Explore the booming food delivery and takeout sector, driven by consumer demand for convenience. This subcategory covers the impact of food delivery apps, ghost kitchens, and the rise of meal delivery services, as well as the challenges and opportunities in this rapidly growing market.
This sound is actually auto-generated. Satisfy permit our team understand if you possess feedback.
Dive Short:
Reddish Robin observed guest satisfaction scores in Q2 2024 boost to degrees the establishment have not observed because 2016, CHIEF EXECUTIVE OFFICER G.J. Hart stated Thursday throughout an incomes phone call.
General dine-in attendee complete satisfaction fees were actually up 6% while Dark Carton social web view ratings boosted through 17% and also adverse attendee problems “go to a record low,” lowering 29% matched up to the year-ago fourth, Hart stated.
These enhancements are actually the outcome of a number of efforts that the establishment has actually executed over recent twenty months as aspect of its own North Star plan, featuring enhanced staffing and also food selection enhancements.
Dive Understanding:
Before its own North Superstar strategy, Reddish Robin’s attendee complete satisfaction ratings were actually 10 factors responsible for the laid-back eating market, the largest scope it had actually observed in virtually a many years, Hart stated.
Improvements to its labor model possessed among the greatest effect on attendee complete satisfaction. In 2023, the provider included even more hosting servers to enable each to pay attention to less desks and also to lessen inaccurate delay opportunities, which are actually stand by opportunities of 15 moments or even even more, Hart stated. The provider additionally recovered multitudes and also bussers to strengthen desk turn opportunities and also sanitation.
Moreover, it included kitchen area expediters and also went back to a control property that would certainly strengthen reliability of purchases. Just before the project, dining establishments were actually managed through basic supervisors, aide supervisors and also per hour supervisors. The assistant supervisor task was actually switched out through either a home kitchen supervisor or even friendliness supervisor, Hart stated in 2023.
Managers explored thirteen% even more dining tables throughout the 2nd fourth matched up to the year-ago fourth, Hart stated. These brows through generally cause visitors measuring their knowledge 12% much better, he included.
Possessing supervisors check out dining tables and also keeping a much better visibility in the dining-room additionally aided regulate the circulation of individuals, while brand new ranges have actually produced inaccurate hangs around practically missing, Hart stated. In the course of Q2 2022, 10% of visitors mentioned inaccurate hangs around, strengthening to 3% in Q2 2023. Since Q2 2024, simply 1% of visitors mentioned long haul.
Guests additionally mentioned a 7% remodeling in speed of adventure and also 3% on purchases fulfilled on schedule, Hart stated.
Off-premise attendee ratings have actually additionally boosted, along with purchase reliability and also meals try up 7% and also crew kindness ratings up through 6%, Hart stated.
Improvements to its menu and also punishment have actually additionally led to much better ratings. Reddish Robin has actually performed its own infinite commitment provide– where visitors may obtain cost-free refills on at the very least 30 food selection products– to 90% of visitors, a 9% boost year over year.
The provider improved a number of elements and also included over twenty boosted premium hamburgers, readied on level best grills which cause more thick and also juicier hamburgers, Hart stated. Meals premium ratings are actually up through 4% every questionnaires of devotion visitors and also meals premium ratings surpassed the laid-back eating portion through 3%.
” The outcome of these efforts is actually total attendee complete satisfaction that has actually hit equality to the laid-back eating market over the final 2 fourths for the very first time in just about 9 years,” Hart stated. “Along with our total attendee complete satisfaction ratings rising like they possess, our team completely prepare for that that is actually mosting likely to remain to steer attendee matters too.”
As of the 2nd fourth, website traffic remained in line along with the market, and also Reddish Robin assumes to “comply with or even go over the market standard on website traffic with the rest of the year,” he stated.
While ghost kitchens were on the rise during the peak of the pandemic, Nimbus — a New York City-based, female-founded collaborative kitchen company — looked very different from its colleagues in the space.
Whereas most ghost kitchens could not be visited physically (or even readily identified on a delivery app), Nimbus operated as much as a community and events space as a delivery kitchen. Many ghost kitchen companies also launched their own virtual brands in addition to partnering with established restaurants, but Nimbus cofounder and CEO Camilla Opperman Morse decided to forego being an operator, and instead focus on perfecting the commissary kitchen in a “WeWork” type of environment.
Now, five years after its launch, Nimbus has four New York City locations (three in Manhattan and one in Brooklyn), and Opperman Morse is taking the company to a new city for the first time. Nimbus will soon open in the former Le Cordon Bleu space in Chicago, and the goal is to eventually grow to the “anti-ghost kitchen” company to all major metropolitan areas across the United States.
“We are providing affordable, flexible commercial kitchen space to food businesses to run their off-premises productions in the hopes of lowering the barriers to entry of… building out their own space,” Opperman Morse said. “It’s really a way for brands to scale and launch in a capital efficient and low-risk way, which has been core to our identity since 2019.”
Even though the Nimbus spaces are ideal for startups or smaller businesses that want to test the waters in a new market, the company gets a wide variety of clientele, “from Noma to Little Caesar’s,” Opperman Morse said. Brands also have the flexibility of choosing the type of rental they want, from four hours (if they want to run a special event), to four years (if they want to build a permanent off-premises home), and everything in between.
