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Rotman Insights Hub | University of Toronto - Rotman School of Management

Why restaurants should prioritize walk-ins to keep customers happy

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Opher Baron

With just the click of a few buttons, customers can order their lunch or cup of coffee from the comfort of their own homes — skipping long lines and saving precious time.

For the online customer, digital ordering is convenient, fast and easy. But is it good for business in the long run?

The answer is no, according to Opher Baron, a professor of operations management at the Rotman School of Management.

In a research paper “Omnichannel Services: The False Premise and Operational Remedies,” Baron — alongside colleagues Xiaole Chen from the School of Business, Sun Yat-sen University in China and Yang Li of the University of Western Ontario’s Ivey Business School — found that walk-in customers are getting pushed aside as businesses juggle demand from online orders, causing walk-ins to experience longer wait times and poorer service, which can have negative consequences for businesses in the long run.

Since the COVID-19 pandemic was declared in 2020, online ordering has become an increasingly popular option for customers. According to a Deloitte study, customers using click and collect hit 25 per cent in 2020 — a 10 per cent bump from the year before.

“The intuition of online ordering is it’s a channel with a lower wait time. People should be happier, and businesses should have more profit,” Baron says.

But, while online ordering can offer businesses greater sales in terms of volume, the benefit might only be fleeting. 

In their paper, the researchers used queueing theory — a mathematical theory that studies how customer congestion impacts business performance — to determine how wait times affect customer utility (satisfaction or happiness for an individual customer) and social welfare (all customers’ satisfaction or happiness) through a series of equations.

In each equation, the researchers analyzed different business models that offer online order services and walk-in customer services, such as ones used by Starbucks and Chipotle, to determine how wait times impact walk-in and online customer satisfaction, as well as its ultimate impact on a business’s throughput (or sales). For example, they analyzed one business model used at some Starbucks restaurants that had staff dedicated to fulfilling online orders. Another model from Chipotle, which required an online customer to wait a minimum of 15 minutes to pick up their order, which in theory, should help alleviate wait times for walk-in customers.

Ultimately, none of the models tested by the researchers provided businesses with both better sales and better customer service for both online and walk-in customers. Baron says each model caused businesses to overextend themselves, leading to potentially higher short-term sales but poorer customer service and therefore poorer sales in the long run.

He says the research helps business owners understand that there are trade-offs when they offer online services that increase immediate profit.

While a coffee shop might experience greater immediate profit when a restaurant is busy serving both online and walk-in customers, repeated slow service for walk-ins increases the likelihood they will choose a different coffee shop in the future where there is a shorter wait time.

There are also optics to consider: Passersby who see a busy coffee shop can make a choice to wait in a long line, or not. Without that visual cue, walk-in customers –unaware of the volume of orders ahead of them – can be made to feel ignored or forgotten, frustrated that they chose a busy restaurant that didn’t, from the outside, appear busy at all.

“In the long term, when you reduce the service level you provide to customers, you lose them,” Baron says.

Businesses should prioritize walk-in customers, which may have less profit in the short-term but offers better customer service and improves customer loyalty and therefore long-term profits, he says.

But, in a world where online ordering has become the norm, how can businesses make the shift to prioritize walk-in customers?

Baron says it depends on the business and its operations. For example, Starbucks baristas who serve only online customers can help serve in-person customers when there are fewer online orders coming in.

But, overall, he says businesses should “use new technology to introduce additional services more carefully.”

“The main message is businesses should go forward with introducing better products, better access, and better channels using modern technology. But, you need to probably change your operations a little bit to get the benefit out of this new technology,” he says. “If you just implement new technology, it doesn’t work . . . and you may find yourself hurting your customers and your bottom line rather than improving it and your service level.”

Opher Baron is a distinguished professor of operations management and the academic director of the MMA program at the Rotman School of Management.