Pizza innovation signals forthcoming QSR shift

BI Intelligence

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Last week, pizza chain Little Caesars announced a new service called the Pizza Portal that streamlines the order-ahead process.

Now, customers placing an order for pickup via Little Caesars’ mobile app can skip the line and head to the Pizza Portal, a “vending machine” that customers can unlock with a PIN or QR code to retrieve their food. The service will be piloted in 12 Arizona stores, with 100 locations planned by the end of the year and a national rollout in 2018, according to USA Today.

The move illustrates the stakes to stay competitive in the pizza industry.

• Digital is cannibalizing other channels among pizza chains. The three leading pizza chains are seeing vast digital ordering growth. Pizza Hut’s digital mix of orders is around 50%, while Papa John’s and Domino’s are both seeing well over 60% penetration. That’s eating into phone-based takeout orders as well as in-restaurant ordering.
• To stay afloat, firms are doubling down on digital investments. In addition to pouring money into research and development, firms are offering innovative, but often gimmicky ordering methods, like Pizza Hut’s pizza sneakers, to attract attention in a competitive environment while promoting digital commerce. That’s logical, especially since digital-ordering customers tend to be more loyal and spend more money per transaction.

But it could also be a harbinger for other QSRs, which might have lasting implications. Pizza chains have been ahead of the curve with regards to mobile ordering — Papa John’s 42% mobile sales are well above BI Intelligence’s 4% industry estimate for 2017. That means that, like coffee chains, we could think of the pizza industry as a preview of what’s to come in the space, and therefore should expect major shifts in the way restaurants approach ordering and payment for food moving forward. That could be great news for mobile payments — QSRs are one place where US consumers seem to be receptive to in-store phone-based payments — but not necessarily great for restaurants, which face new pain points from the rapid speed that mobile payments require.

Ayoub Aouad, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on retailer mobile wallets that:

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