Kitchen rentals at Nimbus come with access to facilities, equipment maintenance, food safety monitoring, basic equipment, and Wifi, to name some of the main assets. Operator partners also have access to front of house space, where Opperman Morse said they ran 265 events last year.
The Nimbus team chose Chicago as the next phase of expansion because it’s well-known as a food city with a “strict regulatory environment and high cost of real estate,” which might be prohibitive to businesses just starting out.
“There are a number of cities around the country where it’s much easier to open a kitchen or it’s much cheaper to get your own space,” Opperman Morse said. “So, we would not necessarily be solving as much of a problem in those markets.”
Over the past five years, she has watched as other ghost kitchen, virtual restaurant and other adjacent businesses have failed or been acquired by other companies. Opperman Morse said that they stand out by avoiding some of the pitfalls of these companies—namely being a tech company first or trying to be a jack of all trades within in the off-premises business.
Opperman Morse said that this is the major reason why Nimbus has not started its own concepts, nor has the company tried to be a traditional incubator with financial support for startups. Instead, the Nimbus team has carved out its own niche for brands that are looking to rent out a space with resources to become more than just a typical dark kitchen.
“Ghost kitchens have gotten a lot of bad press, and I think rightfully so,” she said. “Many of these vertically integrated kitchens tried to grow too quickly and were trying to do too many things at once: running a kitchen, developing tech products, and launching virtual brands…. We’ve always emphasized the in-person hospitality element of our business, and… I think that in-person interaction and bringing hospitality back into the equation is key.”
Over the next five years, Opperman Morse hopes to grow Nimbus to 50 locations in new cities, with a focus on expanding methodically without burning out.
Instacart and Uber announced a new and unexpected partnership on Tuesday that adds hundreds of thousands of Uber Eats’ restaurants to the Instacart app.
In the next few weeks, Instacart will add a “Restaurants” tab to its app, giving its customers access to Uber Eats.
Members of Instacart+, the company’s loyalty program, who place orders from Uber Eats-affiliated restaurants will receive the same offer — free delivery for orders over $35 — given to Instacart’s grocery customers.
Instacart noted in a press release that Instacart drivers will still fulfill grocery orders, while Uber Eats couriers will fulfill restaurant orders.
“Our goal is to make it effortless for people to go anywhere and get anything,” said Uber CEO Dara Khosrowshahi in the press release. “We’re excited that this new strategic partnership with Instacart will bring the magic of Uber Eats to even more consumers, drive more business for restaurants, and create more earnings opportunities for couriers.”
Instacart CEO Fidji Simo said the partnership aims to make it easier for Instacart customers “to conveniently tackle all their food needs from a single app.”
“Whether it’s ingredients for a beloved family recipe, a prepared meal from a nearby grocer or takeout from a favorite restaurant — customers can now get the food they want, from the retailers and restaurants they love, all within the Instacart app,” Simo said.
The partnership helps Uber by driving more orders to its restaurant partners, the company said.
Meanwhile, the new partnership poses a challenge to competitor DoorDash, which offers delivery both for restaurants and grocery stores, among other retail businesses.
DoorDash CEO Tony Xu said at the beginning of 2024 that the company aims to expand further into grocery in 2024.
As of January, DoorDash dominated restaurant delivery with 59% of the market, according to YipitData.
In mid-February, Xu said making grocery a priority has “paid off really well,” noting that more than 20% of its customers were using the app for non-restaurant delivery.
“I mean, we’re now north of 100,000-plus stores that are outside of restaurants that are on our platform, which, you know, we estimate to be the largest in North America,” he said during DoorDash’s Q4 earnings call in February. “More and more grocery retailers are coming inbound. And then similarly, more and more consumers are shopping for the first time in the grocery category on DoorDash even ahead of restaurants.”
Papa Johns’ customers are spending less than they had previously, and when they do spend money on pizza, they are more likely to choose third-party aggregators over the company’s first-party delivery channels. This shift in mix balance was a primary driver behind the Atlanta-based pizza chain’s 2% decline in North America same-store sales, as well as revenue and overall sales deflation for the first quarter ended March 31, 2024.
Sales from aggregator channels have grown to 16% this quarter, as compared with 12% the same quarter of 2023, meanwhile organic delivery has declined year-over-year, while carryout remains flat. This highlights the quandary operators face when utilizing third-party apps: they are crucial to pull in new and non-regular customers, but operators lose revenue from these transactions.
“This shift in channel also led to a slightly lower average ticket, as the relatively profit-neutral revenue from our organic delivery fee decline and strategic pricing actions by our revenue management team helped to somewhat mitigate this delivery fee impact in the current environment,” Papa Johns CFO and interim CEO Ravi Thanawala said during Thursday’s earnings call for the first quarter.
Like many other companies this quarter, Papa Johns is feeling the negative effects of a more cautious consumer environment, where discretionary income is down overall, so customers are being choosier with where they spend their income.
“We’re also seeing customers become more deliberate in managing their overall order costs, so while our core offering pizza remained higher year-over-year, sides and beverages were lower,” Thanawala added.
As many of their competitors in the industry ramp up discounting to lure in more budget-conscious guests, Papa Johns is finding that the brand’s everyday value strategy could be hurting the bottom line in the short-term:
“The highly competitive promotional environment has been a headwind to transaction,” Thanawala said. “We believe Papa Johns’ perceived value is about providing high-quality product innovation at the right time and at the right price. It is important that we maintain discipline in our limited time offers, pricing strategies, and product innovations for the long-term success of the business. Although, we won’t hesitate to make short term adjustments as we deem appropriate on a market-by-market basis to remain competitive.”
