Food delivery has become more of an expectation than an optional addition for consumer foodservice operators. A world that used to only contain pizza and Chinese food now includes every cuisine type. At the 2019 Food on Demand Conference, restaurant operators and delivery platform executives discussed the choices operators must make, the types of customers choosing delivery, and the future of the industry.
First Party vs. Third Party
After deciding to deliver, a restaurant operator must choose between delivering their own food or trust a third-party platform to get their food from kitchen to customer. Third-party platforms are preferred due to their ability to gain scale with limited costs and increased speed. Additionally, the amount of resources required to begin delivery through first party include high labour and insurance costs.
Staffing in hospitality is already a problem in a booming economy making hiring full-time drivers, who could work for flexible third-parties, even more difficult. According to GrubHub President and CFO Adam DeWitt, third party delivery systems can be feasible in towns with as few as five to ten restaurants.
Restaurant operators discussed the difficulty of controlling customer experience once food has been handed over to a third-party delivery driver. Companies looking to maintain their experiential dining must choose a partner wisely and curate the customers’ experience through packaging and other brand-first elements. However, new integration systems can weave together multiple third-party platforms and loyalty systems without sacrificing customer flow.
Third-party providers vary with providers ranging from GrubHub whose platform is solely dedicated to consumer foodservice, UberEats who offers cross promotion through their transportation platform to even smaller players like Waitr who utilize uniformed employee drivers to ensure customer experience. Every platform offers a slightly different experience and operators must decide to establish an exclusive deal with one platform or to allow delivery through many regional platforms to ensure the broadest customer base.
Where are the customers coming from?
One concern for restaurant operators is that introducing delivery will lead to significant declines in dine-in sales. This is troubling as most third-party platforms charge expensive delivery fees meaning the restaurant cannot raise its prices.
Studies conducted specifically for the Food on Demand conference suggest that a sizable portion of people choosing delivery do so in place of cooking at home. This would mean an overall expansion in the consumer foodservice industry as opposed to complete substitution between dine-in and delivery. Still, a significant portion of delivery customers are choosing delivery in place of dining in or takeout.
Alex Canter, operator of Los Angeles’ Canter’s Deli and Ordermark founder, gave clear advice when suggesting ways to optimize delivery without shrinking overall profit. Canter’s Deli currently does 40-45% of its business through delivery by using and consolidating 14 delivery platforms, downsizing the menu to profitable and easily transportable options and continually testing their own products by driving them around independently or ordering them from home.
The Future of Delivery
Food delivery is one of the hottest markets for innovation with self-driving cars, robots and drones currently in the testing phase. Ford partnered with Postmates to launch an autonomous vehicle pilot in Miami in 2018. The first step included delivering retail goods from mass merchandisers such as Walmart and Target. The pilot is set to expand to DC in 2019 and reach full scale operations by 2021 according to Thomas Walsh, Ford’s Head of Autonomous Vehicle Partnerships.
In addition to autonomous vehicles, Postmates has developed Serve robots, which are delivering food and small retail items in Los Angeles, San Francisco, and Vancouver. The robots have also taken off on college campuses with easily accessible FDA compliant buildings and a younger demographic that is more open to the new technology.
Google has partnered with Guzman and Gomez, an Australian burrito company, to launch the first successful drone delivery service. Though US regulations currently leave little space for drones, the team was able to test their project stateside recently delivering ice cream to a 3-year-old in Virginia. Overall the sentiment was that “the days of delivering 2lb burritos in a 2-ton vehicle” are limited.
Beyond the delivery itself, changing technology will dictate how food is being ordered. Many new vehicles now come equipped with voice assistants that can order your favorite coffee and donut without having to roll down your window.
According to Paul Damico, Naf Naf Grill’s CEO, the importance of brand cannot be overstated saying “Soon Google will do the choosing. Customers will say ‘Hey Google order a hamburger’, but it is the operator’s job to preemptively ensure customers’ specificity saying, ‘Hey Google, order a Naf Naf falafel bowl’”.
Another emerging trend in delivery is “ghost kitchens” or virtual restaurants. The general idea is that restaurants can operate without a brick and mortar location through third party delivery. Virtual restaurants come in a few forms. Existing restaurants looking to expand may use a community kitchen to test out the readiness of the market for their cuisine before signing a lease. Additionally, the virtual restaurant concept lowers barriers to entry for new and independent restaurants looking to open in cities with higher rents and labor costs.