How Food Delivery is Changing the Restaurant Landscape

The delivery craze is getting your food into the hands of more people. But are the compromised brand experience and revenue worth it?

We’ve all been there, you’re stuck at the office and it’s past 7PM and you’re hungry – there’s no time to run out so you cue up the UberEats app and get to work. In a world that used to be limited to pizza delivery to satisfy our late night cravings without heading out into the world, we now have choices at our fingertips and it doesn’t show any sign of stopping.

We know that the restaurant industry is always evolving, whether it is a new style of restaurant, a new way to manage POS or a disruption like food delivery. With millennials working more than ever and spending less time cooking at home, services like UberEats, Postmates and Doordash are making waves in the way consumers make purchase decisions.

In today’s on-demand economy, we want things when we want them and the expectation of quick delivery grows day by day. The food delivery industry is no different. In fact, the disruption being made by food delivery services is paving the way for other on-demand services to throw their hat in the ring.

When you think of a service like UberEats, it seems simple: You click on what you want, pay in the app and get it delivered to you ASAP. This is exactly why the service has become so appealing to restaurants. When a restaurant has a delivery driver on staff, they have to send them out and then wait for them to return, losing time and money in the process. With services like UberEats, the driver picks up the delivery and takes it where it needs to go – no need to return to the restaurant or wait around.

In today’s on-demand economy, we want things when we want them and the expectation of quick delivery grows day by day.

With the growing millennial population and their need to have everything right now, the on-demand trend shows no signs of stopping. Just recently, Amazon introduced their own brand of food delivery with Amazon Restaurants and Amazon Fresh – answering not only the restaurant delivery question, but bringing groceries along for the ride. By eliminating the need to leave home and freeing up more time for millennials to do the things they enjoy without having to worry about a grocery trip, Amazon has set themselves up for years of future success.

Downsides?

Of course, everything that glitters is not gold. There are downsides to these types of services that restaurants must address. The main concern is handing the hospitality that you have cultivated in your restaurant over to a third party. Once food is prepared, packaged and handed to the delivery driver, the restaurant loses control of the product and customer service.

Additionally, delivery apps are taking 20-30% off the top of each order which can spell trouble for a restaurant that is not booming with delivery orders. Restaurants who use these services are realizing that although the additional orders are coming in because of these delivery apps, the commission that is being taken off the top is counterproductive to the additional sales.

With the pros and cons of these delivery services, it is easy to see why deciding to utilize one as a restaurant brand is such a tough decision. The on-demand culture that we are building lends itself to wanting more and more of these services by the day. Without an end in sight, restaurants need to take a look at the value added versus the revenue lost and determine if this is a trend worth taking a risk on.

As a society, we continue to side with convenience and ease when it comes to dining decisions and restaurants have an opportunity here to make things easier than ever for customers – but at what cost?

People won’t care how you deliver the food.

There has been a lot of hype about food delivery over the past quarter. Longer, but it seems to be concentrated hype right now. Leading delivery brand, Postmates got a big investment, celebrity chef David Chang’s delivery service is growing. Brands are creating services and partnerships to optimize the way they deliver. UberEats is rolling out across the country. Jonathan Maze is pondering whether to-go and delivery is the savior of casual dining. The hue and cry for drone delivery is growing louder every day.

There is a battle raging to deliver consumers their food. And according to new research by Mintel, everybody is winning. 9 of 10 say delivery services make life more convenient. What does that tell you? People weren’t clamoring for a new way to get their pizza delivered. The high school kid dropping it off for a small tip worked just fine. The ask from consumers is for more restaurants and cuisines to be available by delivery. Unless you live in a handful of metros, that wasn’t a reality until this burst of services came on the scene.

65% of respondents said going to a restaurant was more fun than ordering in.

Don’t misunderstand the trend. Delivery is not the replacement for dining out. Delivery is the addition of an occasion without leaving home. Part of this is the same trend that was driving fast casual to overtake casual dining. Speed and convenience are king. Cater to my cravings and make it faster when I need it to be. In the same Mintel study, 65% of respondents said going to a restaurant was more fun than ordering in. Guess what – just about that same amount (63%) said delivery is more convenient than dining out. Surprise!

People aren’t saying they’re loyal to brands that deliver (though there is a subculture of people living solely off of Postmates and Seamless). These services may be new, but the problem is old. People are simply telling us that they are still looking for convenience.