As Papa Johns navigates these operational challenges, the company is still moving full-steam-ahead with its “Back to Better 2.0” strategy launched in January, which is meant to “enhance restaurant level profitability and reinvigorate development over the long term.” This quarter, the company introduced the new “Crispy Cuppy ‘Roni” platform across three menu items, featuring the trending cupped pepperoni. Papa Johns also introduced a refreshed marketing platform meant to “drive brand relevance” with modern images and messaging across advertising channels.
“While it’s only been five weeks since we launched our new brand platform, early research of the campaign showed an increase in the consumers purchase intent,” Thanawala said. “Moving ahead, we’re focused on improving sales by our revenue management strategies, ongoing loyalty improvements, and adapting our media strategy mix to maximize effectiveness across channels.”
The company also plans to focus on continued portfolio expansion and expects net new units to increase by more than 20% in the year ahead.
For the first quarter ended March 31, Papa Johns reported total revenues of $514 million, down 2% from $527 million the same quarter the year prior. Net income was $14.6 million or $0.44 per share, down from $22.4 million or $0.65 per share the same quarter last year.
Papa Johns reported eight net unit openings in the first quarter, largely driven by North America growth for a grand total of 5,914 stores systemwide.
Third-party restaurant delivery is a major consumer innovation that links ordering through marketplaces to fulfillment by gig drivers managed by marketplace algorithms. It began in fits and starts — mostly just ordering marketplaces, with restaurants left to figure out fulfillment on their own. Third-party restaurant delivery accelerated when DoorDash linked the front and back ends together, effectively surrounding the restaurant in what initially appeared to be services the restaurant could not do on its own.
Third-party delivery has, in many ways, been a boon to all involved. Although not all delivery sales are incremental to on-premises sales, restaurants have generated incremental sales. Consumers have greater choice and convenience in procuring prepared meals. Millions of couriers collect extra income from The Gig ATM, effectively monetizing their auto assets by delivering restaurant food. The marketplaces make it easy for restaurants to get online, make it easy for consumers to order from a wide choice of restaurants, and make it easy for workers to find gigs. These platforms have successfully brought together three different stakeholders in a way unlikely to have occurred without them.
While the primary allure to all of these stakeholders is “easy to,” that upfront ease obscures downstream friction resulting from third-party platforms. Assuming that restaurants have figured out how to price for marketplace commissions and that delivery consumers have determined that paying higher prices for convenience is worth it, five major problems have emerged for restaurants now that third-party platforms are ubiquitous.
Challenge #1: Overwhelmed Kitchens
The idea of incremental sales is alluring. All restaurateurs know that transactions are the lifeblood of each restaurant location. More transactions are almost always better — except when they all occur at the exact same time.
As delivery has become a more ingrained behavior, it has become clear that most delivery orders occur simultaneously with most on-premises orders. This has left restaurants in the unusual position of having their kitchens controlled entirely by another business — the third-party marketplaces.
Consumers choose what to order based more on the menu than anything else. If you are a brunch place, expect morning orders to peak at the same time as your dine-in traffic. If you are a lunch place, expect lunchtime orders to peak at the same time as your dine-in traffic. If you are a dinner place, expect evening orders to peak at the same time as your dine-in.
Challenge #2: Food Waiting for Driver Arrival
“Get ahead of the wave” has been said in most kitchens. “Always be baking” is another similar phrase often used in pizza restaurants. The idea is that you know the peak is coming, so line staff should do whatever they can to get ahead. This might mean prepping ingredients, cooking 100 burgers knowing that someone will order them, or dropping in fries even if there are no orders on the KDS.
What this mindset has come to mean in terms of delivery is that if a delivery order comes in and there is capacity to make it, then make it. Make it without knowing where the driver is or when they will arrive. Make the difficult or capacity-constrained items first, even if they will degrade while the team pulls together the other items. Just make it.
While this mindset, in theory, increases capacity utilization by freeing up the team to make another order later, it often results in food sitting and waiting for the driver’s arrival. Nothing good happens to food while it sits, no matter how good the packaging is. And the more food sits, the more shelves are necessary. And the more shelves a restaurant is filled with, the more it looks like an e-commerce fulfillment center and not a pleasant dining experience. The more e-commerce fulfillment takes over, the more correct order-to-driver matching becomes a problem.
Challenge #3: Restaurants Crowded with Non-Customers
Restaurants with more than 20% of their sales coming from delivery put their assets and teams under significant stress. With one in five parties present merely to collect an order on behalf of someone else, that means one in five parking spots are not directly generating revenue, one in five cars in the lot are blocking parking for on-premises guests, and one in five people trying to talk to the hostess merely want to collect the right bag.
Regardless of the professionalism, or lack thereof, of any given courier, these additional people can crowd the restaurant, again at peak time, causing both asset and front-of-house staff to work harder than the model was designed to do. This problem is exacerbated by the lack of coordination between courier arrival and food prep. While many restaurants try to “get ahead” of delivery orders, the courier often arrives before the food is finished. This wait time — frustrating to restaurants, couriers, and consumers alike — reduces parking spot turnover and furthers crowds in on-premise pickup areas.
