Sponsored by Cardlytics
In 1981, futurist Faith Popcorn described Americans’ desire to spend more time at home as “cocooning,” and 15 years later, Time magazine recognized it as a major social trend. Given the soaring demand for delivered restaurant meals in 2017, there’s ample proof that people appreciate their couch time as much as ever.
For decades, pizza has dominated delivery. But now the industry’s largest players are entering the fray. A reported 80 percent of publicly held restaurant chains are now offering delivery, testing or considering it. With the help of the third-party delivery service, UberEATS, 3,500 domestic McDonald’s restaurants are bagging up Big Macs for off-premises sales. Drawing on lessons learned from its successful off-premises catering arm, Panera Bread Co. is making smaller deliveries with its own fleet of vehicles. And seeing its own opportunity in multi-daypart breakfast sales, Denny’s has joined the delivery battle.
“Morgan Stanley says the delivery pie is worth more than $200 billion,” says Matt Drewes, senior vice president of national restaurant partnerships, at Atlanta-based Cardlytics, a purchase intelligence platform that uses real purchase data to make marketing more relevant and measurable. “So, there’s a ton of room [for that option] to grow.”
1. Build on the pizza segment’s example
With annual domestic sales estimated around $37 billion, the pizza industry’s grip on delivery is powerful. Yet even if pizza delivery accounts for half of that sales total, it’s still less than 10 percent of Morgan Stanley’s predicted potential.
“There’s more share to be gained for sure,” Drewes says. “Outside of Chinese and pizza, there’s not been a whole lot delivered with any consistency. But now you’re starting to see it pop up everywhere.”
Cardlytics’ data reveals that just 0.7 percent of credit card transactions are spent on delivery, which, while small, is significant to Drewes.
“That’s up 115 percent versus a year ago, and it’s 1.1 percent of total restaurant spend,” he says. “And that was happening before all these restaurant chains even began announcing that they’re doing delivery.”
2. In-house or third-party delivery?
Pizza providers will tell you that managing a private delivery fleet is expensive and labor intensive. Delivery expenses can include the cost of:
- Hot bags
- Vehicle signage
- Driver mileage reimbursements and staff costs
- Delivery liability insurance expenses that can amount to several thousand dollars per unit annually
Some of those costs are offset by delivery charges, but it remains an expensive means of managing the entire service experience.
Not surprisingly, many third-party services such as Grubhub, DoorDash and Seamless are moving in. Not only does using them minimize the direct costs of delivery, it also removes the tech burden of producing a delivery app or website for every brand.
“Some brands have expected customers to engage them through their own app, but the last thing everybody wants is 20 different apps,” Drewes says. “Customers can use a third-party delivery company, like Grubhub or DoorDash, and then they have a huge variety of restaurants to choose from.”
3. Target your delivery customers
Drewes says credit card purchases provide solid details on who is a delivery customer and who isn’t, and that mining that data is wise. Typically, he says, the busier the customer, the better the chance they want delivery, and also, if they’re younger. Most in such situations are working long hours and lack the time to cook. Tech-savvy sorts also are prime customers since they’re comfortable ordering via the internet and mobile devices. Millennials, of course, fit both parameters.
“Be very deliberate about whom you’re going after if you want to do delivery,” he says.
Experts also advise restaurateurs to consider delivering in a daypart one’s business hasn’t penetrated. Ask whether:
- an existing menu item could be delivered at breakfast or lunch.
- one’s customers might find themselves craving restaurant food in off-peak hours.
Incremental sales tend to happen in those market gaps, Drewes adds. “McDonald’s is saying that 60 percent of delivery orders come in the evening or late night, during lower traffic times,” he says. “That’s significant.”
4. Consider limiting the delivery menu
A quick way to tax staff resources and add expenses, such as new packaging or holding boxes, is to allow delivery of the full menu. Experts suggest operators pare back the selection to items that can be made quickly on-site and which transport well off-premises.
“Denny’s is a great example of choosing limited offerings and not the whole menu,” Drewes says, adding that the company has invested in new packages that vent steam well and make at-home reheating easy. “Who would have thought scrambled eggs and pancakes would hold well in delivery?” Drewes says. “I know I’m interested in seeing how it works out.”