How Dunkin' Leverages AI To Drive Its Rewards Program FEATURE STORY (p . 6) SEPTEMBER 2019 News and Trends Restaurants feud with Yelp and 9 Grubhub Deep Dive QSRs turn to AI and ML to better serve 13 customers through voice, kiosks and back- end operations Scorecard The latest mobile order-ahead provider 19 rankings MOBILEORDER-AHEAD Tracker Table Of Contents What's Inside 3 QSRs and third-party digital ordering platforms work to keep up with record customer demand Feature Story Stephanie Meltzer-Paul, Dunkin’s vice president of digital and loyalty 6 marketing, discusses how the DD Perks loyalty program engages members and offers insights News and Trends 9 The latest headlines from the mobile order-ahead space, including Starbucks’ plan to open a pickup-only concept store in Manhattan Deep Dive 13 An in-depth look at how QSRs are leveraging AI and ML to power faster ordering Scoring Methodology 16 Who’s on top and how they got there Top 10 Providers and Scorecard 18 The results are in. See the top scorers and a provider directory featuring 77 players in the space About 49 Information on PYMNTS.com and Kount Acknowledgment The Mobile Order-Ahead Tracker is powered by Kount, and PYMNTS is grateful for the company’s support and insight. PYMNTS.com retains full editorial control over the following findings, methodology and data analysis. © 2019 PYMNTS.com All Rights Reserved 2 WHAT'S INSIDE Digital food ordering is more popular than ever, with and Houston. Some third-party delivery services do not restaurant delivery expected to grow at three times the have what it takes to survive, though — even eCommerce rate of on-site dining between 2018 and 2023. More than giant Amazon could not find a foothold in the mobile or- half of these delivery orders are projected to come from dering market. restaurant-branded apps or websites. Entrepreneurs The competition will only intensify as the market grows, with their fingers on the market’s pulse are even opening pushing both restaurants and third-party platforms to fight phantom restaurants that have no brick-and-mortar pres- for customer dollars. ences and exist solely to serve third-party delivery apps’ customers. Mobile order-ahead developments around Quick-service restaurants (QSRs) are employing increasing- the world ly sophisticated automated tools like artificial intelligence Fast-casual restaurant and bakery Panera Bread recent- (AI) and machine learning (ML) to keep pace with the ly announced partnerships with DoorDash, Grubhub and growth. AI and ML are leveraged in both customer-facing Uber Eats to expand its mobile ordering options. Custom- applications like voice-activated ordering systems and in ers will be able to order through the third-party sites as back-of-house functions that provide staff with more ef- well as Panera’s and have their food delivered by the lat- ficient order processing and inventory fulfillment. Such ter’s drivers. Delivery currently accounts for 7 percent of tools do not come cheap, however. McDonald’s reported- the chain’s total sales. ly invested $2.4 billion in self-service ordering kiosks last Third-party platforms are also expanding their capabilities. year, for example. Postmates recently introduced group ordering, enabling The race to keep up with the demand for mobile customers to create groups and set dollar limits for each order-ahead is no less fierce on the third-party front. Door- person. The group creator can also set tip amounts before Dash is the current market leader with 36 percent of meal orders are placed. Postmates’ group ordering option lacks delivery sales, followed by Grubhub at 33 percent. Different several features its competitors offer, however, including services are more prevalent in certain regions, however. splitting the bill with Venmo and allowing an entire office Grubhub reigns supreme in Boston, New York and Phila- to place a single order. delphia, while DoorDash gets most of its sales from Dallas © 2019 PYMNTS.com All Rights Reserved 3 What's Inside Other third-party platforms have found themselves in hot water. A group of restaurants has alleged that Yelp has Executive replaced the “Takeout and Delivery” phone number on restaurants’ pages with Grubhub phone numbers, mean- INSIGHT ing that customers have been inadvertently been placing orders through the third-party platform. This has allowed Grubhub to charge restaurants with service fees. Yelp has How can AI- and ML-based fraud prevention begun to specifically label which phone numbers are affili- solutions reduce the need for human oversight? ated with Grubhub as a result. “The best fraud analysts seem to have an innate ability to For more on these stories and other mobile order-ahead identify fraudulent transactions. With a quick review, they developments, read the Tracker’s News and Trends sec- are able to just know when something is off. It’s a