Challenge #4: Chargebacks and Fraud
Recent surveys of restaurant owners have found that a shocking 3-4% of delivery sales are charged back to the restaurant. When delivery makes up 30% of sales, this can translate to more than a point of sales missing from the restaurant. Worse, the food has likely gone out the door. When food and paper costs are 30% of sales, restaurants could lose a half margin point just to chargebacks.
Perhaps the restaurant made a mistake, perhaps the courier consumed the food, or perhaps the delivery guest committed fraud by reporting an item or order missing that was, in fact, received. In most cases, it is impossible to say where the problem occurred. But marketplaces generally put the liability on the restaurant: guilty until proven innocent.
Delivery is not necessarily more prone to errors or fraud than is dine-in. The fragmented system just makes it harder to detect and correct errors and fraud. Where did the problem occur? Who is responsible? How can the problem be remedied? Can it be remedied?
While the guest relations and profit problems associated with chargebacks and fraud are obvious, the operational costs are less obvious. Owners, managers, and finance departments across the country incur these costs by investigating and disputing each individual chargeback.
Challenge #5: Lack of Guest Relationship
The last problem may be the most nefarious because its impacts are difficult to immediately quantify. Restaurants have lost their relationship with their guests and, with it, their ability to engage in hospitality.
Many restaurants lament the lack of guest data coming through third-party channels. Who is ordering? How often do they order? What do they order? While this lack of data seriously affects feedback loops and a restaurant’s ability to remarket to the guest, it isn’t really that different from recent history.
As little as 10 years ago, few restaurants knew the answers to these questions at scale. When sales were down at a major national brand, the Consumer Insights department deployed massive surveys to determine why- no behavioral data told the restaurant whether the problem lay in frequency or penetration. Were fewer customers coming in? Or were the same customers coming in, just less often? No one knew for sure. And yes, having this data is better than not having this data, but something else has been lost as a third party has been inserted between the guest and the restaurant.
The real problem for the restaurant is its complete inability to engage with the end consumer. The restaurant has no control over who represents its brand or how its brand is represented through couriers. The restaurant has no control over batching several deliveries into a single run. The restaurant has no control over fixing an issue when it arises.
Couriers are people. And like all people, some are more professional, and some are less. A specific restaurant may have a standard in mind for their employee brand representatives, but with a third-party system, there is no way to enforce this standard. The restaurant gets what it gets, in accordance with the invisible hand of the algorithm.
Some couriers engage in “self-batching,” combining orders from different restaurants to different destinations by using multiple phones to simultaneously deliver for multiple platforms. These couriers can increase their earnings by taking two orders from similar parts of town. Anyone who has ordered from a marketplace and watched their courier’s car stop at one or two other places of business, then one or two other places of consumption, knows how maddening this is. Delivery times run longer, food degrades further, and the consumer regrets the tip they placed at order, which no longer seems justified.
In response to this behavior, third-party platforms did not see a problem that needed to be eliminated. Instead, the marketplaces saw an opportunity to capitalize on. Third-party platforms now algorithmically batch orders. While this may be marginally better than the judgment of a courier running multiple phones, it’s still not great. Even well-batched orders will be slightly delayed, resulting in degradation in food.
As YouTube influencer Mrwhosetheboss pointed out in his recent video “The Internet Is Starting to Break: Here’s Why,” platforms use this degradation in service to not only enrich themselves (two delivery and service fees for one delivery) but also to create tiers of service for which they can further upcharge consumers. Don’t want to wait on the risk that the platform batches your order with one from across town? Pay an extra $2.99 for expedited service.
And where is the restaurant in all of this? Odds are the consumer will receive their order of cold, old food and blame the restaurant. Every front-of-house employee is trained in guest winback in case something goes wrong in a transaction. But how can a restaurant employee win back a guest who is unknown to the restaurant and complains to a third party? Worse, what if the complaint is a low star rating and an essay about the quality of the food on the platform, when that quality issue was created by the platform itself?
Getting Rid of Third-Party Complications
Over the last 10 years, a huge amount of innovation has gone into the consumer-facing front end of these challenges. If only we could get consumers to order directly from the restaurant, the thinking goes, all of these problems would go away. First-party online ordering systems have improved dramatically over the last 10 years, with many systems rivaling the frictionless ease of ordering through a marketplace.
Changing consumer behavior is harder than it seems, and merely offering consumers the ability to order directly from a restaurant has not always resulted in consumers ordering directly. Enter loyalty programs. Loyalty programs purport to give consumers enough value from ordering directly that they are more likely to do so. Loyalty programs have likewise come a long way, now offering consumers benefits beyond mere discounts and collecting behavioral data while they do so.
But still, the third-party marketplaces persist. As long as they offer restaurants access to consumers they might not otherwise get, consumers convenience that takes memorized passwords and credit card numbers to replicate, and drivers the ability to earn money flexibly that they might not otherwise make, the third parties will continue to be a part of running restaurants.
Solutions to Date Are a Start, but Inherently Reactive
Every Venture Capitalist loves a good problem statement. A great product becomes irresistible to its target market because it solves a genuine problem, a pain point. And the interesting thing about restaurant food delivery in 2024 is that it creates SO. MANY. PROBLEMS. These problems create rich soil for technological innovations to grow in.
