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.

Missed the Fast Casual Nation Documentary? Watch it Now on Amazon

FCN Doc Amazon Poster

This week, Foodable Network released its first documentary— Fast Casual Nation: Changing The Way America Eats, on Amazon.

The full-length documentary, narrated by the network’s CEO and Executive Producer, Paul Barron, begins by exploring the food landscape that led to the birth of fast-casual concepts across the country.

“You had casual dining, you had fast food and that pretty well defined food service. Sit-down experience: you tipped, the service, longer wait times. Restaurants doing great sales volumes and then QSR, fast food. Nothing in between,” said Firehouse Subs’ CEO, Don Fox.

Modern Market’s CEO, Anthony Pigliacampo believes fast casual could not have happened if it wasn’t for the fast food segment teaching consumers how to eat out multiple times a week over a span of 30 years.

“I think what’s really happening is consumers are finally saying: 'Wait a second, I really need to eat out all the time because of my lifestyle. I’m a busy modern person, I need to eat out'... And we think that’s how consumers view fast casual and it is the fuel that enables them to have this modern lifestyle,” explained Pigliacampo.

Millennials, of course, are a big driver of the fast casual sector and with this generation growing up in a world where technology, food customization, and social media have all collided, it created the perfect storm to drive this food sector to new heights.

Fast+Casual+Nation

"This is a part of my life's work to explore the future of food. Fast casual is and will be a part of that future that is shifting in a big way today.  This documentary is the first step in a mission that is designed to help the restaurant business shift into what will be the next generation of food.  Fast casual is on the threshold of being a catalyst of how food and restaurant operations will flourish in the next 20 years,” said Barron, who has over 25 years of experience in the industry.

The film also touches on how some restaurants were able to survive the 2008 recession by getting creative with real estate, the changing attitudes of the consumer towards healthier options, and how traditional culinary professionals began moving into the fast casual space in order to make thoughtful food more approachable.

"It is clear that you cannot create a market, what happens is you can understand and see things in a different way. Understand how the consumers respond and then respond to it,” said Ron Shaich, founder of Panera Bread.

Fast Casual Nation: Changing The Way America Eats is not just a film for restaurant industry professionals. It’s a documentary where anyone from the business world, film world or even foodies can learn something from and enjoy!

Amazon Prime members can watch the film for free as long as they have an active account. Non-members can rent the high-definition movie for $2.99 or buy it for $9.99.

'Fast Casual Nation: Changing the Way America Eats' Documentary Now Available On Demand

The way America eats is changing. We want better options. We want better ingredients. We want better sourcing. We want better experiences. We want food with a story — and we want it fast. The last four decades of fast food is fading and now we're making room for a new culture of good food: fast casual. And what is fast casual?

Find out in "Fast Casual Nation: Changing the Way America Eats." This full-length documentary, which has been 10 years in the making and which first premiered in 2015 during the National Restaurant Association Show, is now available for streaming through Vimeo On Demand and soon to be available on Netflix.

Follow Paul Barron, the pioneer who coined the term "fast casual" in 1993, as he travels around the country to share plates with the greats. Featuring Smashburger Cofounder Tom Ryan, Firehouse Subs CEO Don Fox, Modern Market Founder Anthony Pigliacampo, Panera Bread Founder Ron Shaich, and many others, dig into the stories of the iconic leaders and game-changers who are transforming the movement of our restaurants and the future of our food.

"My advice for people getting into the business is fast casual is clearly where one should expect to find the energy, the growth, and quite frankly, the ability to find what the next couple of generations are going to be eating on an everyday basis," Ryan said in the film. "By consequence of that everyday basis, it's where the biggest part of our business is going to grow to."

Fast casual — the societal shift and evolution from quick-service to high-quality, efficient, better-for-you, and better-for-the-environment ingredients — is the David vs. Goliath story of food. From Miami, Dallas, and Washington, D.C., to the Pacific Coasts of San Francisco, and all the foodie gems in between, this is documentary is more than exclusive interviews with top chefs and restaurateurs. "Fast Casual Nation" is our chance to change food for the better.

"I think the story shows the entrepreneurial nature of the restaurant industry and how consumers are driving change. There is a little something for everyone, whether you are in the industry and want to hear from your peers...or you just love food," film director Nathan Mikita said. "My hope is that you walk away with an education on how the restaurant industry has shifted, and that as consumers, we have a voice — we just need to choose where to put that capital."

Often times, we only see the rotten stories of foodservice: the inhumane, the unhealthy, and the distasteful. "Fast Casual Nation" is here to prove the foodservice industry is one of advancement and one of renewal, and that foodservice is not just filled with the bad apples we see dominating the food documentary scene.

