قالب وردپرس درنا توس
Home / Business / Fast food companies are investing heavily in delivery. It might not pay off

Fast food companies are investing heavily in delivery. It might not pay off



Many years ago, most people who wanted food to come to the door were confined to pizza. But delivery platforms such as DoorDash, Uber Eats, Postmates and Grubhub ( GRUB ) have opened the floodgates: Now people can order breakfast from Panera, coffee from Starbucks, a burrito from Chipotle, a McDonald's burger among countless other options.

Delivery represents a great business opportunity for restaurants. Customer visits to restaurants have been roughly flat over the past five years through May, but delivery has grown 17% over the same timeframe, according to David Portalatin, national food and beverage analyst for NPD Group.

And the supply has plenty of room to grow. Portal utin accounts for only 3% of all US restaurant orders.

The transition to delivery is "deep," said Noah Glass, founder and CEO of Olo, a business-facing food ordering platform that works with restaurant chains and delivery units such as Uber Eats. "It's happening incredibly fast and the stakes are incredibly high."

Collaboration with delivery platforms can give restaurants access to a whole new set of customers. But some, like Domino's ( DPZ ) think it's a bad idea.

Third-party platform commissions can damage restaurants by eating into profits and eroding customer loyalty. By partnering with them, restaurants can eventually hurt themselves.

  Restaurants must pay a commission when collaborating with supply units.

Going all in

To make money from the growing trend, restaurants are making great efforts on delivery.

Pizza Hut plans to close 500 restaurants in the United States to "accelerate the transition" to locations that are better suited for delivery and takeaway, said outgoing CEO Greg Creed during a recent earnings interview with analysts. Starbucks ( SBUX ) announced this summer that it is expanding its collaboration with Uber Eats nationally. Many large chains, such as McDonald's ( MCD ] collaborate with multiple delivery units to reach customers loyal to each one.

Some only offer flashy promotions through

  DoorDash buys Caviar food delivery service for $ 410 million
Burger King offered a limited time "taste test" when it launched the meatless Impossible Whopper nationwide. Customers ordering both regular and Impossible Whopper for $ 7 were only available through DoorDash. Wendy's ( WEN ) similarly celebrated two million likes on a tweet by giving away spicy chicken nuggets via DoorDash.

By monitoring operations to accommodate delivery and direct customers to third-party platforms, restaurants hope to reach new loyal customers e towards these services. Most restaurants also offer delivery via their own websites and apps, as well as collaboration with multiple platforms.

Chipotle ( CMG ) who has added a second assembly line designated for delivery and contracting orders, says the partnerships are increasing sales.

"Delivery is still an important driver of our digital growth," CEO Brian Niccol said during a recent earnings call. "We've seen very little guest overlap between our own in-app delivery and our third-party delivery partner apps," he added.

However, some companies, such as Starbucks ( SBUX ) have not yet capitalized as much as they had hoped for delivery.

"There are still early days for food and beverage delivery in the United States," CEO Kevin Johnson said during a recent earnings interview with analysts. "While we don't yet see Starbucks Delivers making a meaningful contribution to our US business performance, we believe that Delivery is an important long-term growth opportunity. "

Not all restaurant chains believe delivery partnerships are the way to go. Domino's has specifically decided not to work with delivery sites.

  Domino is not a partner with third-party suppliers. [19659031] Domino does not partner with third party suppliers.

Holdout

For Domino's, delivery is a big deal. [19659014] Not only has the company delivered for many years, but it uses the service to showcase technological capabilities: It has tested self-driving delivery cars, looked at delivery with a drone and is now exploring using e-bikes for to skirt traffic.

But even Domino's are being pushed by the delivery platforms.

The pizza chain's sales have suffered in part because of "aggressive third-party delivery activity," CEO Richard Allison said during a conversation with analysts discussing second-quarter earnings.

He added that Domino continues to "see significant pressure" from these services and that he does not "expect this activity to facilitate in the short term."

Despite the pressure, Domino's does not plan to partner with a delivery site.

Allison said that he does not believe that working with third-party platforms creates incremental sales, and that these platforms will end up damaging the restaurant's profits.

The question of whether third-party platforms drive new sales or just redirect customers is key.

What can go wrong

Step by step sales are good for restaurants. But if customers who want to order from the McDonald's app, for example, go through a partner like Uber Eats instead, McDonald's earns less profit because it has to pay Uber Eats a commission.

It can also lose these customers to competitors.

Someone using a restaurant app can only order from that restaurant. When they visit a delivery unit, they can sort by distance, delivery time, price or food and end up ordering from a different location based on these metrics.

  Tipping your food delivery person can actually help a big company

"It has become clear to restaurant brands that they need to work hard to get their loyal customers to order directly from the brand, "Glass said.

And if something goes wrong with your order, customers are more likely to owe the restaurant than the delivery service. By outsourcing delivery, food companies also outsource their brand management.

However, restaurant brands should not avoid working with delivery services entirely, said Morningstar analyst R.J. Hottovy.

"I think at this point there is enough consumer demand that you have to do it," he said.

But "you have to be smart about who controls this data," Hottovy said. "That's the biggest thing."

Ultimately, Hottovy predicts that restaurants will come with a "hybrid" approach, relying on off-season delivery services and using their own drivers otherwise.


Source link