While restaurant delivery surged during the worst parts of the pandemic, momentum has slowed as consumers have returned to in-person dining and takeout orders. In fact, a recent study from Paytronix found that takeout now accounts for a majority of all digital orders. In the background, restaurant tech companies have been stumbling amid layoffs and profitability challenges. This has led some to question the long-term viability of delivery, which was difficult for restaurants to make work financially even in more stable economic times. On the surface, a rise in takeout business sounds like good news. But it may be just a blip before tech-driven delivery rebounds, according to a new book, Delivering the Digital Restaurant by Meredith Sandland and Carl Orsbourn. They say restaurant tech is still in its infancy and it can be difficult to imagine a different way of operating, but “there are places in the world where delivered food is actually cheaper than eating at a restaurant, even without drones and sidewalk robots and automated food trucks cooking en route.” Delivered food at a lower cost is possible, they say. However, front-of-house staff, dedicated dine-in space, prime real estate, and a third-party companies making deliveries aren’t part of the picture in those cases. As much as restaurant businesses have winnowed down their operating models, there is likely much more change to come. If delivery is a critical pillar to your business, how might you further transform your model to make it work?
Inflation is a worry for nine out of 10 adults, according to a survey taken recently by the online research firm Momentive for The New York Times. As guests scrutinize more of their expenses, discretionary restaurant spending is a natural place for them to cut back. But on the plus side, demand persists for restaurant food – it may just look different for a while. As John Church, co-head of HSBC Bank’s food and beverage unit, told The Food Institute, “Consumers are likely to trade down during inflationary times as they will want to continue to enjoy some level of out-of-home dining experience.” Restaurant operators may just have to double down on strategies to get guests in the door. Right now, focusing on providing value can help. Offer combo meals that emphasize cost savings – like a family meal deal that may even provide some leftovers for lunch the next day. Create a sense of urgency with guests by creating a rolling line-up of limited-time offers. Give people a reason to return by asking them if they want to receive special offers, then following up with deals related to foods they have enjoyed from you in the past. Take a page from your pandemic playbook and package up an experience – a cooking class or wine tasting, for example – that makes restaurant food or drink feel like a worthwhile outing or a go-to choice for someone looking to give a special gift. When you offer those experiences, talk them up on social media to inspire guests looking for memorable ways to gather with friends and family.
What if your customers could be anywhere in the country – or even the world? It’s an appealing thought at a time when operators are struggling to manage high inflation, supply chain fluctuations and general uncertainty in the market. But the creative solutions that have come out of the industry in the past two years have the potential to transform the industry into one of greater opportunity for all. In a recent segment on CNBC, Joe Ariel, the CEO of Goldbelly, discussed how the Omicron variant and inflation concerns have triggered a surge in food e-commerce. He expects more companies – his among them – to take an omnichannel approach to food sales going forward. Imagine if a family was craving a wide selection of regional specialities – Philly cheesesteak, New York cheesecake, Chicago pizza – and they could enjoy authentic versions of them at the same meal? Or perhaps your restaurant gets a lot of summer traffic and guests who have been coming to you for years want to be able to enjoy your food year-round. Are there stars on your menu – memorable entrées, secret sauces, special desserts – that you could serve to a worldwide audience with the right marketing and packaging? How can you take what you do best and get it out to your best customers?
Even before the pandemic, the shift from on-premise to off-premise dining was happening. But the pandemic truly accelerated it, and even as people return to restaurant dining rooms now, there is still a way to go before things look the way they did a couple of years ago. To be sure, the trend is especially stark for full-service restaurants – new data from FSR Magazine indicates that in September of 2019, 80 percent of traffic at full-service restaurants was on-premise (compared to 20 percent for carryout), whereas the mix in September of 2021 was 56 percent on-premise, 44 percent carryout. Still, across restaurant categories, an operator needs to make a clear-eyed assessment of their business model in light of current market conditions, then take steps to protect the business for the long term. That means expanding, not limiting, opportunities to serve guests – and resisting the urge to revert back to how you were operating pre-pandemic. Consider new opportunities for catering, particularly as businesses are looking for ways to maintain connections between hybrid workers and clients. Keep communication open with neighboring restaurants and complementary businesses that may be able to pool resources, share staff, or collaborate with you on promotions. Think about how to make it easier and faster for your food to reach guests who want to eat it off-premise, whether that means assessing third-party delivery providers to find the best-possible arrangement, starting an in-house delivery service or using a ghost kitchen.
Restaurants and consumers alike have experienced the effects of the current supply-chain crisis, whether in the form of product shortages, delayed shipments, or changes in store hours due to reduced labor availability. (According to a recent National Restaurant Association survey, 75 percent of restaurants have been forced to change menu items due to supply chain issues.) While the challenges are widespread, many of them can be minimized. Consider these actions: Where possible, shrink the number of links in your supply chain between a food item and your guest: Pre-pandemic, this was about helping the climate and cutting waste, whereas now it’s also become a necessity for any restaurant that wants to be more certain of the items it will be able to offer on its menu. Plan farther down the line. According to FSR Magazine the casual dining brand Twin Peaks now places orders 12 weeks in advance when four to six weeks used to provide ample time. Focus on your relationships. In addition to communicating effectively with suppliers and paying bills on time, lean into existing and new collective agreements that enhance your purchasing power. Consider your branding. As operators focusing on chicken wings have learned in the past 18 months, it’s important to give yourself some leeway to broaden your offerings – perhaps to include new cuts of meat, or plant-based alternatives, or different presentations. FSR Magazine also suggests restaurants might consider building up a just-in-case inventory buffer – depending on the perishability and size of items that must be stored.
