Innovation, Technology Drive New Retail Formats
Smaller stores, drive thrus and technology that fuels convenience and speed are creating a new breed of restaurant, panelists at the national ICSC conference say.
LAS VEGAS—Earlier this week Shake Shack opened its first drive thru in Minnesota. It was an about-face for the food retailer as its CEO had said from the company’s start that it would never have a drive thru. But then about three years ago, executives began to realize drive thrus would capture a wider audience in some markets. Then came Covid, when food retailers and restaurants doubled down on this format amid the need for social distancing.
After that, the company leaned into drive thrus, Carren Coston, ICSC trustee and vice president of real estate and development at Shake Shack Enterprises, related at the national ICSC conference here in Las Vegas. “We are opening two in the next two weeks and we have quite a few in the next year,” she said during a panel session.
Like everything else retail related, the pandemic has made an indelible impression on the sector’s dining concepts and formats. Drive thrus are in; so is take out. Fine dining was, for quite some time, out. Fast casual is in. Some of these trends will reverse as the pandemic one day wanes but others appear here to stay, such as Shake Shack’ embrace of the drive thru. In fact, the company is also looking at other formats, Coston said, such as smaller restaurants, possibly with no seats. “We have a lot to learn from the drive thru first.”
Kitchen United’s business concept is another trend that has been gaining traction and then accelerated during the pandemic. It services restaurants for off-premise dining, panelist Atul Sood, chief business officer, explained.
“We work with malls, grocery stores, and we are looking at food halls as well. We aim to launch 10-12 kitchens or restaurants in the same facility serving different cuisine types and we think of ourselves as an amenity.” The benefit for its clients: access to a large base of customers within a small vicinity.
Tech Gives as Edge
As these companies expand, they are enabled with investments in technology, some of which was made before the pandemic. Shake Shack, for example, reinvested in its global platforms to make it as easy as possible to pick up food, Coston said. “On the digital side for us, it is about making the drive thru a different experience. A lot of our investment is in our menu boards and the technology that reads back orders to make sure there is consistency. We are also doing pre-ordering through an app. As many orders as we can get through that is ideal.”
Kitchen United, as well, relies heavily on technology, which it developed itself, Sood said. Indeed, its tech platform is a de facto revenue driver of sorts for the company. “Our average order is about $60 because people are ordering cross concept. All the delivery guys are losing money on every order. $35 is maybe the threshold where it becomes profitable,” he said.
“When you have 12 different restaurants under one roof, you need to be sure all of the things are prepped and come out at the right time so our tech gates all of those orders based on the customer need.”
More Convenience
These investments in new technology and formats will fuel another, larger trend that the panelists see on the horizon, which is ever more convenience for the customer and getting food to them as quickly as possible. Existing brands are gunning to deliver on this premise as will new-to-market ones as well.
“I think the next great brands across the country are being created now,” Sood said. “They are being quicker and more nimble. A lot of them will be multi-format. A lot of smaller spaces, less room for customers to sit in and dine in. New lanes to get in and out. A lot more ghost kitchens I am betting on.”
On the other hand, the Red Robbins of the world, with their large lobbies and dining areas may well fade away, he continued. “I don’t think people want that any longer” although he does think full service will make a comeback. Full service “is waking up to capture some of the market share that fast casual has taken over the past decade. Some of the stuff they are doing with virtual concepts is pretty innovative.”
At the same time, restaurants are wary of the pendulum swinging too far in any direction. “We are looking to have a balanced portfolio,” Coston said. “We aren’t looking to be a full drive thru company. We don’t want [our restaurants] to be backed up into a line of cars on the street.”
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