On the other hand, customers don’t see it that way. Convenient delivery. It’s usually very fast and, perhaps best of all, they can do it through the app – without having to talk to anyone at all.
Although eating restrictions have been relaxed in most places, delivery rates are still higher now than they were before Covid. In 2019, delivery made up about 7% of all US restaurant sales, according to Euromonitor International. After rising sharply in 2020, it settled at around 9% in 2021, according to last year’s Euromonitor forecast (the company’s 2021 foodservice data has not been released).
So whether restaurateurs like it or not, delivery is here to stay.
Consumers are accustomed to having products delivered to their homes,” said Joe Pollack, managing director of Technomic, a food service consultancy. Now, restaurants have to “figure out what needs to be done to make it profitable.”
For restaurants, overhauling delivery means not only making it work better, but also finding ways to convince customers to choose delivery or carpooling instead.
During the pandemic, restaurants have had to switch to a delivery or takeaway model to survive, said Tom Bailey, senior consumer food analyst at Rabobank.
“They didn’t necessarily do the most effective modification,” Bailey noted.
For some restaurants, the economics of delivery simply don’t add up. Third party service providers charge a fee of up to 30%. Restaurants, particularly independent restaurants, already have tight margins. For some, delivery charges can mean working in the red.
“Our third-party delivery providers were understaffed with Omicron, which affected their ability to meet part of our distribution needs,” he said. “This has required us to increase the use of alternative delivery solutions that are much more expensive in order to meet strong customer demand,” he added. In the end, the disruptions meant a “rapid increase” in costs.
One way to tackle the delivery challenge is to separate service from normal restaurant operations, primarily using it to attract new customers. This is especially important for casual dining brands like Applebee’s and Chili’s, which are designed to serve diners primarily in their restaurants.
The pandemic has prompted these and other chains to put online-only concepts tailored for delivery.
Online-only brands allow restaurants to promote products that travel well for delivery, such as sandwiches and wings, helping turn service from a burden to a competitive advantage.
These virtual brands “offer some truly unique opportunities to explore … delivery-centric urban and smaller prototypes,” Brinker CEO Wayman Roberts said during an analyst call in February.
For casual fast food restaurants and fast food, which are already designed to get people out of the house quickly, the best route may be through drive-through and express delivery incentives.
Better drive and easier to pick up
As customer habits change, restaurants are rethinking their schemes. For many, that means more driving.
What we saw with Chipotlane [is]The company’s CEO, Brian Nicholl, told CNN Business in a recent interview before the chain’s 3000th location opened. “From an economic point of view, the best margin transaction for us is in order for the future, after which the customer comes in.”
If chains can’t convince customers to use the express checkout method, they might try something else, like a small reward for skipping a delivery.
If all else fails, companies may see delivery naturally decline as service prices rise.
To make delivery more profitable, companies were making it more expensive.
In many restaurants, Paulak said, “menu prices are higher for delivery than they are…when someone goes to the restaurant.”
Companies raise prices on everything from menu items to consumer goods and say that for now, customers are still stuck. But this will not last forever.
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