The Restaurant Delivery Drive

Delivery and carry-out is changing the restaurant industry. Like the rest of retail, consumer trends and digital are driving change. New trends are sweeping across the industry from hyper local sourcing to fine casual dining. None, however, has been as impactful as the rapid growth in the delivery and carry-out model.

Fueled by shifting consumer preferences, market trends, and opportunities for digital ordering, the growth in delivery is impacting restaurants across the operational spectrum from space and personnel requirements to recipe development and revenue per order. In this post, we’re going to look at three pivotal ways restaurants are having to accommodate the increase in demand for delivery and carry-out.

Physical space needs and prototypes are changing

As more customers are seeking convenience and ordering for home delivery, the physical space needs of restaurants across the country are changing from the kitchen to the drive-thru in a push for greater efficiency and the ability to service more customers.

Andy Misiaveg, Partner, TSCG

Inside the store, restaurants are having to accommodate in a variety of ways including having separate areas for preparing food for delivery and catering, and food to be served in-store. In addition, new and separate queues for takeout are popping up across the country as are commissaries.

The result has been smaller restaurants are often requiring more space to accommodate for the separate food area and lines, while larger facilities, especially those in the 4,000 to 7,000 square feet range are downsizing to adjust for fewer in-store dining patrons.

One interesting trend within a trend is the increase and growth in drive-thru lanes. Fast food to fast casual restaurants across the country are adding or expanding the lanes they currently have. We are consistently hearing of gains of approximately 20 to 30 percent just by redoing the drive-thru lane to accommodate more customers and provide faster and better service.

As the trend continues to evolve, some restaurants are looking toward the future, changing their store prototypes to accommodate for takeout and/or delivery, more drive-thru lanes, in-store kiosks, and the now much-talked-about “experience” of dining out. There is even a growing trend toward fine casual dining.

Coined by Shake Shack founder Danny Meyer, fine casual combines the speed and convenience of fast casual with a quality, “chef-driven menu and other other upscale touches that take the experience up a notch.

Technology is at the core

Whether a restaurant is offering delivery via online ordering directly through their website or through a third-party service partner such as Postmates, GrubHub, Seamless, or DoorDash, technology is at the core.

While the delivery model has been around for ages by phone, consumer adoption of online and mobile ordering has allowed for the growing demand by consumers for convenience to make its way unhindered into the restaurant industry. Although restaurant operators know resisting the trend is not in their best interest, the fees charged by the various delivery services can be hard to swallow. Ranging from flat booking fees to a percent of the total sale, and monthly service fees to advertising fees for better placement in search results, the question is the impact on incremental revenue per order. In truth, many restaurants are struggling with the cost of the third-party model but recognize that it is an essential service because the consumer demands it. If they don’t deliver or have a presence on the popular apps, the consumer will simply choose their competitor.

Panera Bread decided to take matters into their own hands and started hiring their own drivers in 2016. By 2017, they had hired approximately 10,000 drivers and other employees for their delivery orders, and earlier this year, launched their delivery service nationwide.

Food recipes are being retooled from scratch

One aspect of this trend that I found interesting was the need to retool recipes and/or cook times, to accommodate for transit times and the jostling about that can occur during delivery. Some restaurants offer separate menus for delivery not allowing certain dishes to be ordered for that purpose. The goal is to maintain the quality of the food comparable to the in-store experience.

Delivery is here to stay. As the trend continues to grow, I expect to see restaurant operators across the country accommodate their existing operations and space to provide more efficient service. More importantly, however, is finding the right combination of back and front of the house ingredients that will grow the bottom line.

— By Andy Misiaveg, Partner at TSCG

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