Third Party Delivery Life or Death for the Restaurant Operator

The conversation surrounding food delivery continues to be a major concern for today’s restaurant operators as they wade through a number of new technologies providing third-party delivery solutions.

GrubHub is up by over 38 percent in sales. The online delivery marketplace has also acquired Tapingo, Eat24, and LevelUp, and recently partnered with Dunkin’. However, not far behind, DoorDash just overtook GrubHub in U.S. monthly food delivery sales. The ever-popular Uber maintains a steady 91 million monthly active users in over 20 countries and provides food delivery for 50 percent of the U.S. population.

Nevertheless, our research here at Foodable Labs shows that there are some beginning signs of fatigue in both the operator and the consumer in terms of sentiment toward third-party delivery. An analysis of over one million conversations about third-party delivery reveals a few key areas that consistently problematize the companies’ claims to convenience.

Top 10 Third-Party By Sentiment Rating

Source: Foodable Labs

The Fees hit both the operator and the consumer. Operators typically pay third-party companies 20 to 30 percent of the base cost of the ordered food. Depending on the delivery service, consumers may pay a yearly fee or pay fees for delivery from certain restaurants. In just this past quarter, there has been a sentiment drop of 3.6 points on the consumer side across the top ten delivery services. On the operator side, the drop is even direr: sentiment fell by 5.8 points.

The Data represents a constant battle between the operator and the delivery service: who owns a guest’s information, order habits, items, and frequency of purchase? The restaurants believe the guests’ data belongs to them because the customer is their guest eating their food, whereas delivery services want to leverage the data to the max with deals, app notifications, and constant marketing.

The Brand is a key area that hits home for every restaurant business. Because the restaurant loses control of the delivery, brand continuity often comes into question. Food safety and new packaging is a constant concern for restaurants to ensure they maintain each customer’s business and overall enjoyment of the restaurant.

The Jimmy John’s sandwich chain, one of the first restaurants to embrace delivery services, has refused since its beginnings to deal with third-party companies due to these issues. “We’ve been researching … what is best for our customers and our brand,” says Jimmy John’s Chief Marketing Officer John Shea. “In our exploration, we came to the conclusion that we do it better.”

The question still remains whether food delivery companies like GrubHub and UberEats can come up with a program to solve these issues. My take is that the industry is incredibly complex: businesses range from independent to franchises to emerging chains to Titans of QSR, and each business has different needs and complaints regarding the current model of third-party food delivery.

Some members of the industry are seeking the bottom line of profit, while others are looking for top-line sales and incremental lift. The brand also comes into play, and profit is always a factor. The guest connection could also change the entire landscape of food delivery over the course of the next few years.

A few brands are taking matters into their own hands. Third party delivery can deeply cut profits, so fast-casual restaurants like Modern Market and Panera Bread are investing in their own ordering and delivery platforms. This move is risky, as it could limit the company’s competitive potential. But the choice ensures that the restaurant can maintain brand continuity and better address customer concerns regarding the food delivery process.

Third party delivery providers have a fiduciary responsibility to grow the business and create stockholder value. And history shows that pushback from the community can be a deterrence to the growth of these companies. The real difference here is that the dynamics of the restaurant industry does not fare well for third-party deliverers. The real future for the third-party delivery companies lies in the development of their own foodservice brands —whether they are cloud and virtual kitchens, or full on commissary systems that can meet massive demand. In my video report from last November, I break down the idea of how third-party restaurant brand development is the real gold rush for likes of Uber and GrubHub.

Foodable Labs Highlights Top 8 Chicken Concepts

Chicken concepts are a proven safe bet for fast food and fast casual chains. And while the plant-based market is certainly booming, chicken remains one of the most efficient sources of protein in terms of its carbon footprint.

Source: Shutterstock

Source: Shutterstock

A recent Foodable Labs report showcases the top ten chicken concepts currently on the market based on CSR (Consumer Sentiment Rating). And which companies are in the top five?

1. Chick-fil-A

According to the American Customer Satisfaction Index, Chick-fil-A is the most beloved restaurant in the U.S. by a landslide. The company is also only behind McDonald’s and Starbucks in terms of total sales per fiscal year: its latest year totaled $10.5 billion in sales.

