Food to Go: New Delivery Services Reshape the Restaurant Industry
June 10, 2016 10:01am
by Natalie Holmes
Gone are the days when take-out options were limited to greasy fast food. Today, hungry city-dwellers can enjoy meals by top chefs in the comfort of their own home, or hotel room, thanks to a swathe of third party delivery services that are revolutionizing the restaurant industry.
Over the past few years, a growing number of delivery start-ups have made waves in the market by providing an online platform for ordering food and taking care of the real-world logistics.
London start-up Deliveroo made its debut in 2013 and after several rounds of investment, has expanded to major cities worldwide. Competitors such as Doordash, Seamless and Foodora among others, are also thriving – and transforming the dining culture in urban centers across the world.
“This development allows restaurants to tap into new markets that were simply not available to them before,” says Colin Chan, Senior Research Consultant at JLL UK. Where once they were limited by floor space, restaurants can now reach all residences and offices within a third-party delivery service’s catchment area.
For restaurateurs and food retailers, the impact is significant. “Business owners are factoring in the potential of increased covers when deciding whether to take up prime locations within the city,” says Chan. “In our experience, some of the big operators are definitely seeing an advantage. Large restaurant chains are expanding, and some have experienced a significant uplift in trade since signing up to third-party delivery services.”
Smaller independent food outlets also stand to benefit. In major cities like London, where space is tight, demand high and supply lacking, “start-ups may not be able to afford a prime pitch, however, they might find a small unit that, though expensive, will justify the overheads because of the potential to have a high number of meals going out,” says Chan.
Third party delivery services’ business models vary, but they typically charge a small fixed fee per delivery to customers, and a commission per sale to restaurants.
The instant gratification food market
For consumers in urban areas, options for take-out food have multiplied manifold. It’s now possible to order full meals from upscale restaurants to be delivered within 30 minutes. The challenge for both restaurants and third-party delivery services is to ensure that the expected quality of the food and the standard of customer service are maintained, while also minimizing disruption to traditional diners.
“There’s a responsibility from both parties,” says Chan. “The restaurant can’t reduce their quality, nor their in-house service. If one hinders the other then it’s not a successful model.” From the third-party’s perspective, ensuring the food arrives in a timely manner without a reduction in quality is essential.
According to Chan, the trend towards third-party food delivery is partly generational. “This is a tech-driven service.” Digital natives expect to be able to use their smartphones to access all aspects of culture, from fashion to food.
And, as more consumers with disposable income want their favorite meals on demand, it’s becoming a rapidly evolving – and increasingly crowded – marketplace. While most use the same model, some are adapting it to suit their business needs.
No one size fits all model
In 2015, Uber launched its food delivery spin-off, which employs its existing network of drivers to deliver pre-ordered food in 12 major cities across the U.S. and Europe. It also has the UberEats Instant Delivery option, which promises to deliver meals within 10 minutes. Instead of accepting bespoke orders, the service works by having drivers collect a small selection of popular dishes in temperature-controlled containers, keeping them in the vehicle and then delivering them to nearby addresses on demand.
While delivery accounts for a fraction of the restaurant market, the age of ‘food on demand’ is making it an important one. As Chan says: “We are far from a point where food businesses rely solely on delivery companies; people still want to dine in restaurants. But such services do now offer food outlets a certain safety net, which can play a part in decisions about inner-city real estate.”
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