Off-premises business the new battleground for restaurant chains

Major restaurant chains embrace to-go and delivery business, report positive impact from focus on off-premise sales initiatives

Off-premises food popularity was a top dining trend identified at the beginning of 2018. As consumers look for more convenience, there is no shortage of chains wanting to bring their food to where the consumers are. That’s exactly what IHOP’s president, Darren Rebelez, said on an August 1 investor conference call led by Dine Brands Global, its parent. For IHOP, the sales momentum it gained in its Q2 2018 quarter was not exclusively due to the initial lift from the much-publicized Ultimate Steakburger Combo and its related “IHOb” promotion, but also due to a focus on off-premises sales and operational execution. Off-premises sales accounted for 8 percent of the chain’s Q2 sales, noted Rebelez.

As the company delivered a second quarter of positive comparable sales increases, IHOP to-go sales accounted for seven percent of sales and grew 150 basis points as a percentage of total sales, compared to last year. To-go comparable sales dollars grew 32 percent and to-go comparable traffic grew 23 percent, meaning the to-go average check also increased during the quarter—not just customers purchasing for takeaway. Applebee’s, which is also operated by Dine Brands, saw half of its comp growth come from off-premises sales, which grew 31 percent during Q2. Delivery at Applebee’s is offered at more than 500 restaurants nationally.

Delivery is a tricky dance; consumer demand hard to read

At IHOP, a partnership with DoorDash allows 300 stores to offer delivery. That number will increase by 1,000 just this year, said Rebelez, while the chain conducts a concurrent test at 150 stores with Amazon and GrubHub. The balancing of delivery and to-go orders, without creating operational difficulties for the kitchen is a careful dance. Pleasing the guest is another one. Attitudes toward third-party delivery services are not changing, according to a 2018 consumer survey by AlixPartners—most consumers prefer delivery directly from restaurant operators (47 percent); however third party is a reality that could settle in, especially with younger diners. Food quality and price are the biggest factors driving delivery intent at a particular restaurant, according the same survey by AlixPartners that was conducted in 2017.


The survey hints that fast-food and casual-dining chains shouldn’t expect to see increased intent for delivery; however, there’s still a lot of room for improvement, particularly for new delivery services. Fine-dining restaurants and fast casuals are the only segments in which consumers expect to increase delivery orders. The fast-food and casual-dining operators that will be successful in the off-premises arena will be those taking share from competitors and conveying a heightened value proposition. This is the reckoning of a consumer landscape that may not increased usage from existing delivery customers, but may reflect increased demand from younger generations entering the workfroce and also from older consumers who are not currently using delivery.

On August 1, The Cheesecake Factory announced DoorDash will be its exclusive delivery partner, adding to a relationship that already involves POS integration and joint marketing activities. “So many of our guests enjoy the convenience of delivery, and the new terms of this agreement will allow us to maximize profits from our growing delivery business,” said Dave Overton, founder and CEO, in a company statement. The exclusive Cheesecake Factory-DoorDash partnership will offer enhanced operational data on delivery and will allow the companies to further collaborate on marketing opportunities during the current year.

In celebration of the expanded partnership, The Cheesecake Factory will offer free delivery August 1 to August 5.


Popeyes financial reporting for the second quarter also indicated there was a lift in sales from delivery services, although it was not quantified at the time of an August investor conference call conducted by its parent, Restaurant Brands International (RBI). Comparable sales for the chain grew 2.9 percent, while new unit count increased 8 percent. RBI has stated that a priority of the restaurant company is to increase delivery. In May, Popeyes began testing delivery in five key markets in the United States.

Starbucks-Alibaba strategic partnership

Strategies to increase off-premises sales are a global imperative for restaurant chains, not just a domestic one. Starbucks just announced a deeper, strategic partnership with Alibaba. Through the Starbucks-Alibaba partnership, delivery will be launched in Beijing and Shanghai in September using the platform The alliance will expand the program to 30 cities and more than 2,000 stores by the end of the year. The new strategic alliance also enables the creation of “Starbucks Delivery Kitchens” within Hema supermarkets to enhance fulfilment of Starbucks orders for delivery.

The Starbucks-Alibaba strategic partnership is enabling omnichannel experiences across the Alibaba ecosystem via, Hema, Tmall, Taobao and Alipay, “Alibaba is thrilled to expand our existing partnership with Starbucks by leveraging our cutting-edge New Retail infrastructure and digital power to enable an unprecedented experience for consumers,” said Daniel Zhang, chief executive of Alibaba, in a statement.

Starbucks and Alibaba will also create a virtual store so members can register, redeem benefits and enjoy an “extensive range” of services in a more personalized manner.


For more about the publisher of this restaurant news site, navigate here.

Leave a Reply

%d bloggers like this: