Phoning It In: Digital Ordering

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Mobile order and pay-ahead apps boost sales and customer loyalty – but restaurant operators must address Mobile order and pay-ahead apps boost sales and customer loyalty – but restaurant operators must address the legal issues that come with digital ordering, too.

Only a few years ago, customers relied on restaurant mobile apps primarily to find a nearby location or to browse a menu. But now, they’re reaching for their phone for a whole lot more.

“As a growing number of restaurant chains move into the mobile/digital space, the features available to guests are become increasingly complex,” according to Lisa Jennings, West Coast Bureau Chief for Nation’s Restaurant News. Guests are turning to digital ordering - mobile apps to order ahead, pay, and skip the line. They can choose to have meals delivered, order and send gift cards, study nutritional information on menu items and track their loyalty rewards points.

All of these options offer lucrative avenues for boosting business and customer loyalty. But as with any new innovation, digital ordering can also pose some legal risks. “Restaurant operators need to be careful to address privacy issues inherent in mobile payment,” said eCommerce attorney Darin M. Klemchuk of Dallas-based Klemchuk LLP. One way to reduce risk is to have comprehensive privacy policies and terms of use agreements with customers in place. “These agreements are relatively inexpensively created and maintained,” said Klemchuk. “Because eCommerce law changes frequently as technology develops, these agreements should be reviewed periodically.”

Restaurants that do tackle these privacy issues, and design their mobile apps for digital ordering well, are reaping the rewards.

“Digital ordering leaders are enjoying larger than average order sizes, increased visit frequency, and guest satisfaction,” said Noah Glass, CEO of Olo, a New York based provider of customized digital ordering systems for restaurants.

With their focus on takeout, pizza providers have chalked up the most digital ordering experience, first in online and now mobile ordering. According to Pizza Marketplace, it took 15 years for Papa John’s, Pizza Hut and Domino’s to go from zero to 50 percent digital. Now, all three brands see more than 50 percent of their sales coming through digital ordering (where customers order from a personal computer or smartphone) versus analog ordering (customers order over the phone or in person in the store) .
Olo’s Noah Glass believes that the rest of the restaurant industry – within the spectrum from quick service to casual dining -- is well on track to achieve that 50 percent digital market share by 2022, in half the time that it took pizza to get there.

“If you think about what that entails, a shift in that non-pizza limited service base, which is around a $200 billion annual sales space, to 50 percent digital means that $100 billion is going to shift from where it is today to brands that are doing digital ordering well,” Glass said.
Glass adds that when consumers shift to digital ordering, they tend to visit about 30% more often. A guest who visited three times a month may start coming in four times a month, for example. And often, customers spend more when loyalty incentives and upselling are incorporated in the mobile app.

“When you combine these two things and you think about someone coming in extra times per month and in all of those visits spending 25 percent more, you have an incredibly powerful platform there,” Glass said.

About the firm: 

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX. The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights. The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.