Any restaurateur engaged in delivery receives many emails, phone calls, and visits each day from well-meaning sales reps of startups offering point solutions to each of these many problems. The solutions are amazing.
And dizzying. There are cameras and scales to reduce chargebacks. There are shelves, lockers, and packaging to deal with food waiting for drivers. There is throttling software and dynamic pricing to eliminate super-peaky demand. There are tools to select delivery fulfillment companies, geofence the restaurant, automate chargeback dispute resolution, and automatically ensure a restaurant’s online store on the marketplace is up.
Getting to Root Cause Prevents Problems by Solving from First Principles
But what if none of these tools were necessary? What if the solution to the problem is not having the problem in the first place? Is there a way to give consumers what they want, without creating a disjointed system that results in so many problems?
Designing from first principles means stepping back to determine what we are trying to achieve (great food delivered cost-effectively to a consumer). Instead of adding incremental solutions to an existing model, first-principles design solves for the objective, not the problems, by creating a well-coordinated, purpose-built system specifically for that objective.
The magic of a well-coordinated system is that everybody wins. With increased efficiency, the restaurant, the driver, and the consumer are all better off. While a well-coordinated system may take more effort upfront to set up, it is easier and more profitable once it is in place.
Does this, therefore, enable new entrants to the restaurant industry to have an advantage over current incumbents? Maybe. If we ask the executives of top restaurant chains what they would change about their operating system, many would likely touch on specific functions that need improvement. We would argue that it’s not the functionality that should be considered initially but the mindset of those shaping the operating system that needs to change. A new entrant can design from a blank sheet. An incumbent must build on what is already generating revenue, so it is understandably not easy.
Perhaps it should not surprise us that many incumbents are designing stand-alone digital kitchens and their respective operating systems, intending only to service off-premise orders. As we discuss in the final chapters of Delivering the Digital Restaurant: The Path to Digital Maturity, restaurant owners will reach a fork in the road on how they decide to handle the challenges of food delivery. Some may be tempted to lean deeper into experiential dining and forgo the incrementality of delivery. Others may need to develop stand-alone units with systems to optimize their delivery experience – something we believe can only be achieved through a vertically integrated tech stack.
If you are tired of your guests complaining about your delivered food being old, cold, or missing….
If you are tired of a crowded parking lot and bags of food lined up where guests should be….
If you are tired of sorting through chargebacks to determine what is your restaurant’s fault….
If you are tired of your staff not being sure which order to prioritize during peak….
Maybe it’s time to look at how your multi-channel restaurant needs a fresh perspective. One that doesn’t attempt to solve the problems that come from delivery but instead tries to do delivery well. Something that gives your guests as good an experience through delivery as they may have sitting inside your restaurant itself.
As we have written in “Delivering the Digital Restaurant: Your Roadmap to the Future of Food” in “Chapter 5: Why Pizza Works,” there is a way to deliver without all the headaches. Pizza has known and achieved this for years. Control your destiny, control your delivery. By vertically integrating order, production, and fulfillment, your restaurant can prevent the problems that come with third-party involvement.
About the Authors
Meredith Sandland and Carl Orsbourn are co-authors of “Delivering the Digital Restaurant: Your Roadmap to the Future of Food” and “Delivering the Digital Restaurant: The Path to Digital Maturity.” After each spent 20-plus years in corporate strategy and retail food, Meredith and Carl concluded that food in America was changing. They left their corporate jobs in search of innovation that would transform the restaurant industry. Ghost kitchens, virtual brands, digital marketing, the gig economy and lean operations are at the heart of the future they envision. Meredith is the CEO of Empower Delivery, software that powers delivery-centric kitchens. Carl is the co-founder of Juicer and an advisor to restaurant groups and technology solutions. Subscribe to their newsletter and podcast at deliveringthedigitalrestaurant.com.
With the rise of cloud-based technology, there has been a decisive shift in the past few years toward software innovations in the restaurant industry. However, as restaurant operators increasingly demand seamless integrations across their tech stack, and more vendors look toward becoming all-in-one vertically integrated tech solutions, physical hardware innovations have returned to the foodservice industry.
This month, there were several new hardware announcements from tech vendors, including kiosks and KDS technology, from big tech names like Clover, Square, and Epson. The common thread among these announcements is integration. As operators look to simplify their tech stacks (many of which have become complex and unwieldly over the years), assuring that each component speaks the same language through integration is crucial.
Besides the introduction of a new generation of kiosks and other physical technology, other tech news this month includes Uber and Instacart partnering up for restaurant delivery, the launch of a tech platform specifically designed for independent pizzerias, and more.
Tech Tracker rounds up what’s happening in the technology sector of the restaurant industry, including news from restaurants, vendors, digital platforms, and third-party delivery companies. Here’s a breakdown of what you need to know and why:
In recent years, operators have moved toward implementing a tech stack that’s more in the clouds than on the counter, but lately, hardware is having a bit of a renaissance.
Even though kiosks and KDS tech are nothing new — the latter might even be seen as an old workhorse of tech operations — there have been several new tech hardware announcements this month that newly emphasize seamless hardware/software integrations and in-house end-to-end solutions.
POS system, Clover, just introduced a new larger KDS, as well as its first kiosk, and both include automatic integrations with each other and the Clover POS system. Similarly, earlier this month, POS system Square introduced Square Kiosk, the tech vendor’s first fully integrated first-party software and hardware solution that is seamlessly connected with Square’s other products. The tech company touts it as a natural evolution of QR code ordering that’s easier both on the customer and employee.
