Why restaurants are jumping on the food delivery bandwagon
As restaurant operators struggle to entice more people to eat out, they are increasingly turning to food delivery as a way to overcome stagnating traffic.
Fueled by the explosion of mobile ordering apps such as DoorDash and UberEats, food delivery sales have grown 20% over the last five years, while restaurant traffic has flatlined. That’s according to a new study released by the NPD Group, a market research firm that monitored trends in food delivery between 2012 and 2017.
The report’s conclusions reinforce the shifting trends in consumer behavior as the ease of online shopping and meal delivery have taken a bigger bite out of retail sales and eating at restaurants.
“Delivery has matured a lot,” Solochek said. “It used to be the fast-food pizza guys and your local Chinese guy, and in the past five years, there’s been this explosion of delivery opportunity because of the third-party aggregators and also because the demand for restaurants has not really grown, so restaurants have had to do something to get people to continue to use their product.”
In addition to the 20% growth in delivery sales, the NPD study also found that individual orders increased 10% over the five-year period. Although digital ordering is a key factor in the growth of food-service delivery, phone orders still represent nearly half of delivery business, the study found.
In all, delivery over the five-year period accounted for 1.75 billion orders and $16.9 billion in sales, NPD said. Third-party purveyors such as GrubHub and Postmates represented 13% of delivery traffic.
“The restaurant has to understand the cost of doing business with one of those aggregators,” he said. “Will I get my name and menu out there and will each of those delivery orders make me money? Some independents may think it’s worth it just to put their menus out there because otherwise people won’t think of me when they make their orders.”
Both DoorDash and UberEats say their platforms are introducing people to restaurants they might not otherwise have tried.
“If a restaurant isn’t in your neighborhood, you may not venture into that restaurant, so with delivery, we’re able to expand a store’s customer base,” said Jessica Lachs, who oversees analytics for DoorDash. “We are also able to market on our platform where we showcase a merchant and highlight newly added restaurants.”
Loring estimates that the share of Burger Lounge’s business from delivery is in the single digits but is significantly higher in some Los Angeles-area and Orange County locations where people are more reluctant to drive to the restaurants.
“Third-party delivery in restaurants, I believe, is here to stay, so we’ve embraced it. There’s no reason not to, and restaurant sales have been challenged over the last two years,” said Loring, whose chain has 23 restaurants, with three more scheduled to open in the coming months. “Also, a large percentage of our delivery happens in off-business hours, and that’s business that might not otherwise be there.”
Weisberg writes for the San Diego Union-Tribune.
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