October 24, 2016

Should You Build A Restaurant App?

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So you want to build an app for your restaurant. That may not be a terrible idea. As you know, one in four U.S. consumers has a native restaurant app on their mobile device. And for successful brands like Starbucks, Chick-fil-a, Taco Bell and Domino’s — their apps have all proven to show a lift in check sizes and revenue. The Starbucks app accounted for a whopping 21% of all U.S. transactions in Q1 of 2016 and Taco Bell has seen a 20% higher average check size in mobile ordering than in-store.

But a deeper dive past the top-performing restaurant apps reveals a much more challenging picture faced by restaurants looking to build and launch their own app. According to Applause Mobile’s 2016 Restaurant App Sentiment Analysis, report the average sentiment score for a restaurant app is a mere 37.8% on a scale of 1 to 100. That is well below the average sentiment for all apps, which sits at 67.3%. Forty-five of the top 100 restaurant brands in the U.S. do not even have a native app.

Mobile web traffic is also outpacing the growth of apps, growing 1.5 times larger and 1.5 times faster year-over-year. And 70% of consumers use the same 200 apps. All of that seems to suggest that the once budding app market’s best days may already be behind it.

According to data pooled from app marketing firm Sensor Tower and Nomura, downloads from the top 15 app publishers across both Apple iOS and Google Android devices fell 20% year-over-year. And Quartz has reported that most smartphone users in America download zero apps per month! 

All of those stats definitely make for a scary landscape for restaurants looking to spend a lot of money to develop their own app. With finite space available on smartphone devices and the conversion of many sites to mobile-optimized web pages, apps need to provide real value to lure customers to download and keep an app on their phone.

The top four restaurant brands listed above benefit from a foundation of strong customer evangelism supported by the ubiquity of their brick-and-mortar locations and high brand loyalty. But these top-tiered chains appear to be the anomaly more than the norm. That is why so many restaurants are forced to offer high incentives to gain an uptick in downloads and user engagement, which otherwise seem hard to come by.

Even then, the audience you tend to target with an app will be your most loyal customers and ardent fans — an important subset of your overall customer-base for sure, but only a small piece of the total pie. Look at Chiptopia, released this summer by Chipotle as a loyalty program set to target customers and overcome the negative sentiment left by the E. Coli outbreak. With the numbers now in, it appears as though the program only offered a nominal lift to check averages and did not roll back the stunning 30% drop in same-store sales in Q1 of 2016 after the outbreak. Chipotle marketing director Mark Crumpacker recently said in an interview that the chain was still losing customers to fast-food giant McDonald’s.

All of this is a high price to pay considering that Chipotle’s rewards were some of the best in the industry: the purchase of twelve burritos over a three-month period gave the customer four free burritos. That is a startling return rate of roughly 33%. The program did successfully target Chipotle’s most loyal customer base, potential offering stunning rewards to consumers that were already bought in. Even Starbucks, with their app’s jaw-dropping 25% customer engagement, still reveals that 75% of all guests that buy Starbucks products have no engagement whatsoever with their loyalty play. 

So building an app may seem like a grand idea when you look at the best in show. And for those top few, the pay-off seems to be valuable. But a closer inspection beyond the top performers to the rest of the restaurant app industry just below, suggests that building an app for your restaurant is, at best a huge risk, and more likely a total waste of money and time.