Meals on wheels
Let’s be honest, there is nothing new in ordering take-away food. Not long after I moved into my first flat one of my guilty pleasures use to be ordering a meal for one from the local Chinese restaurant, even though it was no more than a 10 minute walk from my front door. Back then of course the choice of takeaways meals was quite limited with the only real alternative to Chinese being a curry or in some parts of the country a pizza.
This started to change through the 1990s as operators such as Domino’s and Papa Johns started to provide fully integrated delivery services accessed via a phone call. Over the years developments in technology and access to the internet has meant more and more operators have now entered this market place. A significant change in recent years has been with the emergence of third party ordering and delivery services such as Just Eat, Deliveroo and Uber Eats. So what is all the fuss about?
According to the MCA Foodservice Delivery Report, the food delivery market in the UK was worth £8.1bn in 2018, up over 13% on 2017. This equates to around 851m meals with an average spend per meal of around £9.50. If current trends continue then the MCA predict that the market will be worth nearly £10.0bn by 2021.
So are operators missing out if they aren’t delivering food to our doors?
A smaller slice of the cake…
The hospitality industry is full of examples where operators have seen a trend and then tried to ride on the back of it. Whilst this can work it is not always a recipe for success. What might be appropriate for one type of operation and offer, may not work for someone else. The same will be true when it comes to using a third party delivery service.
You need to ask yourself why you are doing it? What are your objectives? What does success look like? As more and more operators sign-up to these services their ability to stand out from the crowd will reduce. The risk here is that the main way to compete will be on price or by offering promotions. We already know that margins within the industry are quite tight and while you may save on staff costs when it comes to paying waiters etc. all your other overheads are likely to remain the same.
These services also come at a cost.
When Deliveroo first set-up they typically charged restaurants 10% of the price of the order for their service. Although each restaurant group will negotiate its own deals it is widely accepted that their current rate of commission is closer to 30%. This is very much in line with industry norms with Just Eat reported to charge around 35%. So using a third party delivery partner isn’t necessarily the best way to drive profits.
Interestingly it currently also doesn’t seem the delivery companies themselves are making a profit which then brings in to question the whole model.
Keep an eye on things…
If you do decide that using a third party ordering and delivery service is the right to take then choosing the right one for your offer is key. Look for one which has similar values and if possible guarantees. You also need to monitor how they perform. It is not uncommon for restaurant brands who use delivery operators to lose otherwise loyal customers after just one bad experience.
Just because you aren’t involved with delivering the food doesn’t mean you shouldn’t take an interest in how it is done. For example making sure you and your delivery partner are realistic about delivery times is crucial when it comes to building trust with your customers. Consumers repeatedly voice their frustration at late deliveries. The way consumers see your brand can also be damaged if the food isn’t hot when it arrives or it looks nothing like what they ordered due to spillages or poor packing.
And it’s not just about the delivery. The whole ordering and paying process needs to be as easy and simple as possible. If it isn’t then would-be customers will soon look for alternatives.
Food for thought…
From a simplicity point of view offering the same menu items online as you do in outlet would seem a sensible approach to take. However does it also make sense commercially? As we have already discussed margins on delivered food are likely to be much tighter than they are in outlet. If this is true is there a case to offer variations on your in outlet menu to help mitigate against this? As well as protecting margins there may also be an opportunity to offer online exclusives which may help you stand out from the crowd.
Of course which tactic you adopt may well be driven by what your objectives are for using online delivery in the first place. If it’s to increase awareness and ultimately drive customers to your outlets then having the same or a very similar menu is probably a must. However if you are aiming for incremental sales and perhaps trying to reach a new audience then having a different menu may offer a better solution.
Some operators have taken this a step further by introducing ‘virtual brands’. Virtual brands are essentially online only brands that have been created by existing physical restaurants, but with a completely different positioning. And in many cases there is no link to the parent brand. For example the restaurant chain Las Iguanas has created a chicken-based delivery concept, Blazing Bird, which operates out of their kitchens.
Here to stay…
Whether you decide that using either your own or a third party delivery service is right for your operation or not, one thing is for sure they are here to stay. Another thing which is also certain is that they will continue to evolve as both consumer demands increase and the need to find a more profitable way to meet these demands are sought by restaurateurs and deliver firms alike.
For example there are already companies in parts of Europe who are trialling delivery robots as one way to get costs down. On the operators side there has also been an increase in what are known as ‘dark kitchens’. These are kitchens which are solely setup to cook for delivered orders only and who don’t have any physical restaurant. These can see multiple businesses cooking from the same kitchen which in turn helps keep costs down. It is also a great way to enter the market with limited investment.