No Mystery: shopping the 'shops' gains in popularity: with new techniques and methods in place, an age-old practice once again is fashionable.
Nation's Restaurant News
December 13, 2004
By Amy Garber

In the restaurant industry's perpetual push to improve unit-level operations, the highly competitive quick-service-restaurant segment is renewing efforts to evaluate how it's measuring up with customers.

New techniques are modifying operators' decades-old use of "mystery shoppers"--professional evaluators who pose as customers and report detailed findings about service and overall quality--though that method is back in vogue and growing in popularity. That's especially true since QSR segment leader McDonald's Corp. revived a national mystery-shopper program for its U.S. restaurants in 2002.

The assessment campaign is one component of the burger giant's turnaround plan, which has been successful in propelling domestic same-store sales. McDonald's began to scrutinize its operations more carefully nearly three years ago by deploying an official but anonymous visitor to evaluate each of its domestic restaurants on a monthly basis.

Now the world's largest restaurant chain, bullish on the success of the program, rapidly is expanding its reliance on the technique from 13,600 U.S. restaurants to include all 30,000 of its worldwide locations in 120 countries by the end of 2005.

"It is a program that people have embraced, and it ensures that our customers have an excellent experience when they visit any of our restaurants," says Sue Fangmann, program manager for McDonald's U.S. Restaurant Operations Improvement Process, or ROIP.

In contrast, rival Jack in the Box, which has 2,000 QSR units nationwide, is scrapping its mystery-guest program and replacing it with one that asks randomly selected customers to rate their restaurant experience in an automated survey via the telephone or Internet. The chain's new program, dubbed "Voice of the Customer," provides restaurant managers with more relevant guest feedback, according to officials of the San Diego-based burger chain. The survey system is expected to save the company about $1 million annually.

Jack in the Box spokesman Brian Luscomb says the change was made "to provide a better vehicle to assess feedback from our guests. (Mystery shopping) was an effective program, but this is a better program for evaluating guest service. We are able to generate more frequent reports on the level of service that the crew is providing."

Nonetheless, quick-service chains of all sizes around the country, from McDonald's and Sonic to Captain D's and the relatively small regional operator Zoup, insist that mystery-shopper initiatives are worth the investment. Often those anonymous assessments are used to reward to reward employees, which operators say create incentives for providing top-notch service. They also point to new advancements--such as computer-generated reports available almost immediately via e-mail--that are making mystery shoppers more useful tools than they were 10 years ago.

"Mystery shopping in and of itself is a unique type of research," says Jeff Hall, president of the Mystery Shoppers Providers Association, or MSPA, a 150-member trade group based in Dallas."The type of information collected through a mystery-shop program could not be gathered through any other means." He adds that anonymous visits provide "insight on the customer experience" and give quick-service operators measurements on speed of service, temperature and weight measurements of different products, and the cleanliness of the facility, including the drive-thru.

Hall, who also is president of Second To None--the Ann Arbor, Mich.-based mystery-shopper provider he founded 15 years ago--says increased competition among fast feeders has led to more chains utilizing anonymous-visit programs. He estimates that between 70 percent and 80 percent of quick-service operators are using some type of mystery-shopper program. Although costs vary widely, Hall believes that a 25-unit chain would spend in the range of $15,000 to $25,000 annually on a program involving one shop per store each month.

"The QSR segment is more competitive than ever before, and chains have to compete with nontraditional outlets, like C-stores and fast-casual concepts," he says. "Consumers have more choice but not necessarily more discretionary dollars."

Hall concedes "that it is difficult to relate mystery shopping to an increase in sales or customer loyalty." He adds, "Oftentimes when a mystery-shopping program is in place, there are also other initiatives that an operator is running that could have an impact on sales."

However, "we know that there is a return on investment," Hall insists. "We don't know exactly how to define it, but it certainly is there. Operators who are using mystery-shop programs consistently see an increase in performance."

For McDonald's a national mystery-shop program ensures "that every restaurant has one goal and one set of marching orders," according to Fangmann. "We can leverage the program to make strides in consistency."

On each monthly visit to a single restaurant, the McDonald's mystery shopper evaluates both the front counter and the drive-thru, measuring speed of service, order accuracy and cleanliness of the dining room as well as the rest rooms. Each professional mystery shopper is instructed to order and assess the quality and appearance of three menu items, including a core product, such as the Big Mac; a side item, like fries; and a beverage. In addition, the friendliness of the staff--like a smile and greeting from the order taker--is evaluated, according to Fangmann. "We are looking to see if the sandwiches are hot and fresh, if the fries are salted and if the drinks are carbonated," she says.

"Mystery shops are a unique tool," Fangmann explains. "They allow us to touch every restaurant every month. It is also a great tool to use for restaurant crew incentives."

The mystery-shop report, once completed, is e-mailed to the company officials and the operator of the store, if it is a franchised unit.

"Every month we look at the results, and they provide us insights into how we are performing," Fangmann says.

