Third-Party Delivery

It may seem like a lifetime ago, but pre-pandemic, I vividly recall being involved in executive meetings and struggling with how much emphasis (if any) we should put on off-premises dining – specifically delivery. Then the pandemic hit and our lives as restauranteurs changed dramatically, delivery became a necessity, and it was often the only option in generating revenue. And as we continue to look at the delivery sector, the statistics on growth and market share are staggering. (I chose not to list these statistics as I think we have all have seen them in some form or another.) But as we came out of strict lock-down and we look at our businesses today, it brings us back to the age-old pre-pandemic question – does delivery make sense for our business? And at what cost – from potentially damaging your brand, to cutting into already slim margins, to the negative environmental impact?
 
Some of the many arguments – both pre and post pandemic - for NOT focusing on delivery….

• The Experience: Often part of the aura of the concept is the experience dining in/at the restaurant. At Logan’s Roadhouse, the atmosphere was an integral part of the experience with lively, upbeat music, buckets of peanuts on the tables and empty peanut shells on the ground. At Swenson’s Drive-Ins it is about the “dinner and a show” that the curb servers put on every shift, sprinting from one car to another taking orders and delivering your food on window trays. So why focus on an aspect of business that automatically eliminates these integral parts of the brand and the experience? These are experiences can’t easily replicate with delivery. Ultimately, does delivery detract your attention from your core business? I often admired Joe Lee, the former Chairman and CEO of Darden Restaurants and whom I had the pleasure of working with. Joe would constantly advocate to “get back to the basics” of what you were known for. Additionally, I admired the late Kent Taylor, founder and CEO of Texas Roadhouse, a direct competitor of Logan’s Roadhouse, for his laser focus on what they stand for - “Legendary Food, Legendary Service.” When you look at the continued success of these mega-brands, it speaks volumes to brand focus.
• Food Quality: The fundamental question being – how do your food and beverage offerings travel? As a chef, it was one of my biggest concerns with the many concepts I was involved with. Much of the food we served didn’t travel well. I.e., French Fries. Now don’t get me wrong, I am a problem solver, and as a team I felt we could figure out ways to package items or ways to evolve the delivery menu for the best delivery experience. But this often resulted in new menu items and a whole new set of training aides and materials on how to package the food correctly. Not a difficult obstacle to overcome, but often a challenge in execution, especially with reduced staff levels. I know we’ve all spent endless hours training and retraining staff on our current procedures, but adding these new variables often becomes even more challenging.
• Cost: There are costs associated with delivery with the most obvious being the high third-party delivery fees. Navigating these fees can be challenging – do you pass these onto the customer? Does the restaurant take the hit? (A challenge in these times of high costs and ultrathin margins) Or do you split the fee with the customer? Other costs include – packaging and as the business grows, it requires a dedicated team to handle this area of business – a challenge today with the current labor pool and the high cost of labor.
• Core Business: Will this business negatively impact the in-restaurant business? We all know that we can staff and handle in-restaurant business as there is a fixed capacity - the number of seats or in the case of Swenson’s, the number of parking spaces. However, if your delivery business has an unexpected increase, it can negatively impact the customers in/at your operation. Yes, I know we can temporarily turn off the delivery service, but should we? In my opinion, turning off your delivery service is analogous to telling a customer that arrives 10-minutes before you close that the kitchen is closed. It just doesn’t feel right.
• Environment: With the pandemic, we saw a huge increase in home-delivery of all sorts, but this has had a huge impact on the environment, from the massive amounts of packaging going into our landfills to the emissions created by the tractor-trailers and local delivery trucks needed for home-delivery. As an environmentalist, it is always top of mind for me. How can I reduce the negative impact of my business on the environment? And in many cases, this was a fundamental part of the brand.

So how do we handle all these obstacles and challenges? And should your business focus on delivery or for that matter take-out?

