Mobile Order Ahead ChartBI Intelligence

In January, quick-service salad chain Sweetgreen stopped accepting cash at six of its 48 locations. After the success of this pilot, the company is considering whether to go cashless, according to a report from The New York Times. 
That’s because cash usage is decreasing — at Sweetgreen, just 10% of transactions are made in cash, compared to over 40% nine years ago. The move is also likely a recognition that millennials, a rapidly growing market in the big cities where Sweetgreen stores tend to be, are more comfortable paying via app or card and are less likely to prefer cash.
But shifting to better match its consumers’ payment habits could also benefit Sweetgreen in two key ways:
  • Higher mobile app usage: Sweetgreen stores that don’t accept cash take payments via card or through the firm’s mobile app, which allows users to order and pay ahead of time and skip the line upon arrival in-store. In-app purchases already account for one-third of the Sweetgreen's total, according to co-CEO Jonathan Neman. And that corresponds to a growing national trend — BI Intelligence forecasts that mobile order-ahead volume at quick-service restaurants will reach $38 billion in 2020, up from just $4 billion last year. Eliminating cash could encourage users to pay via app, which in turn could increase customer engagement and loyalty through rewards programs. 
  • Increased payment volume: Average order value often increases when users pay via app — at Taco Bell, for example, mobile order values are 30% higher than in-store orders — which could drive up overall volume. The app’s impact is compounded by the fact that eliminating cash allows employees to process up to 15% more transactions per hour. That means that stores that don’t take cash could be processing a larger number of high-value transactions, which in turn would push up overall business.
Quick-service restaurants (QSRs) — also known as fast-casual restaurants — such as Starbucks have been turning to mobile order-ahead apps to extract higher sales, intensify customer loyalty, and heighten foot traffic.
Mobile order-ahead refers to a consumer-facing mobile payment platform that allows customers to order food remotely, pay for the items on their phone, and pick up their order at a specific restaurant location.
Leading QSRs in the U.S. are beginning to adopt these platforms at an accelerated pace and are benefiting from them. Taco Bell sees 30% higher average order values on mobile compared to in-store, and Starbucks' Mobile Order & Pay already represents 10% of total transactions at high-volume stores, directly contributing to increased company sales.
Mobile order-ahead is still in its early days, but will be a $38 billion industry by 2020, accounting for 10.7% of total QSR industry sales. This will be driven by full adoption among the top QSRs in the US, the growth of mobile commerce, QSR adoption through aggregators like Grubhub, loyalty programs, higher average order values, and new buy buttons.
Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed Mobile Order-Ahead Report that profiles the companies that have proved the mobile order-ahead concept and analyzes the trends contributing to this new industry's growth.
Here are some key takeaways from the report: 
  • Mobile order-ahead apps — platforms that enable consumers to remotely purchase menu items for in-store restaurant pickup — are on the rise among quick-service restaurants (QSRs). We expect sales on these platforms to reach $38 billion by 2020, representing a five-year compound annual growth rate (CAGR) of 57%.
  • Mobile order-ahead will ultimately have an additive effect on the QSR industry. Mobile ordering platforms have been proven to intensify customer loyalty, increase purchase frequency, and lift average ticket sizes through order customization and easier checkout options. This means that mobile ordering is not a simple substitution for in-store purchasing, but a channel that can enhance the lifetime value of QSR customers. This makes mobile order-ahead a critical channel contributing to the growth of the QSR industry.
  • Alternative commerce solutions will help propel mobile ordering. Aggregators like Grubhub will onboard smaller fast-casual restaurants into the mobile ecosystem by offering them an existing app to integrate into, lowering the upfront costs of creating a mobile channel of their own. And in-store self-service kiosks will help popularize remote ordering and accustom users to less traditional forms of payment that don't require a cash register.