Restaurant delivery continues to climb: In 2023, the online food delivery market is expected to balloon to $154 billion from $111 billion in 2020, according to Statista. Are you doing all you can to make sure that as many delivery orders as possible are coming to you from customers directly instead of through third-party delivery apps? Your patrons aren’t necessarily seeking out the DoorDashes and GrubHubs of the world – they are simply ordering via the channel that’s most convenient to them. You can make direct orders more convenient (or at least more enticing) for them when they’re ready to place an order. First, make sure your customers know they can find the best food selection and deals if they order directly from you. Limit the menu options you offer via third-party providers to your highest-margin items – and make it clear on your website, search engine listings and social media posts that people can find a wider variety of food options, lower prices and access to limited-time offers by coming directly to you. When they do visit your website, they shouldn’t have to navigate far to where they place an order. Modern Restaurant Management suggests using a pop-up banner with a link (and perhaps a QR code) that directs them to your online ordering page. On that page, encourage them to join your loyalty program so you can continue to reach them with direct and increasingly targeted offers. Finally, make sure your customers know that they can best support you and your staff in challenging times – and help ensure they can keep their favorite dishes coming – if they order from you directly. Include language on your menu, website and on notes placed in third-party delivery bags that says just that.
Restaurant brands are more reliant than ever on third parties responsible for the last mile between a consumer and the takeout food they ordered. Yet even when food arrives cold or soggy due to a third-party delivery vendor who took too long to reach an end customer, the restaurant – not the delivery provider – is far more often the one to receive the negative review or angry phone call. The handoff is critical and both the restaurant and third-party delivery provider need to be in sync about the importance of protecting the restaurant’s brand in off-premise environments – through accuracy, speed and service. As Geoff Alexander, President & CEO of Wao Bao, said at The Spoon’s recent Restaurant Tech Summit: the “brand transfer has to be the most guarded and respected piece by the brand itself and by the operator to work together.” If your restaurant offers delivery, what do you do to ensure your brand doesn’t lose value when you hand an order to a third-party delivery provider?
As much as we all hoped and expected this summer would represent a return to pre-pandemic gathering and eating out, the delta variant has had other plans in store for many parts of the country. Restaurant operators, again, have been put in the challenging position of having to be enforcers of ever-fluctuating state and local regulations – all while continuing to juggle ongoing labor and supply shortages. If you haven’t already, it’s a good time to take a look back at your early-pandemic playbook and identify income streams that might help you weather the current challenges. That could mean posting new products for sale on your website, offering cocktails to-go if allowed in your state, and promoting family-style meal packages for guests who crave your food but aren’t yet comfortable eating out. Consider how your restaurant might adapt to the current situation of local consumers – whether that be a continuation of working from home or the beginning of hybrid work. Try to create stability, wherever possible, for both guests and staff. That could involve sticking with delivery and takeout service only (at least for the time being) or operating on a limited but set schedule. While it may feel like you’re missing opportunities to generate sales, guests and employees alike are likely to value predictability. Your loyalty program may help you here too. Do you want to boost visits on particular days and times? Increase your carry-out business while dine-in business is uncertain? Consider how you can incentivize your most loyal guests to help you keep business humming.
As the pandemic continues, hybrid work arrangements look like they may be here to stay for many – if not most – companies around the country. Global research indicates that 72 percent of corporate leaders plan to offer hybrid models of working. How might your restaurant meet the moment? If your dine-in business lunch traffic continues to be low, could your business find a new way to attract the guests who used to come to you? Panera, for one, has been acting on a new strategy aimed specifically at remote workers. They are offering scheduled group ordering, as well as catering for companies with workers in different places. At a time when companies are trying to navigate how to maintain camaraderie across employee teams that may only see each other for a few days each week in satellite offices, offering a regularly scheduled catered lunch might be an appealing way to make the most of the time employees spend face to face. Or, you could target the large population of consumers working from home. The World Economic Forum said recently that up to 20 percent of the U.S. entire workforce will continue to work from home permanently, up from 5 percent pre-pandemic. If you’re located in an area with condominium complexes where people are apt to be continuing to work from home, offering a scheduled building-wide delivery might enable you to attract lunchtime traffic – even if it’s not in your dining room
As evidence of their growing prominence in the restaurant industry, ghost kitchens are now getting their own events. In June, the Ghost Kitchen Conference in Dallas addressed this new and growing segment of the restaurant industry and how brands are approaching everything from menu development to digital marketing to site selection. Nation’s Restaurant News reports that ghost kitchens are demonstrating potential and an ability to gain competitive advantage in a few key areas. Service is one. While demand for delivery and off-premise restaurant food is high, the experience of eating this food can be lacking and difficult for operators to control. There is opportunity in the ghost kitchen segment to condense the physical distance between restaurants and customers and also channel more resources into building stronger relationships with delivery providers in an effort to make delivery a higher-quality experience (Fazoli’s, for example, treats delivery drivers to breadsticks.) Because ghost kitchens are small, nimble and flexible, there is also potential for them to push the boundaries of the segment. They can easily plug into grocery stores, airports, hotels or other facilities with a captive audience for restaurant food. Finally, these kitchens are lowering the barriers of entry into the industry. No longer does opening a restaurant require a substantial investment or attractive real estate (though the challenges of marketing ghost kitchens without brick-and-mortar counterparts surely generate new challenges related to marketing and customer engagement).