skill built tion (p. 9). over time: First, they learn from what’s happened in the past, then they start to be able to see anomalies in certain Dunkin’s loyalty program runs on AI transactions. Dunkin’ is one of the largest QSR chains in the world, with Next-generation AI-driven fraud prevention is able to emu- 11,300 locations in 36 countries. One of the tools fueling late the decision-making process of an experienced fraud analyst by weighing the outcomes of both supervised and its omnipresence is DD Perks, its mobile loyalty program unsupervised machine learning. [Supervised] ML con- that rewards customers with free donuts or coffee. Behind siders historic data while [unsupervised] ML analyzes the scenes of this service is a sophisticated AI network linkages, identifying bad actors. The best AI draws from that leverages data analytics to make sure customers get a robust universal data network comprised of billions of the right offers at the right times. For this month’s Feature transactions over a number of years, making the process Story (p. 6), PYMNTS spoke with Stephanie Meltzer-Paul, faster, more accurate and more scalable than what a fraud Dunkin’s vice president of digital and loyalty marketing, on analyst can accomplish alone. powering DD Perks with AI and the app's insights. Yet, this doesn’t mean AI-driven fraud prevention replac- es people. In fact, fraud analysts can add increased value Deep Dive: How AI makes QSRs smarter by contributing on a strategic level rather than managing manual reviews. Depending on the company, product or AI and ML are rapidly making inroads in a variety of sectors, promotion, Kount’s customizable controls allow fraud pre- automating or supplementing many jobs that were once vention managers to set risk thresholds based on tolerance done by hand. QSRs are no exception, with AI-powered and desired outcomes. Fraud prevention isn’t just about voice ordering, inventory management and self-service ki- eliminating chargebacks, because that is easy to do: sim- osks becoming more commonplace. This Tracker’s Deep ply don’t accept any orders. The most effective and agile Dive (p. 13) explores how AI and ML applications are af- fraud prevention needs human input in order to maximize fecting QSRs and how the technologies work in tandem outcomes — because that means the company has aligned their fraud prevention strategy with their business goals.” with human employees. BRAD WISKIRCHEN CEO, Kount © 2019 PYMNTS.com All Rights Reserved 4 What's Inside Five Fast Facts 12m 28m Total number of DD Total number of delivery orders Perks members placed through Panera Bread’s mobile app this year $2.05b 70% 1,800 Projected growth of the self- Portion of fast food Number of Chipotle service kiosk market between orders placed at drive- locations testing AI 2019 and 2023 thrus voice ordering © 2019 PYMNTS.com All Rights Reserved 5 How Dunkin' Leverages AI To Drive Its Rewards Program © 2019 PYMNTS.com All Rights Reserved 6 FEATURE STORY Dunkin’ is one of the most widespread QSR brands in the world, How DD Perks works selling coffee, donuts and breakfast items at more than 11,300 DD Perks leverages a points-based system to foster return vis- locations in 36 countries, including 8,500 restaurants across its, similar to many of its competitors’ offerings. Members earn the United States. One might think that a chain with such a five points for every dollar spent, with 200 points earning them global footprint might not need a dedicated program to foster a free beverage. Members are periodically given additional ben- customer loyalty, but with 12 million members and an addi- efits, such as a free birthday beverage or discounted items for tional 500,000 added every quarter, the DD Perks mobile app special events like local sports team victories. rewards program has proved to be a hit. “As an example, we recently celebrated the start of summer An extensive analytics framework is necessary to keep this with three times the points on medium or large … iced or frozen massive number of customers satisfied, however, pushing beverages,” Meltzer-Paul said. Dunkin’ to implement AI-driven applications to enhance the DD Perks accounts for approximately 13 percent of all Dunkin’ mobile customer experience. Stephanie Meltzer-Paul, Dunkin’s sales in the U.S., but this growth was stymied because custom- vice president of digital and loyalty marketing, recently spoke ers were required to preload credit cards to use the app. Many with PYMNTS about how DD Perks entices customers to make were hesitant to do so, fearing security breaches. Dunkin’ is no return visits and how Dunkin’ leverages AI to assist both mem- bers and other customers. © 2019 PYMNTS.com All Rights Reserved 7 Feature Story stranger to such attacks and announced data breaches in Dunkin’s AI can send a coupon for the donut to encourage November and February.