"'Fast Casual Nation' is the first of many restaurant genre films that we [Foodable Network] are launching this year and next, as the need need for great stories about our industry is a huge injustice to the restaurant industry," Foodable founder, film writer, and executive producer Paul Barron said. "Our mission here at Foodable Network is to change that public perception that our industry is full of bad actors."

"'Fast Casual Nation' has been a dream of mine since I launched Fastcasual.com in the mid-90s, and even more so since the publishing of my book, 'The Chipotle Effect," he continued. "The full story is now in place. This documentary is really the first chronology of some of the greatest innovators our business has ever known. This is your chance, as a viewer, to become part of the revolution."

Social Restaurant Visits Jump Over 5 Million: What Does That Mean for the Industry?

On this episode of “On Foodable Weekly,” host Paul Barron highlights the restaurants that have grown the most in the past month and what that means for the industry as a whole. We will also look at Del Taco’s brand performance and its biggest competitor: Moe’s Southwest Grill.

According to Foodable Labs, the restaurant industry continues to show an increase in growth. This growth is illustrated through the analysis of real-time data signaling a brand’s visibility across social media platforms. One of the big indicators of restaurant industry health is SRV or Social Restaurant Visits. A social restaurant visit is an action a consumer takes, whether it is a mention, photo share, or “check in” on a social media platform, referencing a restaurant’s location either in a post or within the post’s geo-metadata.

“If volume on conversation is up, that gives us a indicator that potentially we could be seeing either sales shifts or traffic in restaurants moving up or down,” Paul Barron said.

Foodable Labs has added another measurement known as Facebook and Twitter Combined Industry Visibility. Are people talking about going out to eat and are they engaging with top brands? Currently, the total industry visibility month-over-month was somewhat flat, with a slight increase in interactions, unique users, and units identified in the month of October over September.

Looking back at June 2016, the industry experienced the lowest number of interactions of the year to date, with numbers of interactions at 54 million and the number of unique users at 31 million. Contrarily, October showed continuous growth, although slow, in the industry with interaction figures reaching 71 million and unique users reaching over 42 million.

Growth Within the Industry

Restaurants showing notable SRV growth in October over September 2016, include:

  1. Tender Greens jumps to the No. 1 spot with an 8.82 percent SRV growth.
  2. Chick-Fil-A steals the No. 2 spot this month with a 5.11 percent SRV growth after not making the Top 10 list back in September.
  3. Arby’s has been consistent in its ranking month over month, staying at the No. 3 spot since August. Its SRV is currently at 4.92 percent.
  4. Shake Shack, which has been on the list before, is now at the No. 4 spot with a 4.87 percent SRV growth.
  5. Freshii drops from the No. 1 spot to No. 5 with just a 4.82 percent. SRV growth month over month
  6. &pizza is a new entry in the Top 10 list, coming in at the No. 9 spot with a 4.27 percent SRV growth.

An important takeaway from this data is total SRVs for the industry jumped up in August, September, and again in October by over 5 million.

Top Performers

Two brands that prove our case are top performers Del Taco and Moe’s.

Here’s what Foodable Labs found:

Del Taco

  • Same store sales growth for 12 quarters
  • New market and new menu item penetration
  • 68.48 percent increase in overall Foodable Labs score

Moe's Southwest Grill 

  • 36.4 percent of Chipotle guest crossovers
  • Overall higher engagement than Chipotle
  • 50.87 percent increase in overall Foodable Labs score

Watch the full episode to learn more!

Rising Fast Casual Brands Shaking Up the Foodable Top 25

Rising Fast Casual Brands Shaking Up the Foodable Top 25

By Mae Velasco, Custom Content Editor

If the restaurant and hospitality industry were the box office, then the fast casual segment would be the Shirley Temple of foodservice. And instead of tap dancing, singing, and acting its way into the hearts of millions of consumers, fast casual’s top-performing factors would be elevated flavor profiles, higher-quality ingredients, and efficient service. (You might see diners tap dancing and singing in joy, though.)

From the rise of the better-burger concept and craft pizza, to now explorations in the artisan chicken sector, fast casual has changed the way America eats  — with the numbers to prove it. Known as the fastest-growing segment in the restaurant industry, the Washington Post reported a 600 percent growth from 1999 to 2014, which was more than 10 times the growth seen in the once-dominating fast food sector in the same time period. And according to Forbes, even during the recession in 2008, fast casual saw a rise in sales within the Millennial demographic.

Fast casual is a space for businesses to thrive, for new, unique visions to incubate, and is a hotbed of success waiting to happen. Unsurprisingly, there have been a flood of concepts expanding into the industry, creating a challenging arena to stand out as a fast casual champion. As more consumers are embracing this segment and look toward its future, how do operators, companies, and restaurateurs set themselves apart from the rest?

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