Understanding customers' preferences
at Applebee's International

by Teradata Staff

The Business Environment

Applebee's Neighborhood Grill & Bar is the world's largest casual dining concept - with restaurants in forty-nine of the United States and in seven countries - but its mission is to be much more than a restaurant chain. The company - which has over 300 company-owned restaurants and 1,100-plus franchise restaurants - wants guests to see their local Applebee's as a favorite neighbor, offering good food at an excellent price and friendly, attentive customer service.

At each restaurant, the company strives to give its patrons the feeling that they've come to experience a good meal and a good time at a neighborhood grill - not at a typical franchise or chain restaurant.

Business Objectives

To keep its brand promise of being a neighborhood grill appealing to regional tastes - yet efficiently manage the nationwide chain of restaurants from its Overland Park, Kansas headquarters - Applebee's needed a clear, focused understanding of its guests.

"One of our business challenges is to understand our core guest," says Seth Jensen, Senior Manager of Business Analysis within the Finance Group at Applebee's. "We want our guests to have a voice in saying what they prefer on our menu. Customer input serves as a valuable complement to the creativity of our culinary team, enhancing the team's ability to develop menus that satisfy our guests' preferences."

Understanding customers' preferences is considered much more than a customer benefit at Applebee's; it's a key business strategy.

"Our competition now is as fierce as it ever has been. So, it's crucial to us to focus on our core guests who made us successful to begin with - and understand their preferences," explains Jensen.

Insight into regional preferences - such as patrons in Texas preferring steaks more than patrons in New England do - proved laborious and too time consuming with the company's original method of using only spreadsheet software to analyze data gathered from point of sale systems in its 300-plus company-owned restaurants, and from its financial, inventory, management, food cost variance, and labor systems. Just gathering the data took the effort of many people; analysis of the data could take weeks.

In order to achieve its objective of gaining an integrated view of its guests and its business, Applebee's realized that it needed a much more efficient method to gather and analyze all of its data - it needed a data warehouse solution.

The Solution

Applebee's International, Inc. selected a Teradata® Warehouse to integrate data from its 300 company-owned restaurants, as well as from its labor, financial, inventory, management and food cost variance systems. Additionally, the company chose Retail Decisions for Business Intelligence and MicroStrategy as its reporting and query tool.

Figure 1. Teradata Data Warehouse Solution Summary

Applebee's Teradata Warehouse is located at the company's Restaurant Support Center and supports 50 to 60 users. Eventually, the company plans that remote users in different areas of the country will use its Teradata Warehouse.

"Keeping up with approximately 150 inventory turns per year, as we do, would be very difficult for any company," says Richard Stroup, Director of IT Product Development at Applebee's International, Inc. "Our Teradata Warehouse helps us to do that and helps us make timely decisions with a lot more information, thereby empowering us to do a better job for our guests."

In fact, now Applebee's gets information every day from the previous day's sales at every company-owned restaurant. This sales information is broken down into every ticket item sold in fifteen-minute increments.

In addition to reducing the amount of time it previously took to get that information from weeks to one day, Applebee's Teradata Warehouse, says Stroup, "helps us make informed decisions quickly about our business so that we can react to our guests' needs."

Business Insights

"Thanks to our Teradata Warehouse, we're really beginning to understand our business as a whole," Stroup says. "There are three parts to our business: sales, demand, and cost of labor, materials and food. Understanding those three areas gives us a good picture of our entire business."

Making decisions in those three areas, adds Jensen, is significantly faster now with the Teradata Warehouse.

"Before, without our Teradata Warehouse, getting the information to make decisions was extremely cumbersome," he explains. "Now, we can put information in the hands of the people that make those decisions, and empower them to make better decisions."

Understanding Sales

"Our goal is to put the right products in front of our guests. By doing so, we ultimately increase frequency of visits as well as guest satisfaction," says Jensen. "Those two attributes together are the basis for how we drive our revenues on a same store level." Teradata-driven analysis took the guesswork out of decision-making, giving Applebee's the power to quantify what the company thought to be true about customer preferences. As a result, Applebee's was able to use its newfound actionable information to make better, faster decisions and uncover business opportunities.

"For example, that information directed and helped us understand what we needed to do to increase carry out sales without decreasing bar sales," says Stroup. "That's additional sales information and insight we gained from our Teradata Warehouse that we would never have been able to analyze before."

