99 restaurants and Applebees

Bad:99 Restaurant andApplebees
Applebees has definately made a bigger deal out of this little marketing ploy than the 99 Restaurant and Pub has by spending a lot more money on their advertising. This is evidenced by the sheer number of television commercials. Applebees runs them all the time, but I have yet to see one for the 99. Applebees calls it “Carside to Go”, while the 99 just calls it Online Ordering. This isn’t a new concept and it’s basically the same thing no matter what you call it. Any given pizza parlor does it all the time. You order your food, then go pick it up. What a concept!

Unfortunately, there’s one fatal flaw. People go to Applebees and the 99 for the food and for the atmosphere. That’s why they can charge more. When you call for pizza, you’re buying a meal for the whole family that probably averages $15-$20 for the entire thing. Contrast that to a meal at Applebees that averages $12-$15 per person. There’s an obvious price difference there.

What’s not so obvious is that when you order from Applebees for their fabulous “Carside to Go”, it’s lukewarm by the time you get it home, you can’t easily send it back if something is wrong, and you are given plastic silverware. That means to eat your steak, you either make futile attempts to cut with the plastic knife, get your own metal knife from the drawer, or squat down and using both hands grind on it like a caveman. Oh, did I forget to mention that you’re paying the same price as if you went in and sat down?

Somehow, their “Carside to Go” seems a bit second rate. To be blunt, it downright sucks. I don’t think the food is as good as if you went in and sat down. You probably save a few bucks because you aren’t ordering drinks and can use your own personal stash of booze, but let’s be honest. The atmosphere counts as part of the price, as does having the food piping hot when you get it.

Somewhere in the corporate ladder, an operations executive said “Allright, our restaurants are a bit crowded, especially on the weekends. How can we get more sales at the same location, without having to expand the buildings, charge more, or push people in and out the door faster? Let’s let people phone in their orders, and come pick them up! Brilliant!” This guy needs to stick to operations and stay out of marketing.

Nice try guys. It’s not going to work. In fact, I can give you a perfect example of where this has failed. I worked on a pilot shopping project for Wegmans Food Markets back in 2000. It was a pilot program to sell groceries online to Wegmans customers. Think of Webvan, but with much smarter executives who tested the waters before committing a billion dollars to the project. A small team of us put together the back end infrastructure at the corporate office, and there were employees on-site at the pilot store who would manage the labor aspect of the project.

The executives at Wegmans intentionally stacked the deck against the project. They used one of the smallest stores that actually had space for the project. They also severely limited the number of potential customers who could participate, after qualifying them as internet users of course. The basic concept was for people to order their groceries online and then, pick them up at a designated time slot on any specified day within the next 7 days. After the system went operational, within weeks the labor costs were shrinking fast, average order sizes were higher than predicted, and things were generally going quite well.

After a number of marketing meetings and customer feedback sessions, the pilot program was killed. This didn’t make sense to me at the time, but it does now. I suppose the years have made be a bit wiser because I was pretty upset with what they did. The decision was made to not move forward with the project because customers enjoyed shopping in the Wegmans stores. Incredible, right? Stupid on the part of Wegmans? I thought so at the time, but having become widely read since then, I’m even more astounded at their foresight. When customers like coming into your establishment, that alone says volumes about your business. There are companies who would (and probably have) kill for those kinds of customers. How did they get them? Where did they get them?

They did it by being good companies to shop at. Most of you will not have been to a Wegmans, but I assure you that it’s an entirely different experience than Shaws, Star Market, Price Chopper, the Piggly Wiggly, or any number of other food stores. If you ever get the chance, I’d recommend stopping into one. The difference is just amazing and it is one of the few things I really miss about living in Rochester, NY. For just a small taste, go totheir website, sign up for an online account (it’s free and they’re amazingly conscious of privacy) and add items to your shopping cart. Then when you’re viewing it, notice that they tell you which aisles everything is located. Change the store you’re shopping at, and everything is shuffled into the right aisles. How’s that for convenient?

Back to my story, Wegmans had the foresight to realize that by offering groceries online, they were not going to increase their share of the market. On the contrary, they were merely going to shift the location of the customers buying groceries, and at what cost? Online customers only see what they’re looking for. They don’t browse up and down the aisles. “Ooh, I’ll buy that. It’s on sale.” This is referred to as impulse buys. That’s why individually wrapped candy bars line every register. It’s an impulse buy and a lot of people do buy them. It also costs a lot in terms of labor to have employees doing shopping for the customers, even if they know where everything is.

Applebees and the 99 think that they’re being smart. Certainly, they’re shifting the location of their customers, which is what they absolutely need to do. However, when the quality of the food you’re serving drops like a stone, not only will people stop ordering by phone, they’ll stop coming all together. The bad food will be related to Applebees, not to “Carside to Go”. Bad food equals fewer customers. So technically, they will of course reach their goal of offloading customers, but it will be only because their customer levels are decreasing. If it’s not obvious, this is bad.

What they really need to do is move those customers from the busiest parts of the week to the parts of the week which aren’t so busy. This will allow them to maintain complete control overquality, while increasing their market share and encouraging people to come back for more. Most people won’t eat at a restaurant every day, but when they want to go to Applebees, they’re going to go. The one near me has a TGI-Fridays right next door. If Applebees is too crowded, you walk next door and they lose business. To me, and to many others the two are basically interchangeable. If you go on a Wednesday, you want something different on Friday.

But, if Applebees could convince even 10% of their Friday customers to come on Wednesday instead, they have not only increased Wednesday sales by that much, they have reduced the line at the door on Friday by 10%. They will still get the same amount of money on Friday, but they’ll also get an additional 10% of Fridays sales on Wednesday.

I believe that while this strategy will appear to work in the short term, over the long term it will not. People will gradually stop using the service because the food quality suffers so much and they will be back where they started, with reduced profits, long lines at the door, and refusing customers because they simply don’t have the space to handle them.