Insights

Do you deliver?

How QSRs can meet modern diners’ expectations for convenience, speed and quality

There was a time, not so long ago, when the restaurant industry was one of the few sectors untouched by digitization—but third-party delivery has shattered that. Since 2014, digital ordering and delivery have grown 300 percent faster than dine-in traffic; six in ten Americans order delivery or takeout once a week.

With consumer behaviors changing so dramatically, the food industry must rethink existing business models so that they can provide the convenience, speed and quality today’s diner expects. Here we discuss how quick-service restaurants (QSRs) can tap into the growing delivery market and adapt operations to meet the needs of the consumer.

Author

Rishi Ranjan

Since 2014, digital ordering and delivery have grown 300 percent faster than dine-in traffic.

Delivery is the new normal

The drive thru was introduced to improve convenience—but nothing is more convenient than having food brought to you. That’s the not-so-secret behind the rise in delivery and its ability to edge out traditional take-out options.

However, unlike the drive thru, which was a channel owned by the restaurant, organizations have a variety of options for serving delivery orders—the most obvious being a delivery partner. Though, even here, we see an abundance of choice.

North America is host to more than ten online food delivery companies, the largest being Grubhub with over a one third share of the market. Europe also has more than a dozen providers, with Dutch company Just Eat leading the charge. But in terms of sheer numbers, Asia accounts for a massive 55 percent share of the global online food delivery market. China alone registers over $34 billion in online food delivery revenues in 2018.

Online Food Delivery Case - UberEats

To really understand the growing clout of the online food delivery business, one need only follow the story of Uber Eats. Launched in 2014, the company has grown astronomically across the world on the back of its popular elder sibling, Uber. Uber Eats itself is currently valued at a very healthy $20 billion, registers revenues of $1.4 billion annually, has a presence in more than 670 cities on six continents and delivers almost a billion meals every year.

The implication for QSRs is that the shift to delivery has occurred is here to stay. To tap into this opportunity, QSRs must have a strong delivery service. However, with a strong network of established partners available, they don’t need to go it alone. Organizations need not develop their own fleets or distribution channels, which can be costly and complex, but tap the existing market.

Enter the ghost kitchen

Looking beyond the immediate step of partnering with a delivery service, organizations may also consider flexible production models that cater to the growing delivery market. The ghost kitchen, also known as dark kitchen, is a virtual restaurant or commercial space that operates as delivery-only kitchen. Ghost kitchens offer both long-time restaurants and fresh entrants an opportunity to setup operations without significant real estate investments or the high costs of labor. They can further enable restaurants to reach more customers or even decrease the burden on their full-service operations during peak delivery times.

They also allow startup kitchens and would-be chefs to serve hundreds of customers with as little as 200 sq. ft. of kitchen space—without the high rent, food and drink licenses, and labor costs of running the actual restaurant. Often, the kitchens are mobile and can be housed anywhere—under bridges, in the corner of parking garages, and other cheap places you couldn’t usually have a working space to cook.

By setting up virtual kitchens, restaurants can do more business, with little risk, few new costs, and unprecedented flexibility.

model kitchen, handing off food delivery, cooking french fries.

Delivery + ghost kitchens: Dining in the digital age

You might not have seen a ghost kitchen, but it is very likely that you have eaten from one. In the past few years, delivery services have led the charge in using data to identify opportunities within the market for virtual restaurants.

For example, in the U.S., UberEats has helped start 4,000 virtual restaurants since 2017, all of which are exclusive to its Uber Eats app. In Europe and around the world, Deliveroo Editions, collective kitchens that host multiple hand-picked restaurants across a variety of cuisines, now have dozens of locations.

Of course, some QSRs are opting to so solo. Chick-Fil-A, The Halal Guys and Dog Haus are among top brands that have opened ghost kitchens in the U.S.—proving that there’s more than one way to tap into this exciting model.

Looking to the future, the shift to delivery is only likely to intensify as younger consumers vastly prefer staying in. About six in ten restaurant orders from millennials (59 percent) are takeout or delivery. Compounding matters, this segment is notoriously impatient, with brands having mere seconds to get their attention. Add to this millennials’ weak sense of brand loyalty and QSRs have a tall order indeed.

The takeaway (pun intended)? Delivery is a core part of almost every restaurant business… and they need to get the order right the first time.