“Kiosks can be a vital tool in many quick-service restaurants, especially as labor costs continue to rise,” Ming-Tai Huh, head of food and beverage at Square, told Nation’s Restaurant News. “While we’ve seen this technology at large restaurants for a few years, Square Kiosk now allows smaller restaurant groups to harness the tech and its efficiency advantages to keep lines moving and orders flowing.”
Other tech vendors that just announced new hardware products include Epson, which introduced the new TrueOrder KDS that is fully integrated with an interactive kiosk, and iPourIt—a self-serve beverage provider that has now added kiosk technology to its capabilities. Like many of these other products, iPourIt showcases how the technology integrates with software, like loyalty programs.
Checkmate is the latest tech vendor to strive for end-to-end status
B2B SaaS company Checkmate — formerly known as ItsaCheckmate — is the latest tech vendor to reimagine its company as more of an end-to-end platform instead of a singular solution that integrates with third-party vendors.
Checkmate announced its rebranding and scaling of services earlier in May beyond a specialization in digital ordering and delivery to include kiosks, loyalty, catering, data analytics, voice AI, as well as integration with first-and third-party services. Like many other tech vendors right now, Checkmate is trying to become a one-stop solution for operators that are looking to pare down their tech stacks.
“As our customers’ needs grew, Checkmate expanded beyond third-party integrations to become a holistic restaurant ordering solutions company,” Kevin Jaskolka, vice president of marketing for Checkmate, said. “Now, brands have more control over their digital operations with the ability to centrally manage menus across channels alongside a product portfolio that includes first-party and third-party ordering, catering, kiosks, loyalty, marketing, voice AI, data analytics, and more.”
PizzaBox AI launches as a tech platform for pizzerias
PizzaBox AI
Although tech vendors have been marketing toward smaller and independent eateries for a while now, this is the first time we’ve heard of a tech platform built specifically for mom-and-pop pizzerias. PizzaBox AI is a tech platform powered by Resto GPT AI that combines digital marketing, direct ordering (or last mile ordering), and data analytics in one place.
“Pizza is an industry within an industry, and it was the first delivery concept that started before the digital revolution,” Gary Chaglasyan, cofounder and CEO of Resto GPT, told Nation’s Restaurant News. “Setting up pizza menus online is very difficult because there are so many layers and modifiers…. We built everything for the pizzeria so it could be run as their own platform. Our platform helps brands promote themselves.”
In addition to online menu setup and digital marketing, a large portion of the PizzaBox AI capabilities is delivery. PizzaBox AI connects pizzerias with last-mile delivery services using first-party drivers. The company also provides direct lines of communication with both the drivers and delivery customers— allowing customers to provide feedback on their delivery experience via SMS. This affectively cuts out the aggregator middleman while retaining the benefits of a strong digital presence.
AI is the engine that drives the data optimization and customization options of the platform, and can instantly create online storefronts based on a restaurant’s menu. The AI model can get to know kitchen workflow of individual operators, dispatch to delivery at the exact right moment based on how long it knows prep will take, and over time, identify customers to create personalized offers.
To a customer, it just looks like they’re ordering pizza through a restaurant’s website:
“A customer could place an order and all they see is the restaurant’s brand– they make some payments, and from that point on, the order goes through the communications dashboard, to the restaurant’s dashboard, and it automatically contacts the driver,” Chaglasyan said. “Customers see everything is happening at the restaurant, and they could always message the restaurant if there is an issue, and vice versa.”
Instacart is now doing restaurant delivery with Uber
The lines between grocery delivery and restaurant delivery continue to blur with the new partnership announced between Uber Eats and Instacart. As first reported by NRN sister publication, Supermarket News, Instacart is adding a “Restaurants” tab to its app, giving its customers access to Uber Eats.
Instacart+ loyalty members, who pay extra for free grocery delivery, will receive the same offer for restaurant delivery orders placed on Uber Eats. The partnership is not a merger, however, and Instacart delivery drivers will fulfill grocery orders, while Uber delivery drivers will fulfill restaurant orders.
While this partnership will help put new customers in front of Uber Eats and vice versa, a key strategic advantage to this collaboration is competition with DoorDash, which already offers grocery delivery, and has taken a majority of user share within the delivery app space.
Yelp adds more data analytics for restaurants
Yelp had already expanded its features to include front of house solutions for restaurants with the launch of Yelp Guest Manager. Now, those capabilities will be extended even more with the introduction of new features like table usage insights (featuring data on diner flow/time at tables), cover flow (for server flow optimization), party highlights (to create customized guest experiences), and shift notes (to centralize in-house communications between front- and back-of-house).
Other new features include improved wait time accuracy, and updated Yelp kiosk features to allow customers to check themselves in when they arrive at a restaurant. Like other tech vendors, Yelp is strengthening its portfolio to focus on data optimization and integration, powered by AI.
Toast gets in on the digital marketing trend
Previously, we’ve written about the rise of digital marketing software, including updates from top vendors like BentoBox, Aro, and SpotOn. Now, Toast is joining the fray with the introduction of a digital storefront for website building and online ordering capabilities, as well as an automated marketing suite. Together, these tools work together to gather guest data from digital and POS orders, and use those to create automated marketing campaigns, loyalty programs, promo offers, and more.