Specific insights such as these have empowered Applebee's to optimize and enhance its menu offerings.

Understanding Demand

Applebee's has six to eight campaigns each year in which it promotes special menu items. Forecasting demand for the items offered during special campaigns is critical to accurately ordering the right amount of products.

"We've always had campaigns like this," says Stroup. "But with our Teradata Warehouse, we're able to manage them better and we're much closer to our targeted demand than we were before." This ability to forecast demand is important for all of its product offerings, not just for special campaigns. Jensen explains that Applebee's warehouses all of its product mix from its 300-plus company owned restaurants. The items are regionally disbursed so that the company can get a good read on regional preferences and products. "We use this information as a basis to put together financial models that tell us which products are strong performers on the menu and which ones potentially could be replaced," said Jensen.

What's more, says Stroup, information from customer satisfaction ratings has been integrated into the company's Teradata Warehouse. "We can tie customer ratings back to specific items. This helps us understand which items are doing well, which taste good, which don't, what was hot, what wasn't, what presentation was good, what wasn't, down to the plate level. Gathering this information would have been time consuming and dated before we implemented our Teradata Warehouse."

Understanding Costs

With its Teradata Warehouse, Applebee's discovered that there is a wide disparity from region to region in what it costs the company to staff its restaurants, says Jensen.

"Before, all we had was a percentage of sales basis to use as a budgeting tool," he explains. "Now we're actually budgeting how many people should be on staff for a location during a particular period of time because we can project what traffic is going to look like during those periods of time."

With Teradata, the company's ability to accurately forecast product needs has significantly improved, resulting in lowered overall costs. "Our purchasing department benefits from what we're doing with our Teradata Warehouse," said Jensen. "Our forecasting accuracy has improved dramatically. When we run out of product, it's at the end of a campaign. That gives us the flexibility to go on to something new rather than worry about excess inventory."

Why Teradata?

Both Stroup and Jensen agree that scalability was key to Applebee's selecting a Teradata Warehouse over other data warehousing options.

"We didn't know how fast we were going to grow or how much power we were going to need at first," says Stroup, "but a Teradata Warehouse was the only one that offered us the absolute option of scalability."

"With a Teradata Warehouse," Jensen concurs, "we knew we could grow our warehouse without a lot of growing pains."

In fact, soon after Applebee's implemented its initial one-node Teradata Warehouse, the company decided to upgrade to a two-node system. Stroup reports that the upgrade was seamless to end-users. The only indications of system changes were the inquiries about why the system was operating faster.

"For an IT guy," he says, "that's the best compliment you can get!" Teradata's Professional Services also made a strong impression, Stroup explains, because the Teradata consultants were able to quickly assess the company's specific needs and requirements.

"Teradata is absolutely committed to excellence," Stroup concludes. "Teradata's support, software and systems make up a world-class system."

In summary, Applebee's:

  • Pulls actionable information from the Teradata Warehouse to enhance menu offerings
  • Integrates point of sale and other systems' data in daily reports - before the data warehouse implementation it took weeks to gather and analyze the same data
  • Has improved the accuracy of forecasts of product requirements

Solution Summary:

  • Hardware: 2-Node Intel-based 4850 processor
  • Applications: Teradata Database Version 2 Release 4 and Teradata Retail Decisions analytical applications
  • Professional Services: Teradata Professional Consulting and Support Services for initial implementation and upgrade
  • Partner Product: MicroStrategy Version MSI 7.1 for query agent and reporting

More about NCR and Teradata

Teradata, a division of NCR Corporation, offers powerful analytical solutions that help businesses drive growth. Teradata solutions include the Teradata warehouse, along with analytical applications for customer relationship management, operations/financial management, business performance management and e-business.

NCR Corporation is a US$6.2 billion leader in providing Relationship Technology solutions to customers worldwide in the retail, financial, communications, travel and transportation, and insurance markets. NCR's Relationship Technology solutions include privacy-enabled Teradata warehouses and customer relationship management (CRM) applications, store automation and automated teller machines (ATMs). The company's business solutions are built on the foundation of its long-established industry knowledge and consulting expertise, value-adding software, global customer support services, a complete line of consumable and media products, and leading edge hardware technology. NCR employs 32,000 in 130 countries, and is a component stock of the Standard & Poor's 500 Index. More information about NCR and its solutions may be found at www.ncr.com.