• Ghost Kitchens: During the pandemic we saw the rise of ghost kitchens. Many of these kitchens were, and are successful, because the menus and operations are designed to handle this unique type of business. But this may not be right for all operations. One could argue, as Wayne Gretzky once said, “You miss 100% of the shots you don’t make,” but on the other hand, I have seen too many operators lose focus of their core business and jump on a trend because they feel they “need to.” Yes, it is important to try and test new ideas, but in my opinion, you should have the means and infrastructure to do so or be willing to weather the challenges ahead. I applaud Chili’s for both “taking a shot” and realizing what is core to their business. Chili’s opened a delivery-focused test store, but after 2-months in operation they decided to close it so they could focus on core offerings and its “Kitchen of the Future 3.” Chili’s certainly has the means and infrastructure to test this, but most operations do not. Ultimately for some, ghost kitchens make sense, but for others this will become a distraction and negatively impact their core business. 
• Take-Out vs Delivery: Many concepts have decided it is more important focusing on Take-Out vs Delivery. For QSR concepts, relying heavily on drive-thru windows, it certainly makes sense to focus on ways to improve the drive-thru customer experience and to maximize profits. We can look at the many innovations Chick-fil-A and Taco Bell have made to improve the speed and experience at their drive-thru windows. But what about for full-service restaurants? What makes sense for them – take-out only? Or a combination of take-out and delivery? As mentioned earlier, Texas Roadhouse often bucks trends in the industry and in a bold move they are putting an emphasis on it’s off-premises business, which comprises of about 20% of their business. To start and to better understand how to improve their off-premise business, they are rolling out the Yumpingo customer experience software system-wide after a yearlong test. The platform will trigger a survey after each online order – via the app or web – so customers can provide real-time feedback about their experience and food quality beyond restaurants’ four walls. Every to-go guest will receive a survey. (To date about 7% respond, which is in line with other concepts that use such a service.) The feedback is then accessible in about a 30-minutes after it’s submitted. With that said, Texas Roadhouse is relatively conservative with new technologies, for instance it relies on old-fashioned mystery shoppers for much of its in-store feedback. So, in an effort to keep their focus on “Legendary Food, Legendary Service,” these efforts are for their take-out business and not delivery as the chain does NOT deliver.
• Third-Party Delivery Companies: Recently, I have been focusing on delivery as I visit restaurants and much of what I see, would speak to how third-party delivery can negatively impact a brands image. Some recent examples – I saw a delivery driver barrel through a restaurants parking lot, double park in front of the handicap parking spaces, and run into the restaurant for an order. Not an experience I want associated with my brand. Additionally, that same restaurant had an unsightly, make-shift pick-up area for delivery services. I looked around the restaurant and thought about the man-hours that went into designing a beautiful restaurant – from furnishings to layout – and now they have a metro-shelf in the lobby with hand-written signs “Uber”, “Door Dash”, etc. Is that the visual you want your guests to see when they walk into the restaurant? And at another major restaurant, clearly there is a love-hate relationship with delivery drivers as they had posted these signs for delivery drivers “DO NOT PARK HERE” and “DO NOT USE THIS ENTRANCE.” (I think a new cottage industry has developed on managing delivery drivers.) All joking aside, if you decide delivery is right for your business model, it is important to treat it as such. Dedicate the same time and energy to this part of the business as you did creating your brick-and-mortar business.
• Choosing the right partner: For many companies it makes sense to partner with a larger third-party delivery company, but for others it does not. We are seeing the growth in more specialized and local delivery companies such as Black and Mobile, ChowBus or ChopEats. These companies are servicing both under-serviced communities as some delivery companies have been accused of not delivering to low-income areas and smaller businesses that are often overshadowed by larger chains. For many ethnically owned/operated businesses there are language barriers on how to best leverage technology. Ultimately choosing the right partner takes time and resources as the answer is not always one of the larger third-party delivery companies.

The bottom line – take-out has been around for decades and will continue to be a part of almost all businesses, delivery – as we know it today – it seems is here to stay. It’s a daunting question, but an important one for every operator – should we invest time and money into a robust take-out and/or delivery program? Or more specifically, post pandemic, is it still something our brand should focus on? Or is it time to cut bait and focus on other areas of the business that deliver, pardon the pun, better customer and employee experiences? One of my favorite brands is The Savannah Bananas, a quirky independent baseball team known for its team dances and unique “Banana Ball” take on the game. The team is in the enviable position of having nearly 500,000 people on their ticket waitlist. Recently their team owner, Jesse Cole, turned down a $1 million offer to purchase a large amount of group tickets for every single game on the 2023 tour, twice the normal price of $25 per ticket. This order alone could have produced half a million dollars in extra profit. Jesse immediately rejected the order. Cole noted “Since Day 1, we’ve prided ourselves in creating an experience that is fans first. We’ve eliminated all ticket fees, service fees, convenience fees and even paid the taxes for our fans for every single order.” Keeping with the baseball theme – from one of my favorite movies – Field of Dreams – “If you build it, he will come.” (It has often been misquoted as “they” will come). But later in the movie Terrance Mann (played by James Earl Jones) said “They will come. Ohhhhhhhh, people will come, Ray. People will most definitely come.”

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