Customers, on the other hand, don’t see it that way. Delivery is convenient. It’s usually pretty quick, and perhaps even better, they can do it through an app – without ever having to speak to a person.
Although dining restrictions in most places have eased, delivery rates remain higher now than they were pre-Covid. In 2019, delivery accounted for about 7% of total restaurant sales in the United States, according to Euromonitor International. After peaking in 2020, it leveled off at nearly 9% in 2021, according to Euromonitor’s forecast for last year (the company’s 2021 foodservice data was not released.)
Whether restaurateurs like it or not, delivery is here to stay.
“Consumers have become accustomed to having their products delivered to their homes,” said Joe Pawlak, chief executive of Technomic, a foodservice consulting firm. Now restaurants “have to figure out what to do to make it profitable.”
For restaurants, fixing delivery means not only improving it, but also finding ways to convince customers to choose take-out or drive-thru instead.
The delivery problem
During the pandemic, restaurants have had to switch to a delivery or takeout model to survive, said Tom Bailey, principal consumer food analyst at Rabobank.
“They didn’t necessarily make the most efficient adjustment,” Bailey noted.
For some restaurants, the economics of delivery just don’t add up. Third-party providers charge fees of up to 30%. Restaurants, especially independent ones, already have low margins. For some, delivery charges can mean running into the red.
“Our third-party delivery providers have experienced Omicron-related staffing shortages, which has impacted their ability to meet some of our distribution needs,” he said. “This has forced us to dramatically increase the use of much more expensive alternative delivery solutions…in order to meet high customer demand,” he added. Ultimately, the disruptions caused “a rapid increase” in costs.
One way to address the delivery challenge is to separate service from regular restaurant operations and use it primarily to attract new customers. This is especially important for casual dining brands such as Applebee’s and Chili’s, which are designed to serve diners primarily in their restaurants.
The pandemic has prompted these chains and others to implement online-only concepts designed specifically for delivery.
Online-only brands allow restaurants to promote products that travel well for delivery, such as sandwiches and wings, helping to turn service from a burden into a competitive advantage.
These virtual brands “offer truly unique opportunities to explore … urban and smaller prototypes focused on take-out delivery,” Brinker CEO Wyman Roberts said on a call with analysts in February.
For fast-casual restaurants, which have already been designed to get people out quickly, better drive-throughs and take-out incentives may be the way to go.
Better drive-thru and easier pickup
As customer habits change, restaurants are rethinking their layouts. For many, that means more drive-thru.
“What we saw with the Chipotlane [is]our digital business is going up, our delivery business is going down as a percentage, and the order pickup percentage is going up,” company CEO Brian Niccol told CNN Business in a recent interview ahead of the opening of the city’s 3,000th location. chain.” From an economic perspective, the best margin transaction for us is in sight, and then the customer comes in,” he said.
If chains can’t convince customers to use a faster drive-thru, they can try something else, like a small bonus for skipping delivery.
If all else fails, businesses may see delivery naturally drop as the service becomes more expensive.
To make delivery more profitable, companies have made it more expensive.
In many restaurants, “menu prices are higher for delivery than they are .. when someone goes to a restaurant,” Pawlak said.
Companies have hiked prices on everything from menu items to consumer goods and say customers are sticking around so far. But it won’t last forever.