Questions for Analysis and Discussion

  1. What DSS technologies is the company using?
  2. What type of DSS was implemented?
  3. What caused the change in technology at Applebee's International?
  4. How successful has the new DSS and technology change been at Applebee's?
  5. What are the claimed benefits of the new system?
  6. How will this change affect other companies in the industry?
  7. Do you anticipate any problems with the system? If so, explain them.

Editor's Note:

Based on the Applebee's website "The Information Technology department at Applebee’s International, Inc. prides itself on offering cutting edge technology with unparalleled customer service. This team of over 40 associates is broken down into 4 disciplines: Customer Service (Help Desk and Implementation), Technical Services (Network and Infrastructure), Information Strategy (Data Warehouse and ERP-People Soft) and Business Strategy (Restaurant Technology, Decision Logic, Quality Assurance and Franchise Relations). "

According to Jim Ericson in a Line56 article (10/26/2001), "Until mid-1999, Applebee's worked from spreadsheets and gut instinct to plot demand and distribution, service campaigns, and allocate products and labor to its far-flung chain." Ericson quotes Seth Jensen, Applebee's senior manager of business analytics. "Say you're planning staff for a given Monday," says Jensen. "You may use analytics to consider the same day last year, the last three Mondays, factor for customer preferences, holidays, lunch and dinner differences. You can't just staff by historical sales because some states have a tip credit, others don't. Knowing that, we're getting a standardized measure for managing the second biggest cost on our P&L statement, which is labor."

Reference:Ericson, J. "E-Business in a (Data) Warehouse," Line56, October 18, 2001, URL http://www.line56.com.

Editor's update based on presentation at Teradata Partners Conference, Oct. 2, 2002

David Wilson, Finance Project Manager at Applebee's International, provided an update and outlined the history of Data Warehouse development at Applebee's. According to Wilson, business discovery/needs assessment was completed in May 1997. An NCR Worldmark 4700 with 1 node, 133 GB of storage and Teradata database V2R2 was installed in November 1997. The warehouse went in production with product mix data in July 1998. The MicroStrategy 5.6 BI/OLAP product was implemented in December 1999. In August 2000 the system was upgraded and an NCR Worldmark 4850 with 2 nodes, 337 GB of storage, and Teradata database V2R3.0.3 was installed. The database software was upgraded to V2R4.1 in August 2001. The warehouse went into production with labor data in November 2000 and with customer service data in July 2001. In November 2001 the BI/OLAP tool was upgraded to Microstrategy 7.1. The food cost system went into production in September 2002. In 2002 Applebee's began budgeting hourly labor expense using data collected from the warehouse.

According to Wilson, Applebee's upgraded to Microstrategy 7.1 to have the "ability to have users outside the 4 walls of the Restaurant Support Center access the data in the Data Warehouse". He also noted it had better security options, the software was not PC based and there were support issues with version 5.6. Finally, he mentioned "The Digital Dashboard is coming!" Apparently, the plan is to implement this feature at Applebee's.

Seth Jensen, Senior Manager of Business Analysis, explained how he and other financial analysts use the decision support tools and warehouse. Jensen discussed in some detail menu modeling and menu optimization. Based on data from the warehouse a "splatter" graph is routinely created to identify menu items that should be replaced and that are promotion or improvement opportunities. Signature items that receive high overall ratings from customers and that make a significant contribution to sales are also identified.

For more information about Applebee's International go to www.applebees.com.

For more information about Teradata go to www.teradata.com.

Dan W. Conway , Director of Public Relations at Teradata, provided permission to use this case study at DSSResources.COM on Wednesday, July 31, 2002. The current version was posted at DSSResources.COM September 19, 2002. The update was posted October 10, 2002.

Please cite as:

Teradata Staff, "Understanding customers' preferences at Applebee's International", Teradata, a division of NCR Corporation, 2002, at URL DSSResources.COM.

Original case © 2002 NCR Corporation. Used at DSSResources.COM by permission. Product names and trademarks may be trademarks and/or registered trademarks of their respective companies.

This case study is for informational purposes only. DSSResources.COM makes no warranties, express or implied, in this summary.