delivery has evolved into a must-have, versus just a nice-to-have.
A recent study conducted by CHD Expert underscores the material impact from off-premise channels this year alone:
- Takeout for pickup is projected to generate $124 billion in sales this year
- Takeout with direct delivery from a restaurant: $32 billion
- Takeout with delivery from a third-party delivery company: $13 billion
- Catering for pickup or delivery: $40 billion
Delivery is just one piece of a much bigger puzzle. Off-premise sales overall are estimated to account for 37% of total restaurant sales – or $209 billion – this year, according to the study. That number is expected to rise to nearly 50% by 2023.
For Chick-fil-A, this trajectory illustrates the need to at least explore these fulfillment-like units, and Nashville and Louisville are the perfect markets to start.
“Louisville and Nashville are fast-growing markets for us. There is a great history of strong growth for catering business in both cities. Both locations are conveniently located to their downtown areas and are within close proximity to major highways for deliveries to businesses, hospitals, college campuses, etc.,” Pipkin said.
Chick-fil-A has offered breakfast, lunch and dinner catering options for a while now, (promoting the service on it’s Chicken Wire blog in August 2017) but the runway for growth in this channel is still “huge,” according to Pipkin.
“Catering is an area of our business that we are working to generate awareness around. Many of our customers just don’t know we have catering options,” he said. “We’ve learned that 14% of our customers experience Chick-fil-A for the first time through our catering, and QSR catering represents 30% of overall off-premise catering, so we do believe this is a huge opportunity for the brand.”
Though the prototypes not only provide the chain an opportunity to leverage in-demand trends, they are also a good way to preserve the brand’s high customer service standards. The staggering growth of takeout, delivery and catering has squeezed back-of-the-house operations and, in some cases, slowed or compromised service.
“We are hoping these new locations alleviate some of the stress that our other restaurants in the area feel on a daily basis,” he said. “Our restaurants are incredibly busy and our hope is that this new concept will provide both capacity and complexity relief.”
Chick-fil-A isn’t the only restaurant company experimenting with this type of non-retail, commissary-type of concept, according to Erle Dardick, CEO of MonkeyMedia Software, a cloud platform for off-premise business.
“We’re getting into a next generation phase in the marketplace where these brands are realizing they can leverage centralized locations designed for their high-volume takeout, delivery and catering businesses,” he said. “Traditional restaurants were never designed for this added workflow.”
Grocery and convenience stores are also building out this strategy to keep up with fulfillment obligations as consumers increasingly drive an Amazon-inspired, stay-at-home economy.
“Restaurants are being relegated into wholesale operations. What’s happening is that restaurant operators are finding themselves where they have more volume than ever coming from all different types of channels,” Dardick said. “The only way forward is to take control of their off-premise operations.”
The Chick-fil-A prototype, he adds, is the future model of restaurants.
“We’ll see this in every market from most brands by 2020,” Dardick said. “It won’t replace traditional restaurants – it will be synergistic and complementary. But the footprint for traditional restaurants will retrench.”