There’s some people at the confluence of the restaurant industry and the tech industry who are looking at this as a disruption to restaurants. It’s actually the extraction of value that cuts margins for operators. Margins that are already thin and getting thinner with commodity prices, new types of competitors and laws adding salary pressure.

Brands will need to study the cost of any service they partner with to deliver their product. If there is an added service cost to the consumer, how does it affect the value proposition of the brand? Does your snack menu suddenly compete with entree prices elsewhere?

Beyond price, how does the service bring the food? Does it arrive in the same condition as when it left the kitchen? Long term, this can damage loyalty and erode occasions. There is a reason pizza is a traditional top-delivered food. It travels extremely well.

In the end, it doesn’t matter which pizza chain cracks drone delivery first. For a short while, people will order Domino’s by tweeting a pizza slice and drone emojis for the novelty. If it’s incrementally faster, drone delivery will survive. If it’s not any faster, they’ll go back to the old fashioned way – and just tweet the pizza slice emoji.

Eventually, there will be a shakeout. Delivery services will fold and consolidate. But restaurants that play it smart will remain. “Innovations” in delivery are a fad, unless they work.

What restaurants can borrow from Meal Kit Delivery services

Services like Blue Apron, Chef’d, Plated have been a part of the rising tide of companies delivering the pre-set meal kit to customers since 2012. Market Research firm Packaged Facts predicted the meal kit industry would generate around $1.5 Billion in 2016. These companies have attracted the attention of investors, CPG brands, grocers and restaurants alike; each for their own obvious reasons.

Restaurants look on warily, fearing another category competitor carving away much needed traffic and revenue. We at Food and Restaurant Marketing have examined the most successful of the hundreds of meal kit brands to identify a few lessons restaurant chains could apply to their own business. It all starts with understanding why meal kits have been successful.

It is convenient

Well, sort of convenient. It’s delivered to the door of the customer, and is prepared on their schedule. But it does have to be prepared. And cleaned up. While there is convenience, it comes with a limitation that is understood by customers.

Restaurants have both of these same elements. Dining at a restaurant, getting takeout or delivery can be more convenient than grocery shopping and cooking. But waiting and other factors can diminish the value exchange of paying for the overall convenience of not cooking. Restaurants need to continue to look for ways to remove friction from their ordering experience when consumers are looking for that convenience. They don’t necessarily need to cut out all the stops for dine-in guests.

Takeaway: Focus on friction.

Restaurants can take advantage of this trend of adventurous eating by being bold.

Foodies love it

Meal kits have a tendency to feature unique or unexpected ingredients. This gives customers a chance to ‘experiment’ with a new flavor in a safe way. It also lets them explore many profiles of spice, protein and vegetable combinations than they might be able to shop for at their grocery store without guidance. The chefs at Blue Apron have already tested the flavor and assembled the kit.

Restaurants can take advantage of this trend of adventurous eating by being bold. Even if it means offering variations on successful menu items, brands can add spicier profiles and unique proteins where it makes sense. The rise in turmeric and other spices is a trend that has hit meal kits and CPG but not yet mainstream chains. This despite Technomic and others (see previous paragraph) calling for it.

Takeaway: Bring the flavor.

Balanced meals

Remember this concept? Meal kits do a great job of making sure customers get a square meal. Their meals come set with complementary fruit, vegetables and side dishes that all work together. And we’re not talking about the frozen peas and carrots that we know from TV dinners. As above, this is part of a trend of playing to foodie culture that has flourished with gourmet cooking content and celebrity chefs rising to prominence.

QSR and Fast Casual (and many, many Casual concepts) under-emphasize or else flat-out ignore meal balance. For a long time, guests looked past it and just had a meal with fries and a soda. We’re all more educated, even if the lesson is the same one taught in elementary school using the outdated food pyramid. How can your restaurant add vegetables or sides to the mix that make sense to your concept and will be embrace by your guest.

Takeaway: Side dishes can be the star.

There’s also something to be learned in where they fall short:

You can’t predict a craving.

It is great when you’ve pre-ordered that pork cutlet with green chiles, and it shows up three days later and you are still in the mood for it. Yes. However, when customers suffer multiple lapses in orders; when they pass on a meal that’s been delivered, we’ll begin to see attrition.

What most restaurants have going for them is the very thing that you cannot control. Making food that people crave. Know your guests, and continue catering to their tastes. They’ll come when they crave it.

Takeaway: Find ways to drive craving.

These along with other factors such as accurate portion size are reasons that meal kit services have blossomed in the US. But through careful study of their customers, restaurants can find keys to improving their offering, guest loyalty and new customer acquisition.