August 22, 2017

YUM - Update on Pizza Hut's Digital, Delivery Initiatives

YUM
By Bill Becorest

Heavy advertising and online-only deals are lifting digital orders during 3Q17 at U.S. Pizza Hut locations, but delivery expansion and Hut Rewards have had little early impact.

Following the announcement of Yum! Brands Inc.’s Pizza Hut U.S. Transformation Agreement in May and its subsequent goal (July) of hiring 14,000 new delivery drivers by year’s end, OTR Global reached out to 11 Pizza Hut store managers to determine how key delivery and digital initiatives affected stores during 3Q17 through mid-August.

National Ads, Online Offers Lift Digital Sales
Nine of 10 managers said digital ordering increased yy during 3Q17, helped by heavy advertising and exclusive online deals. “I see more commercials pushing the online ordering, and more special offers available only through the website,” one said. “I think it’s having a real impact on customer behavior.” Another said the overall mix of digital orders is typically 50%, but can increase to as much as 75% when there is a popular online special available. Some managers said television advertising in recent months have put more emphasis on mobile and online ordering than ads did in 2016. “Look at commercials for the $7.99 Large 2-Topping online-only deal that have been running,” one said. “The push for online and mobile ordering is stronger than it was a year ago.”

Some managers also cited increased consumer awareness and comfortability with ecommerce in general. “Customers these days are just so used to being able to order everything online; it becomes second nature,” one said. Another cited tech improvements: “Pizza Hut is putting a lot more effort into improving and promoting our ordering technology, and I think [digital sales] will continue to grow.”

Delivery Expansion in Early Stages
Five of seven managers who provided data on delivery said they had either increased the number of delivery drivers at their locations during 3Q17 (two managers) or were planning to add driver positions within the next several months (three). The two managers who added drivers during the quarter said it was too early to judge the long-term impact on sales, but said the additions contributed to delivery efficiency and lifted customer satisfaction. “We are the No. 1 delivery location in our area, currently operating with 12 drivers after adding a couple in the last two months,” one said. “The impact has been a smoother-running operation with less customer complaints.” Two sources noted that they were waiting for updated delivery maps in conjunction with the company’s new delivery network algorithm. Another said more drivers will be needed in the coming months because her store is located in a developing area with an anticipated population increase.

Some managers said finding qualified drivers can be difficult. “It’s always hard to fill and keep drivers,” one said. “They need a clean driving record, there is an age requirement, their background has to check out – all of those variables come into play.” Competition for drivers was also cited as a challenge by two sources who said the industry-wide trend in delivery was contributing to a tighter market for drivers (see OTR Global’s June 6 note on pizza restaurants for similar findings on driver staffing).

Among seven managers who provided data on delivery, the average number of drivers on staff ranged from four to seven. In addition, three of 11 managers said their locations were dine-in or takeout only, and did not provide delivery. All three said there were no immediate plans to begin offering delivery.  

Stores Await More Input on Hut Rewards Initiative
Despite Pizza Hut’s nationwide launch on Aug. 1 of the Hut Rewards loyalty program, all 11 managers said the program had either not been fully implemented at their store or had yet to have any impact on sales through mid-August. “We received a new shipment of pizza boxes last week that advertise the Hut Rewards program, but we haven’t heard much beyond that,” one said. Another said, “I don’t know anything about it yet, but we are scheduled to get some training on it later this month.”

While Pizza Hut’s roll-out of a loyalty rewards program comes much later than some of its key competitors (Papa John’s International Inc. introduced their first rewards program in 2010, and Domino’s Pizza, Inc. launched Piece of the Pie Rewards in September 2015), a couple managers said Hut Rewards’ no-minimum-spend points system would help set it apart. “The points system is friendlier to the customer than it is with Domino’s because there is no dollar limit you have to reach in order to earn points,” one said. “It’s more fair and I think customers will appreciate the difference.” Hut Rewards credits two points for every $1 spent, with fractions of dollars adding to the total as well. (A promotion offering double points is currently running from Aug. 10 through Oct. 1.) With Domino’s rewards program, a customer must spend a minimum of $10 to earn any points. Papa John’s offers one point for every $5 spent.

ADDITIONAL QUOTES
“A lot of times someone calls on the phone to ask about any deals, and I direct them to the website and say they can get a better deal there. They hang up and order online.”

“Yes, we've seen an increase [in digital orders] because of the advertising; it's now always emphasizing mobile and online ordering in general, no matter the offer.”

“Our online ordering has increased a lot since last year. One of the reasons is that a lot of the good deals and specials are available online only.” 

“We went from four full-time drivers to six just recently. We are trying to expand the amount of deliveries that we can do in a given time period. That will help our output and our sales efficiency.”

“Hut Rewards goes through the national website and so we don't have much to do with it at the local level. We've got the new boxes that advertise Hut Rewards, but haven't heard much more beyond that.”

“I do know that Hut Rewards is a more equitable type of rewards system, where every dollar spent counts toward points accumulation. We are hoping that translates to more repeat business.”

Contributors: Maryann Jones

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