Digital delivers for the restaurant sector - three use case takeaways on the menu

Stuart Lauchlan Profile picture for user slauchlan August 2, 2018
For the restaurant industry, delivery is a top priority capability and that means working with third parties to execute.

digital restaurant
Last year around this time, we looked at the emergence of the second D for the Quick Service Restaurant (QSR) sector - that’s fast food to you and me. Alongside digital, delivery became a priority agenda item for many as third party delivery aggregators, such as Uber Eats and Deliveroo, became increasingly popular.

Flash forward twelve months and the importance of delivery capabilities to a digitally-enabled business model is ever more obvious. At McDonald’s, CEO Stephen Easterbrook refers to the “delivery accelerator” and its business impact:

The delivery market continues to grow. With the power of proximity, McDonald's is well positioned to be a leader in delivery. Across the globe, there are more than 1 billion people living less than 10 minutes from a McDonald's. That gives us a significant advantage in quickly bringing delicious food to our customers in their homes, offices and college dorms.

We've been moving at a pace that is unprecedented in the McDonald's System. Last July, delivery was available in about 7,800 McDonald's restaurants around the world. We've continued expanding and now delivery is available from more than 13,000 restaurants through 60 markets on 6 continents.

Customers are responding, he argues, and they’re responding with their wallets:

Delivery's becoming a meaningful contributor to our sales. In several of our top markets, delivery now represents as much as 10% of sales in those restaurants offering delivery. Delivery requires virtually no additional investment and is tremendously effective in bringing profitable and incremental guest count. We're continuing to see delivery orders of about double the size of the standard restaurant average check.

The market opportunity as outlined by Easterbrook is significant, but still relatively untapped. Part of that is down to lack of awareness of delivery options, he suggests:

When more customers learn they can get their favorite McDonald's food delivered right to their door, we're confident we'll see delivery sales continue to grow. With McDelivery Day earlier this month, we celebrated the success of enhancing convenience to our customers with delivery. During the day, we engaged with customers around the world and saw a surge in delivery activity in the markets participating in the campaign. In the U.S., for example, we had the highest number of delivery transactions ever in a single day.

We were also able to leverage our FIFA sponsorship during the World Cup to raise awareness about delivery. A number of our markets, including Portugal and the UK, ran fun and effective promotions that reinforced the convenience of delivery.

McDonald’s delivery capabilities are themselves delivered by a partnership with Uber Eats to execute. Easterbrook sees this alliance strengthening:

Over the past year, we've worked effectively with Uber Eats to optimize the delivery process. We've taken steps to protect the quality of the food as it travels from restaurants to our customers and improved operational efficiencies so orders are delivered as quickly as possible. We're continuing to work closely with Uber Eats to elevate the customer experience and introduce marketing promotions that should stimulate even more growth. Delivery, like other elements of velocity plan is contributing to our success now and offers untapped potential for us to capture in the future.

Other restaurant chains are also picking up on this potential. Over at Denny’s, CEO John Miller can point to some impressive stats:

Our Denny’s on Demand platform continues to resonate with guests who are seeking the convenience of online ordering and payment options for pickup or delivery. Off-premise sales represented over 10% of total sales at Company restaurants during the second quarter 2018 and about 9.5% of franchised restaurants. Since launching Denny’s on Demand last year, off-premise sales have grown over 300 basis points as a percentage of total sales and delivery continues to drive the expansion in our off-premise business.

We have observed a steady progression of Company and franchise stores adding delivery channels over the last couple of quarters. Approximately 60% of the domestic system is now actively engaged with at least one delivery partner. These to-go transactions continue to be highly incremental. Over-index to the late-night and dinner day parts are skewed toward the younger 18 to 34 year old demographic..We anticipate continued long-term growth in the off-premise sales from the Denny’s on Demand platform as more restaurants expand their delivery channels.

Delivery delivered

Such channels come from the digital disruptors in the sector. While phoning up for a pizza to be delivered has long been familiar practice, it’s the emergence of mobile app delivery aggregators that has changed the game. One such firm is Just Eat, which now boasts 94,000 restaurants on its delivery menu, with 24 million customers placing 104 million orders over the past year.

It’s an £83 billion market, according to CEO Peter Plumb, who explains that for Just Eat, there are three pillars for growth:

The first is about building our marketplace business to world-class. We have already built a great business, a very profitable marketplace business, but it has much more headroom in both the market and opportunity to improve our service to customers and the restaurant populace.

Secondly, it's about engineering delivery services to complement our marketplace business. The economics are challenging for delivery and there are strong competitors in that market. But we already know from the data that delivery is all about increasing the restaurant choice for customers. And by increasing choice for customers, we know that frequency of use increases and we earn greater loyalty from them.

And finally, my key challenge is leading a world-class digital global team supporting extraordinary local customer expert. You know it's worth remembering food is a local business, but digital and technology are global skill sets. So bringing these two important ingredients together into a single organization is really what makes Just Eat as an organization both unique and stand out.

There are key areas of investment, he adds, starting inevitably with the app:

When I spoke to at the beginning of the year, I set out three goals for the year. The first was about looking at our app. How do we build the app to be the best and the easiest way for a customer to get a takeaway. You know we must be easier and better to use than any of our competitors in any of our markets.

Secondly, it was about brand. And the target for this year was about growing our brand awareness particularly in Europe. After all, the more people that know us, the more people that like us, the more they will use us. And finally, it was about Order Pad. The ambition is to roll out Order Pads to 75% of core restaurants. Our business is about helping restaurant owners run a better business and the Order Pads are key part of achieving that.

These devices really help our restaurant partners manage their business better. They are bedrock for customer service and I think of them as a digital bridge between our customers our restaurant partners in the Just Eat Group. To give you just one example, we've been using the Order Pads to trial customers automating missing items and canceled orders. And within those trials, we've seen the need for customers to call us fall double digit.That's the step change these devices can give both our restaurants and our customers.

My take

My main experience of such delivery services is avoiding being mown down by bikers with their own ‘unique’ interpretation of road traffic regulations. I’m not a user of such offerings, although I know people whose dietary existence appears to depend on having the apps on their phone.

It’s the same as the days when we had pizza and Indian takeaway paper menus pinned to the kitchen wall, of course, but an excellent example of how existing business models can be effectively disrupted by digital. And unlike the retail sector, the disruptors aren’t about to eat your lunch (or dinner) in the same way that Amazon is to the high street or the mall. This is about co-existence with digitally-enabled third parties to deliver an enhanced customer experience.

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