Founded in 1946, the fast food restaurant is best known for its chicken sandwiches and chicken nuggets. The company’s latest sandwich offering is the Smokehouse BBQ Bacon Sandwich. While Chick-fil-A does not offer much in the way of plant-based or health-conscious options, the chain was the first fast food restaurant to eliminate trans fats from its food and to commit to only using chicken raised without antibiotics.

Despite its positive consumer satisfaction rating, the chain has dealt with some controversy since 2012 due to its Christian origins and continued donations to perceived anti-LGBT groups. Chick-fil-A will likely need to better address this issue as the company moves forward.

2. PDQ

PDQ stands for People Dedicated to Quality. According to a 2016 report, the company’s workers topples Chick-fil-A employees when it comes to being the most likely to have a “pleasant demeanor.” The up-and-coming fast food restaurant is committed to providing fresh food, infusing each dish with a personal touch, and cultivating teams filled with happy workers who want to be there.

The chain was established in 2009 by Bob Basham, one of the co-founders of Outback Steakhouse, and Nick Reader, the CFO of the Tampa Bay Buccaneers. The menu is composed of chicken tenders, chicken nuggets, salads, sandwiches, bowls, and a number of unique sauces. All food is “just made”: every meal is created in-house with hormone- and steroid-free chicken that has never been frozen.

PDQ does have to grapple with some growing pains. The majority of its 65 locations are in Florida, and the fast food restaurant was recently forced to close three of its Oklahoma locations. Still, PDQ is opening its first New York branch in July, and a new restaurant is in construction in Evesham, New Jersey.

3. Slim Chickens

Known for its wings and hand-breaded, all-natural chicken tenders, Slim Chickens prioritizes fresh, flavorful ingredients. Chicken is also always cooked to order using soybean oil. One of the chain’s latest offerings is Devil’s Smoke Shaken Wings, which utilizes a new sauce with a barbecue base and honey and habanero flavoring.

Slim Chickens has an interesting history. First established in 2003 in a now-defunct Arkansas sushi restaurant, the fast casual restaurant chain swiftly expanded to multiple locations in Arkansas and Oklahoma. The chain has since gone international, establishing successful branches in Salmiya, Kuwait as well as London and Cardiff.

Looking ahead? The chain seems intent on continuing to build its brand throughout the UK and the American south. The company currently has 69 locations throughout the U.S. and abroad, and just opened another location in Birmingham, England shopping centre Grand Central. Another Mississippi location is also in the works and set to open this July.

4. Flyrite Chicken

Flyrite Chicken might just be the fast casual chicken-focused dining chain that modern consumers are looking for. While hoping to compete with the likes of Chick-fil-A, the Flyrite menu also caters to the growing plant-based market with chicken sandwiches, veggie burgers, wraps, and salads.

Entrepreneur Kevin Warden founded the chain in 2016, hoping to appeal to meat-lovers and vegetarians and vegans. All chicken is raised without antibiotics, and no artificial ingredients are used by the restaurant. Customers who dine in can also enjoy a beer or wine by the glass with their meal.

The chain currently maintains three Texas locations, its latest restaurant opening this year at Austin Airport.

5. Raising Cane's

Raising Cane’s is all about chicken fingers. The menu keeps it simple with four combos to choose from: The Box Combo, The 3 Finger Combo, The Caniac Combo, and The Sandwich Combo. Chicken is never frozen and always cooked fresh with canola oil.

Raising Cane’s has been in business since 1996, but the franchise truly took off in the late 2000s. In 2008, the company had about 50 locations throughout Louisiana: today, the company maintains over 400 restaurants in 26 states. Like Slim Chickens, Raising Cane’s has also expanded internationally to Kuwait, as well as in the United Arab Emirates, Bahrain, and Lebanon.

Raising Cane’s will open its second and third Tucson, Arizona restaurants in July and October of this year. Todd Graves, the founder of Raising Cane’s, was also named one of the top CEOs to work for by Glassdoor.

According to a recent Foodable Labs study, fast casual is set to garner 100 billion in sales by 2025. The Top 100 Fast Casual Innovators Report found that consumers in the 25-34 demographic are driving this change with a growing preference nationwide for eating food away from home.

Top 8 Chicken Concepts

This post is brought to you by Tyson Foods. To learn more, visit The Modern Chef Network.

Find Out What Consumers and Chefs Can't Get Enough of in the 2019 Flavor Trends Report

Find Out What Consumers and Chefs Can't Get Enough of in the 2019 Flavor Trends Report

Today's consumers are looking for new ways to spice up their plate and palate. Whether it be with a new exciting protein or a dish they know and love that features a new flavor.