Although McDonald's, based in Oak Brook, Ill., declined to disclose its rate of progress on operational improvements since 2002, Fangmann says its U.S. restaurants are performing better "in every category," with the greatest gains in hospitality and cleanliness.

In addition, McDonald's also evaluates the performance of its restaurants with other tools, such as a toll-free telephone number for customers and announced visits made by field consultants.

"We want to make sure the restaurants are running well all the time," Fangmann says. She declined to comment on the cost of the mystery-shop program but says it is viewed as "a long-term investment" that "without a doubt has been extremely successful in the U.S."

The burger conglomerate's goal of having me mystery-guest program in place globally by the end of 2005 means that each McDonald's around the world will be visited by a mystery shopper once a month, according to Fangmann.

"Getting a read every month is an incredibly valuable piece of information," she says.

Oklahoma City-based Sonic Corp., parent of the 2,885-unit drive-in chain, conducts one corporate-sponsored mystery shop a month, but many of its franchisees pay for additional ones.

"We average about 2.4 shops per unit per month," says Diane Prem, Sonic Corp.'s vice president of operations services.

"Basically what we are looking for is speed of service, guest interaction, product quality and presentation, and brand elements."

She adds that the mystery-shop program, which began about six years ago, has evolved with franchisee input. For example, Sonic has mystery shoppers evaluate new products and operational changes, such as the addition of a drive-thru window to 849 of the drive-in chain's locations.

A drive-thru consumer "is looking for a different type of service than those using the drive-in stalls," Prem explains. "So we target those things. We have also done product-specific shops, and new markets are shopped more frequently to see how they are performing."

Unit-level managers receive the mystery-shop reports within 24 hours after they are conducted, either via fax or e-mail. "We want it to be fresh in their minds," Prem says, adding that managers use the shops as part of an extensive 10-month, systemwide crew incentive program called Sonic Games. Prem also uses the reports "to see trends and to balance the business with other measurements. We have a toll-free consumer hot line and Internet feedback, and between all of those, we can get a balanced look at what the customer is thinking."

The restaurant industry has been using mystery shops for at least 30 years, according to Hall. "Mystery shopping gained a solid footing in the late 1970s and has grown exponentially since the mid-1980s, as more and more chain executives have realized the unique benefit shopping programs provide," he says.

Although some fast-food chains rely on professional anonymous shoppers, Captain D's has conducted its own in-house program since it was founded 35 years ago.

"We recruit local business people to come in and fill out a form, and then we reimburse their meal," explains Gary Wilson, senior vice president of operations for Captain D's. The goal is for each store to have six mystery shops each month. The 579-unit chain spends an estimated $25,000 a month--or about $250,000 a year--on the program, mostly to reimburse meals at about $8 per visit, according to Wilson. "Franchisees are required to participate, and they get billed for the program each time a shopper comes in," he says.

In 1999 Captain D's updated the program so that all shopper reports would be filed electronically via email, which allows each store to get feedback immediately so that the managers can make on-the-spot fixes, such as correcting service lapses by shifting labor.

Before electronic reports, "each store got the report weeks later," Wilson says, adding that the manual system also was more costly to run because it involved more corporate manpower.

The chain attempts to rotate shoppers every six months "so employees don't get to know who they are," according to Wilson. "Sometimes we must ask shoppers not to be in the program if the quality of their reports is not good."

For a brief period several years ago, Captain D's replaced its shopper program with a toll-free customer feedback phone number, and, Wilson says, while it provided some valuable information, it was skewed almost entirely toward complaints and it lacked positive comments, which are equally important. That is because Captain D's uses its shopper program for employee incentives, which include gift certificates to Wal-Mart among other rewards.

The 12-unit Zoup chain, based in Ferndale, Mich., introduced a mystery-shopper program about one year ago to evaluate the effectiveness of employee training and reinforce operational standards, says Eric Ersher, managing partner and co-founder of Zoup. He describes the anonymous visits as "one of the truly breakthrough additions to the Zoup training process."

For example, the shopper looks for Zoup's order taker to say hello immediately and for the cashier to say, "Thank you" with a smile, according to Ersher. Each restaurant in the chain is shopped once every two weeks, and the number of anonymous visits sometimes increases if the store has new managers "or otherwise is in training mode," he explains. The cost of the mystery shops--which are budgeted at less than $100 per month per store--is paid from the chain's marketing fund, according to Ersher. Both the franchised and corporate stores contribute to that fund in equal amounts.

"In our view there is no marketing more important than the value of each customer experience," Ersher explains.

The reports are e-mailed to all units, but "we are very careful not to use the mystery shops as a punishment or reward system," he insists. "They are a snapshot and one transaction among thousands. We determine what went right and what went wrong and what we can do better next time."

Ersher adds, "The only time negative scores or negative shop experiences will be brought up as anything more than a training tool is when we see a trend or a consistent falling short of the standards."