Amazon and Grubhub announced that the two delivery companies will be extending their relationship again, allowing Amazon customers to order Grubhub restaurant delivery off the Amazon website and app for the first time.
Two years ago, Amazon announced that it would be taking a two percent stake in Grubhub parent company, Just Eat Takeaway, adding a 12-month offer of free Grubhub+ subscription (a $9.99 value) that was extended for a second year in 2023. Now, the company is turning the one-time deal into an ongoing offer for all Amazon Prime customers, which comes with $0 delivery fees, 5% back on pickups, and lower service fees on restaurant orders.
“We’re thrilled to build on our successful collaboration with Amazon and bring more convenience to Amazon customers by offering Grubhub’s network of hundreds of thousands of restaurants directly on Amazon.com and in the Amazon Shopping app,” Howard Migdal, CEO of Grubhub said in a statement. “More consumers can now experience the exceptional value and service offered by Grubhub+, with Prime members enjoying $0 delivery fees on an ongoing basis.”
The ordering experience on Amazon is roughly the same as it is on Grubhub, and according to Grubhub, customers will see the same restaurant menu prices and the delivery experience will be the same.
This is the second similar partnership announced in one month that merges retail and restaurant delivery, as Instacart and Uber Eats announced a partnership earlier in May, as now Instacart shoppers will be able to place orders for restaurant delivery via the Instacart app.
Starbucks and Grubhub announced a partnership on Thursday that would allow customers to order Starbucks delivery via the Grubhub app for the first time ever. The delivery partnership will roll out to select markets in Pennsylvania, Colorado, and Illinois in June, and expand to the rest of Grubhub’s markets across the 50 states by August.
“Customer demand to get Starbucks delivered continues to increase, as evidenced by double-digit growth in the U.S. delivery business this past quarter, indicating that our customers continue to want convenience in their everyday lives,” Meg Mathes, vice president of digital experiences at Starbucks, said in a statement. “Our new partnership with Grubhub will help fuel this growth by increasing availability of Starbucks products to Grubhub’s tens of millions of customers, via a leading delivery provider.”
According to Grubhub, Starbucks is the most searched merchant on its app that is not yet available. Overall, Starbucks has been slower to partner with third-party delivery companies than many other top chains in the foodservice industry. While the company began offering third-party delivery through Uber Eats in select markets in 2018, Uber Eats delivery was not available nationally until 2020. Starbucks did not begin offering delivery with DoorDash until last January, and the partnership was not expanded nationally until March 2023.
Grubhub is the final delivery company of the “big three” that Starbucks is now partnering with, though the company has the smallest delivery market share at 8% (as compared with DoorDash’s 67% and Uber Eats’ 23%), according to Bloomberg Second Measure.
“By joining forces with a beloved national brand like Starbucks, we’re offering customers more of what they want on Grubhub while strengthening our enterprise offering and growing our merchant supply in markets nationwide,” Liz Bosone, vice president of enterprise partnerships at Grubhub, said in a statement. “We’re proud to offer national and independent restaurants on our platform — a complementary duo — to give customers more choices and build loyalty.”
This partnership makes sense, given the growing popularity of the delivery channel with Starbucks customers. According to CEO Laxman Narasimhan, delivery business has grown 80% year over year, attributable to the company’s DoorDash partnership. However, there is room for growth in that channel, as delivery still only represents 2% of orders. In January, Starbucks announced a delivery partnership with startup GoPuff to tackle the demand for late-night and overnight deliveries.
The Grubhub partnership also has the potential to alleviate some of the pain points the company is experiencing with meeting demand. Starbucks reported declining same-store sales last quarter for the first time in three years, and Narasimhan said that in addition to improving store efficiencies, Starbucks will continue digitizing its stores. A partnership with Grubhub could be a small step in the right direction of improving digital engagement and opening up omnichannel flexibility.
Starbucks and Grubhub announced a partnership on Thursday that would allow customers to order Starbucks delivery via the Grubhub app for the first time ever. The delivery partnership will roll out to select markets in Pennsylvania, Colorado, and Illinois in June, and expand to the rest of Grubhub’s markets across the 50 states by August.
According to Grubhub, Starbucks is the most searched merchant on its app that is not yet available. Overall, Starbucks has been slower to partner with third-party delivery companies than many other top chains in the foodservice industry. While the company began offering third-party delivery through Uber Eats in select markets in 2018, Uber Eats delivery was not available nationally until 2020. Starbucks did not begin offering delivery with DoorDash until last January, and the partnership was not expanded nationally until March 2023.
Grubhub is the final delivery company of the “big three” that Starbucks is now partnering with, though the company has the smallest delivery market share at 8% (as compared with DoorDash’s 67% and Uber Eats’ 23%), according to Bloomberg Second Measure.
As we enter the summer season, the restaurant industry finds itself in the midst of a familiar battle: discount wars. In less than a week, McDonald’s is unleashing its month-long $5 meal deal promotion, the fast-food giant’s latest attempt to woo customers back and turn up the heat on this summer blockbuster. Will McDonald’s promo be enough to triumph and win back value-conscious guests?
Setting the stage: Economic landmines
After what looked to be three months of progress, economic anxiety across America shot up 5 percentage points, from 31% in April to 36% in May. Meanwhile, the 20% of consumers who say they are “spending as usual” is the lowest level we’ve seen in over a year.
