Delivery won’t be the same after pandemic, Grubhub acquisition
Restaurant delivery is facing disruption and change on many fronts. In a deal worth $7.3 billion, according to Fortune, Amsterdam-based Just Eat Takeaway made a bid to acquire Chicago-based Grubhub. The acquisition will bolster Grubhub as it’s challenged to take market share from DoorDash and Uber Eats. DoorDash is the #1 third-party delivery service by market share. Restaurant delivery is not profitable for these third-party app companies and many of the orders delivered for their independent restaurant clients, which pay up to 30 percent in commissions for the service, are not profitable either.
According to foodservice consultancy Technomic, amid the pandemic, 76 percent of restaurant operators say they want a flat commission fee from third-party app service providers, which have been much in the headlines as of late. The exorbitant fees that cut against the grain and vitality of restaurant economics are a liability as we look at the survival of third-party providers over the next 18 months. San Francisco, Seattle and Washington, D.C. have implemented commission caps on fees. It’s not surprising since 71 percent of restaurants operators say third party fees should be capped by law. And use of third-party delivery services is down in the most recent weeks of May, according to a Technomic COVID-19 business update.
Artificial Intelligence may be powering more of consumers’ drive-thru experiences. Two acquisitions in 2019 led to McDonald’s getting a jump on this technology, but now KFC is getting into the picture, according to the consulting firm’s new Foodservice technology in the age of COVID-19 whitepaper. For large restaurant companies, AI is a worthwhile investment but one that has to be handled with care and managed with privacy issues in mind.
Virtual restaurants, including those from hospitality management company sbe, which is setting up its own virtual brands, including Plant Nation, are popping up around the country. Plant Nation is the 3rd delivery-only restaurant launched by sbe. Saladworks and Fat Brands, the parent of Fatburger, are also launching ghost-kitchen-powered locations—these will be serviced by third-party delivery providers.
As nearly half of diners continue to avoid eating out, and many states still mandate restrictions, restaurants are fighting for survival. There are success stories, as well as closures that have become all too common. Among casual-dining brands, Applebee’s, IHOP, Outback Steakhouse. and Carrabba’s had taken on off-premises dining aggressively during the pandemic, and are now returning within earshot of last year’s sales levels. In fact, Outback and Carrabba’s are now within 15 percentage-points of 2019 sales at locations that have reopened dining rooms.
Among fine-dining restaurants, popular Seven Reasons in Washington, D.C. has made a similar play, adding curbside, delivery and offering manu adaptations, and weathered the storm, as it now prepares for a reopening of dining rooms over the next few weeks. There are also losses. Two of Momofuku’s concepts in Manhattan and Washington have closed down. So, too, has Wolfgang Puck’s The Source restaurant in Washington, according to DCist.
Fine-dining may be headed to its next evolutionary stage as it starts to accept demand for upscale restaurant food that can be delivered and ordered to go and as chefs with heavy pedigree look at fast casual 3.0 and virtual restaurant concepts as trends to emulate. As takeout, in curbside, pickup and in delivery format, becomes more pervasive, real estate space can be maximized, but it will have to be choreographed delicately as some diners may not want to return to a crowded dining room when the on-premises occasion arises and restrictions are lifted.
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