On The Money: Roadside Assistance

When construction costs and takeout sales are up, invest in the drive-thru.

By David Farkas, Senior Editor -- Chain Leader, 10/1/2006

With building costs rising, chains must focus on the economical use of space, argues Atlanta-based consultant Jordan Krolick, former chief development officer for Arby’s and head of mergers and acquisitions at McDonald’s. As a result, drive-thru business takes on even more importance.

Will QSR chains have to rethink their drive-thru business as building costs escalate?

The cost to build out a drive-thru is significantly less than the increasing costs of the structure, seating and decor. Meanwhile, for lunch-based quick-service restaurants, revenues have become greater as drive-thrus have shifted from being an additional revenue stream to the primary sales driver. We have to shift focus from the dining room to the drive-thru.

As for the returns?

Drive-thrus have terrific returns on invested capital, and they can be more than 13 times, or 1,300 percent, higher than returns on interior build-outs. Thus, focusing and expanding on drive-thru business is critical.

How can chains focus more attention on existing drive-thrus?

Drive-thrus should be as much of an experience as the interior of the store, more so because three times as many customers use them. Yet due to the lack of face-to-face interaction, investing in systems that enhance fast and accurate service, ordering ease, great food and quality surroundings is critical.

This must be an organizational strategic change. For example, the 3,500-square-foot, 100-seat, QSR building is becoming a dinosaur. Chains should change their goal from the near-impossible task of finding quality sites to fit that building to fitting a building to quality sites.

What’s the impact on site selection?

As smaller, less expensive buildings are put on busy corners of dense areas, the access and ability to stack and funnel cars becomes even more important. The access, design and location of the restaurant interior are now a secondary priority to the drive-thru.

Are you saying a QSR chain doesn’t need a larger building?

When was the last time you went into a successful [fast-food] restaurant and couldn’t find a seat? Chains must develop their concepts and their buildings the way customers use them. Approximately 65 percent drive around the building. Another 15 percent carry out. That leaves only 20 percent inside.

So if you do the math?

If the typical chain sells $1 million of food, only $200,000 is spent eating inside the building. That’s about $550 per day with an average per-person eat-in ticket of $5.50, or 100 customers per day. Even with some customers eating at tables larger than their parties, the only need for a 100-seat building is if all of the customers arrive at the same time.

And yet drive-thru-only concepts have enjoyed moderate success at best. How come?

Restaurants truly serve an experience, with food being the largest part. Although customers may be purchasing food on the run, they typically have a trusting relationship with the brand that was developed from in-store dining. Drive-thru-only concepts can be very successful if they develop a strong brand and experience that compensate for the inability to build customer brand loyalty through sit-down visits.