Delivering on The Promise of Off-Premise

With the exception of fine dining, most every restaurant segment (QSR, fast casual, casual restaurant) is designing for delivery, for more even meals consumed in homes or places of business, or at the soccer field.

    

As reported in QSR recently, 30 percent of orders for Firehouse Subs locations in South Florida came through third-party, meal delivery.

What’s the take-away?

A major re-think of your entire operation.

Let’s assume that today’s 30% statistic could eventually mean that half your business is heading out the doors. That will have significant implications for store layout and how you consider a future real estate parcel.

Where do you put your drink machine and condiments when a dash out the door is a high likelihood?

You might devise a different recipe for a store location in a suburban shopping center, one designed with many more short-term parking spaces for quick getaways onto major thoroughfares.

Next is preparation and packaging. You’re probably going to need to care more about containers and preparation for time on the road, than you might be with sit-down scenarios where the meal is consumed on-site.

This also has implications on staffing, with driver employees or coordination with third-party delivery services.  Should you build your own delivery infrastructure and capture the delivery fee? Consider that many of the new delivery firms will be well-capitalized with private equity and venture backing.

Grubhub Inc. (NYSE: GRUB), the nation’s leading takeout provider, announced 2017 fourth quarter revenues of $205.1 million, a 49% year-over-year increase from the previous year, with 14.5 million “active diners” and 80,000 restaurants in the mix. Do you want to compete with that?

You will also need to become more of an expert at vetting new services that are likely to emerge, integrating and training them and figuring out the right mix of third-party partners. Do you use six delivery partners, or will you have to accommodate every new delivery service that has drivers on the road?

What impact will this have on revenue? Will the average guest order size be larger with delivery? And if so, can you convert that to profitability?  Should there be a discount for an off-premise meal that doesn’t use up as much store space or wear and tear (cleaning) cost and might have a 25-30% upcharge for delivery?

An in-store complaint can be fixed immediately. How will you deal with dissatisfaction from a greater distance? How will you make it right when you can’t even see the problem?

This brings up the matter of loyalty. Operators may need to think about the additional investment and effort required to retain guests who might end up with greater loyalty to the third-party delivery services over repeat patronage to a particular restaurant. Or will loyalty be awarded to the restaurant that executes flawlessly on its delivery experience?

In our view, store technology choices will be even more critical in making sure this shift is a success. And it won’t just be in terms of ordering and POS. Adherence to food safety and quality will be even more critical.

Luckily, most casual dining concepts were built on the principles of Convenience and the winners will know how to execute without letting things go soggy or cold.