JD and Mat go “unplugged – no PPT slides. Just the lively are of conversation about restaurant delivery in the age of COVID. As you may recall, we explored this topic a while back. What’s changed since then? Are things better or worse? If necessity is the Mother of Invention, what innovations have come to fruition?
So with everybody stuck at home and all this delivery mania, you would think that both restaurants and 3rd party delivery services such as GrubHub, Caviar, Door Dash etc. would be making money. Turns out that’s not the case. Many restaurants rely entirely on delivery revenue to make money and stay afloat and are finding their profits eaten away by the approximately 30% commissions that third-party delivery services typically charge business owners.
On top of that, the competition for what essentially is a commodity service is cuthroat. Grubhub has seen its market share decline to about 30% of US sales in November, down from more than half just two years earlier. Meanwhile, venture capital-backed startups like DoorDash have moved into the lead, with 37% of US sales. Food delivery is a low-margin business, which makes money from charging customers delivery and other service fees, and from revenue shares with restaurants. And to sign up some bigger restaurant chains, food delivery services have had to lower their commissions. Those margins are further tightened as food-delivery companies seek to beat out their competition by lowering their fees for customers and offering expensive promotions. These discounts, however, aren’t necessarily locking in customers, but rather encouraging customers to shop around. It’s a similar situation to ride-hailing, where customers are not loyal.
To make matters worse, the Grub Hubs and Uber Eats of the world are doing little (to date) to distinguish and differentiate themselves. Surprisingly, their apps are remarkably rudimentary and lack features that customers have grown used to in other applications:
– Personalization
– Multi Location Ordering
– One Tap Order Button
– Pictures & Reviews
-Premium Offerings
-Nutritional Information
-Rewards/Loyalty Programs
This is not to say there isn’t innovation in the space. It’s just not the ususal players that are making it happen. In North Beach, CA it’s the longstanding neighborhood association, North Beach Neighbors, that has stepped up: For each of the past two weeks, the association has picked a single restaurant in the neighborhood to support and to highlight, and a small team of volunteers has run a free delivery service for that restaurant for several hours. During the first week of the program, Piazza Pellegrini, one of the neighborhood’s many Italian restaurants, was the featured restaurant. According to Sauter, the restaurant made an extra $1,000 as a result of the effort — money that came from extra orders it received thanks to North Beach Neighbors sending out an email blast that included an online form where customers could place their orders. Since volunteers ran all of those deliveries — limited to within a two-mile radius — all of that money went directly to the restaurant. Dispatch Goods, a San Firanciso based start up, partners with restaurants who pack the orders in reusable stainless steel containers. You heat the food (it arrives cold), eat the food, rinse out the containers and place them resusable bags to be picked up at a later date. No fuss. No muss. No waste.
0:00 Intro
1:30 Dining In: Winds of Change
2:43 Delivery Realities For Restaurants
4:25 Pizza – King of Delivery
10:01 The Dispensed Beverage Negation
12:00 Real Estate Just Got Real
13:20 Retail Envy
18:18 Delivery As A Commodity
21:21 Outro
Please note that our opinions are our own and do not represent the position of any other person, organization, or entity.
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About us: We’re two food industry experts with a passion for exploring what we eat and why we eat it.
Jonathan DeVito (JD) is a food industry analyst. He currently leads a food industry market research and strategy practice in Chicago (visit www.pivitasresearch.com). A proponent of immersion research and ethnography, Jonathan maintains real-world experience by moonlighting as a restaurant worker. Jonathan holds a BA in anthropology, summa cum laude, Phi Beta Kappa, from the University of Massachusetts Amherst.
Mathew Mandeltort (Mat Dogg) is a recognized foodservice operations expert. He has held numerous culinary and business leadership roles, most recently serving as Vice President of Foodservice Strategy for Eby-Brown, one of the largest convenience store distributors in the United States. Mathew received his JD from the Chicago-Kent College of Law at the Illinois Institute of Technology, his MBA from the Lake Forest Graduate School of Management, and his BA from Macalester College.