[VIDEO] Is On-Demand Delivery Actually Hurting Restaurant Brands?

By Amelia Levin, Foodable Industry & Research Editor

You thought we were time-pressed before. These days, consumers are busier than ever — with work, family responsibilities, and social lives. There’s not always time to run out, even for a quick lunch or dinner. Sometimes it’s just easier to get it all delivered — to the office, to the home, or even to a social event in catering-like fashion. 

Restaurants know this, and that’s why many have teamed up with third-party delivery services to offer greater reach — literally, in terms of footprint, and in terms of attracting new customers while retaining the regulars. From bike messengers to traditional car drivers, many of these new-age delivery services focus on speed and food quality first, combined with a dedication to the same superior customer service diners expect inside the restaurant’s four walls. 

GrubHub, Seamless, Delivery Hero, DoorDash and newcomer Postmates are just some of the new delivery service companies out there, and restaurants these days have their pick of the litter, including Focus Brands, operator of Cinnabon, Auntie Anne's, Carvel, Moe's Southwest Grill, Schlotzsky's, and McAlister's Deli, which now offers “on-demand” delivery through Postmates. Even coffee shops have responded. Starbucks, for one, has announced it’s testing delivery through Postmates as well. And even Amazon has hinted at plans to bring food into the loop for on-demand delivery. 

According to Foodable Labs data, there have been 2.3 million mentions of food delivery in the past 90 days on social media, which is a 91 percent increase in just the past month. Millennials in particular have been the largest users of these services, namely because of the seamless nature of ordering through an app or other online platform. 

But it’s not all roses. 

“External brand factors are a new element in the on-demand economy, and in many cases, small and unsuspecting restaurant brands may not even be aware of delivery programs taking place from companies like Postmates,” says Paul Barron, founder and CEO of Foodable Network. “The challenge that I see is the performance of the service element of the brand as more and more outsource to on-demand companies. The loss of closing the service loop can be devastating to a brand where on-demand companies are factoring costs and delivery zones into the operations that ultimately affect the delivery speed, product quality, and, in the end, the overall perception of the brand.”

The question then is which delivery services work best, and how can restaurants work with these services to make sure they’re getting the most out of the partnership? More importantly, how do they make sure the delivery service is continuing the extension of their brand once the food leaves their doors? 

Credit: Instagram, @wowbao

Credit: Instagram, @wowbao

Enter Wow Bao, a fast-casual Asian-inspired bun concept by restaurant group giant Lettuce Entertain You Enterprises in Chicago. This delivery veteran has been working with GrubHub and other third-party bike and car messengers for the past six years. As one of the first partnerships with the then-newbie delivery service, Wow Bao has certain “pull” when it comes to where it’s listed on GrubHub’s website. 

“If GrubHub listed restaurants alphabetically, Wow Bao would be last on the list and might not be seen by the customer,” says Geoff Alexander, executive vice president at Lettuce Entertain You and managing partner of the fast-casual brand. In some cases, better positioning requires a little pay-for-play, though not in Wow Bao’s case since it was an earlier partner. 

“You don’t want to just join every delivery service because you don’t want to be misrepresented,” says Alexander. While many on-demand delivery services offer a built-in extra dimension of marketing, social media branding, and convenience for the customer, it’s up to the restaurant to test these companies for their ability to maintain both food quality and customer service. 

Wow Bao also does its part by maintaining controls through select packaging for carry-out and delivery. “We use the same packaging for delivery as in the store in the form of microwave-safe containers so the food can easily be reheated.” The restaurant also follows up with customers who have placed orders through GrubHub to make sure they’ve received their product in a fresh and timely manner, above and beyond GrubHub’s customer service protocol. 

With Postmates in particular, there’s less control over the delivery process because those delivery reps are not required to identify themselves in the stores. 

“We know if it’s a random person on a bike placing an order we can guess it’s a delivery person from Postmates,” says Alexander. While Wow Bao’s buns naturally hold up in transport, the same can’t be said for, say, burgers and fries. 

“As an end-user, I can’t expect my French fries to be perfect, but if I want that delivery service, I might be taking the risk,” he says. 

Credit: Instagram, @postmates

Credit: Instagram, @postmates

From Pinkberry to Postmates

And you thought frozen yogurt couldn’t be delivered. Not so, says Laura Jakobsen, senior vice president of marketing and design for the 275-unit, build-your-own yogurt brand spanning 23 countries. The company has been delivering its yogurt for the past four years in select markets, but recently expanded that service through a partnership just this year with the earlier mentioned Postmates, which delivers individual or larger orders of yogurt on foot, by bike or by car in New York, Los Angeles, and potentially other cities to come. 