This isn’t just a restaurant problem – consumers are pulling back across the board. From our May data among 1,000 consumers 18+ years old, here is the percentage who say they participated in each activity sometime in the past 6 months:
67% dine-in at restaurants (-9 percentage points vs. Q1 average)
40% go to the movies (-8 points)
63% go shopping at a retailer (-8 points)
17% fly on a plane (-7 points)
42% get hair done (-6 points)
It’s no secret that restaurants are hurting. As price increases continue to frustrate consumers, the impact on restaurant visit frequency is increasingly being felt as time goes on. More than half of restaurant customers (52%) say that restaurant prices have gone up too much, while only one third (34%) feel that their most recent restaurant experience was “definitely worth it.” That math just doesn’t work.
If you’re familiar with my data, you may have noticed that the 52% of restaurant customers who are frustrated with price is down significantly from Q4 last year. While this may seem like a good thing, when paired with the visitation data, it implies that those who are most frustrated have simply given up. Not good news at all.
Delivery isn’t faring better than dine-in; 62% agree/strongly agree that “getting restaurant food delivered is so expensive, it’s just not worth it anymore” and 19% have even made a conscious decision to use delivery less often over just the past 3 months.
With economic uncertainty on the rise, prices up, and many past their breaking points, consumers are non-shockingly looking for lower costing food options and trading down in a variety of ways. Where are those in search of low-cost food alternatives turning? Some 31% say grocery store delis/food service areas, and 25% say convenience stores.
We’ve seen this movie before
When operators take price over and over, it drives guests to lower-cost options. Then operators are forced to deal back prices to compete. It’s a tale as old as time in the restaurant industry. I often try to remind people that while discounting drives a short-term boost, more often than not it also drives disloyalty. Over-discounting creates customers that only buy on deals, or worse, those that are ready to jump ship to the next deal a competitor offers.
While customers are searching for value, the idea of value is defined in terms far greater than just cheap food. When the base of the value equation is fortified through experience, discounting can definitely actually prove to be successful at winning long-term customer loyalty.
Chili’s $10.99 deal thrived by tailoring to price-conscious customers by offering a lower price than you can get at QSR, while maintaining the degree of hospitality and experience that you would expect from Chili’s. While price is obviously a key factor, customers want to trust that their order will be right, the food will be good, and that the experience as a whole will be worth it.
So what will the sequel look like?
McDonald’s’ latest promotion focuses on emphasizing value, meeting customers where they are at and reaffirming the principles that McDonald’s stands for.
“Great value and affordability have always been a hallmark of McDonald’s brand, and all three legs of the stool are coming together to deliver that at a time when our customers really need it,” McDonald’s franchise owner John Palmaccio said in a recent CBS News interview.
Burger fast-food restaurants are already the most common option for trading down. With McDonald’s’ $5 meal deal only days away, and 34% of recent fast-food goers planning to take advantage, are other chains in for a rough July?
But we wanted to go farther to predict which chains might be impacted when McDonald’s launches. Of more than 23 QSR restaurants that consumers have visited in the past 30 days, here are the top nine who are at risk of losing market share to McDonalds’ $5 meal deal (the percentage of past month brand users that report they “definitely will take advantage of the McDonald’s $5 Deal”):
46% Hardee’s
44% Krispy Kreme Donuts
43% Pizza Hut
42% Sonic
40% Jimmy John’s
37% Subway
37% Wendy’s
37% Domino’s
36% Dunkin’
36% McDonald’s
Guests of those top 5 major QSR chains are more likely to take advantage of the McDonald’s value promo than McDonalds’ own recent customers!
Lest we forget: For every trend, there is a countertrend. Five brands are more insulated with fewer of their guests being interested in the new McDonald’s deal. They have more loyal, cult-level customers. These brands who appear the most resilient haven’t won their guest loyalty with discounting, they’ve won it with consistency and high-quality experience:
31% Chick-fil-A
26% McAlister’s
25% Jack-in-the-Box
24% Carl’s Jr.
15% In-N-Out
And that’s a wrap
Brands aren’t going to win long-term by making their prices the lowest out there; they’re going to win by providing a better and more consistence experience for a competitive, affordable price.
If you’re an operator, it’s easy to get thrust into the constant race to the bottom of discounting. Not all brands can afford to discount in the way that McDonald’s does. But that’s alright! Any brand can double down on experience and use that to uphold the value equation, instead of discounting.
While price is crucial, at the end of the day, customers seek value and just want it to feel like the money they spent was worth it.
AUTHOR BIO
Lisa W. Miller has over 30 years of consumer insights and innovation experience collecting nearly a million consumer interviews qualitatively and quantitively. Lisa conveys excitement, hope and real hands-on tools to revamp organizational goals and growth. She strategically transforms companies and improves bottom-line results by using the “DNA” of the Business of JOY.
Lisa is a 3-time EFFIE Winner for Advertising Effectiveness, recipient of the David Ogilvy Research Award, and is an expert in consumer insights.
Lisa is the author of the book, The Business of JOY, based on over 55,000 consumer interviews and countless hours spent interviewing business leaders and frontline employees. It gives a 360-degree view of the pandemic — translating insights into an actionable framework for the future. Lisa’s data became a leading indicator of economic recovery. According to Lisa, “Economic recovery and growth begin when JOY is greater than Fear.”
