Is Direct or 3rd Party Delivery Best for Fast Casual Restaurants?
The restaurant industry hasn’t seen tremendous growth for many years, so consumer dining trends have had significant impact on how restaurants serve their customers. Patrons have shifted their purchasing behavior toward favoring takeout, delivery, and even catering as modes of off-site eating. Faced with competition from a crowded restaurant marketplace plus this shift in dining behavior, fast casual stores have had to adjust their approach and embrace what was once primarily the sole domain of such formats as pizza shops and Chinese restaurants: delivery. Current technology and startups make it possible for many more stores to take advantage of delivery than would have previously been possible.
Delivery service using in-house staff was (and still is) prohibitive for many standalone restaurants and smaller chains. Yet demand for delivery services has given rise to 3rd party solutions that meet the needs of consumers and numerous restaurants and chains alike. In the vein of Uber (in fact they have their own food delivery service format in addition to ridesharing), cooperative 3rd party delivery services remove the responsibility of delivery overhead from the restauranteur, and also offers great flexibility to consumers who now have access to ordering favorite dishes from local restaurants that they would like to patronize—in person—more often, but for whatever reason are not able to do so. These delivery services also allow consumers to place mix-and-match orders, patronizing multiple restaurants. While this may be off-putting for some restaurants, it’s actually a win. Whereas traditional direct delivery would limit a group order to a single restaurant (to save on time, delivery fees, tips, and sanity), 3rd-party solutions open up opportunity to make a sale in the midst of a mixed order.
Off-premise food sales (takeout, delivery, catering) is projected to exceed $200 billion this year, and delivery should account for 1/5 to 1/4 of that amount. More than a third of those deliveries will be made by 3rd-party services. As consumers increasingly prefer to dine at home, delivery will cannibalize on traditional dining sales, but will become increasingly important to the bottom line of restaurants of various formats—including fast casual. Consumers are increasingly willing to pay for the convenience (including delivery fees and additional tips), and restauranteurs need to take notice.
The challenge for standalone stores with 3rd-party delivery services is a lack of branding and administrative control. It’s a natural concern that delivery drivers represent the brand with professionalism, cleanliness, and friendly service. And it’s paramount that food is delivered at a proper temperature, in excellent condition, and up to the standards of the restaurant’s in-store quality. Restaurants are right to be concerned; 8 out of 10 consumers will blame the restaurant—not the driver—if the delivered food doesn’t meet expectations.
Some larger chains have opted to institute their own direct delivery solutions to maintain control over the process. While they save the added costs others will incur by using 3rd-party services, they add on a great deal of overhead with delivery staff, training, and other logistics. In the end, the difference may be a wash, depending on the size of and resources available to a particular restaurant or chain. However, the delivery service trend seems to be an opportunity too good to pass up in a consumer climate where patrons literally want their cake—and to eat it too.
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