Postmates was co-founded by Bastian Lehmann (the current CEO), along with Sean Plaice and Sam Street in San Francisco in 2011 but has since grown around the country. 

“The idea was that the company could transform the way local goods move around a city by enabling anyone to get any product delivered in under one hour, eliminating the need for next-day shipping, or even same day,” says April Conyers, a spokesperson for Postmates. Delivery fees start at about $5 and increase as distance increases. Some merchant partners have agreed on that flat $4.99 delivery fee regardless of distance.

Think: Uber for food delivery, or even non-food items like toiletries and other household needs. On that note, even Uber has taken to deliver certain foods and products as LTO specials. But I digress. 

Problem is, some restaurants have reported service problems with Postmates; according to Foodable Labs, currently 310 restaurant brand customers have mentioned Postmates in the past 90 days, but of them, 63 percent have shown a dip in sentiment when it comes to service.

In order to make sure the Postmates partnership would work, Pinkberry had to further refine its testing and research to determine how long the frozen yogurt will stay frozen before melting, and figure out appropriate delivery radiuses around its stores. 

“We just re-tested the product integrity over time so we know exactly how much time we have to deliver the product,” says Jakobsen. “We also worked with Postmates to set the radius around our stores so they know how many drivers or messengers they have in an area and know how much time they have to deliver our product to a set location so that it’s within our standards for quality.” 

In addition to monitoring speed and quality, Pinkberry had to make sure Postmates would continue the brand’s high-level customer service. 

“We wanted to make sure ordering through Postmates was as seamless and easy as it is for customers in our stores,” says Jakobsen. If there is a problem with the order, Postmates proved it was quick to respond with a new delivery or other adjustment, she notes.

Credit: Instagram, @pinkberryswirl

Credit: Instagram, @pinkberryswirl

That’s just it — orders can be as easy or as complex as the customer makes it because Pinkberry focuses on customization first. “We’re not a set meal or lunch experience so the whole experience is picking out your flavors and toppings and we wanted our customers to experience that customization even through Postmates,” Jakobsen says. Through a sophisticated online ordering system, customers can build their own yogurt creations by checking off certain flavors and toppings and type in additional instructions as needed. 

With Postmates, everything is done through the app. “Through our software, we are able to place an order and predict the time of preparation, and then route a Postmate to the restaurant when the order is ready,” says Conyers. Typically, orders are fulfilled within the hour they’re placed. 

Once the order is placed, a Postmates delivery representative will pick up the order – toppings packaged separately – and transfer it to branded, insulated bags for delivering hot foods hot and cold foods cold, Conyers says. And, like Uber, customers can track the location of their messenger through the app, contact them for additional needs, or receive texts from the messenger that they’re on the way. 

Still, restaurants have to protect their food on their end as much as they can. For larger orders, Pinkberry packs the yogurts on dry ice held in insulated Cambro coolers, regardless of who places the order. Since Postmates reps are not required to identify themselves with the company, it’s up to Pinkberry to have the systems in place to make sure the quality’s still there once it leaves the doors. And when a Postmates rep comes in the store to place larger orders, just like any other person might, one Pinkberry team member is designated to handle that separately so as not to disrupt normal in-store service. 

The partnership “allows on-demand delivery while expanding the same experience outside of the four walls as in the same four walls,” Jakobsen says. 

Though it’s still early to report sales successes with the Postmates partnership, Jakobsen has already seen some traffic increases in certain stores. But the delivery service goes beyond just sales and traffic goals. 

“In this increasingly hectic world where consumers want everything on-demand, we still want to be there when someone wants Pinkberry but can’t come into a store,” says Jakobsen. 

Just like Uber, Postmates advertises through Craigslist, Facebook and Twitter ads, as well as through more traditional channels to recruit messengers, so we’re likely going to see more and more messengers, and more and more delivery offerings. But even though there might be more messengers, if they’re not required to identify themselves as delivery reps, it’s up to the restaurant to maintain their controls for any product leaving their doors. 

“It will be a fun ride to watch,” says Alexander, literally, of the new delivery services cropping up. “Will these services hurt or help the food business? If they lose sight of maintaining food quality, it could hurt them, the restaurants and the customer service.” 

Diners will ultimately be the judge.