But consumers' tastes are constantly changing. With that in mind, every year we release reports pulling from our data index to see what consumers are craving.

For our latest report, we used Foodable Labs data to analyzed 910,309 social conversations on multiple social media platforms. Our dataset is made up of chefs, independent restaurant owners, corporate chefs, multi-unit brands, and food influencers.

Read More

Have Amazon Go and UberEats Become a Threat to Restaurant Operators?

Operators have always had to compete in the market with other concepts, but in today's market, there are a new set of power players ready to steal your customers.

Enter Amazon.

Amazon, like the fast casual segment, is catering to the on-the-go consumer with its cashier-less Amazon Go stores, many of which offer grab-and-go food options. These stores have become the most popular during the workweek, especially at lunchtime.

We recently analyzed the aggressive move Amazon is making in the foodservice industry. Listen to this episode of The Barron Report for more insights on if fast casual restaurants can survive this threat.

But there is one advantage that restaurants, namely fast casual restaurants, have over the Amazon Go stores– many have embraced the plant-based movement. According to Foodable Labs data, today's foodies can't get enough of these plant-based menu items.

Don’t miss our video breaking down this data about the plant-based movement below.

Amazon isn't the only threat operators need to be worried about. There is another shark circling to take a bite out of your business.

Third-party delivery services emerged as a solution that many operators desperately needed.

Since offering delivery has quickly become a guests' expectation, an operator has two options. One is to invest in significant funding to build a delivery program. However, this is easier said than done. It entails creating a system, investing in a platform to process these orders, hiring more staff to handle take-out and delivery orders, and then hiring reliable drivers to deliver these orders.

Or an operator can simply partner with a third-party delivery service, which eliminates most of the headaches. When you consider the operational and logistical challenges of offering delivery, its no wonder that operators across the country have decided to go the route of partnering with a third-party delivery service.

But now this has created a new problem.

One of the most popular delivery services out there is now UberEats. This company has quickly conquered the market. UberEats is currently offering food delivery for 50 percent of the U.S. population and has the lofty goal of serving 70 percent of the U.S. population by the end of this year.

As UberEats becomes more popular, the more the fees increase for the participating restaurants. Could this be correlated to the increase in restaurant closings?

Listen to the podcast above as The Barron Report host Paul Barron explains the data showing that third-party delivery growth may be tied to restaurant failures.

Millennial Food Founders Create Specialty RTD Super Coffee Brand KITU Life

Rising consumer demands and healthier diet trends are calling for more and more specialty products to fill the void in the market. One of the top trending diets, the ketogenic diet, currently ranks No. 4 on Foodable Labs’ “Top Diets by Social Mentions”.

Former college athlete and now KITU Life Founder, Jordan DeCicco, struggled to find a keto-approved healthy ready-to-drink (RTD) coffee option — so he created his own.

With millennial coffee consumption up 41% this year, according to Foodable Labs, it only makes sense that the world's first enhanced RTD coffee company is lead by millennials themselves: brothers Jordan, Jake, and Jim DeCicco.

On this episode of The Barron Report, Paul Barron discusses the specialty beverage market with Jordan and how he provided a solution to a gap in the specialty beverage market at such a young age.

Listen to this episode of The Barron Report to learn how this keto-approved beverage came to be, and for insights on how to build a brand as a young entrepreneur with little to no knowledge starting out.

SHOW NOTES

  • 16:25 - Facing a Knowledge Barrier: Managing a Brand Under the Age of 30

  • 19:30 - Strategies on Breaking into the Specialty Food Category

  • 24:39 - How to Tell What Your Company’s Worth Early On

  • 26:32 - Being on Shark Tank: Catapulting the Brand

  • 28:36 - What’s Next for KITU Life?


  • 01:18 - Dorm Room Passion Project Turns into KITU Life Super Coffee

  • 04:07 - The Booming Specialty Beverage Segment

  • 05:46 - What Makes Super Coffee Keto Diet Approved?

  • 07:14 - Challenges of Growing the Business as a Food Founder Under 30

  • 08:37 - Growing into 30 Whole Foods Locations in 6 Months

  • 11:29 - Launching & Co Packers: A Critical Point in a Brand’s Lifespan