2018 has seen the food delivery scene in Australia take off with the meteoric rise of Uber eats, the launch of Marketplace+ and the changing face of Menulog from takeaway to delivery service it is clear that the food service industry is changing for the long run but is it changing for the better?
Analysts at Morgan Stanley predict online takeaway food orders will rise from $1.5 billion to a whopping $4.2 billion – nearly 23% of the fast food market by 2025. In order to survive this massive surge in take away food small to medium business will need to embrace the food delivery movement or alternatively attempt to entice the overworked and introverted masses to step out of their comfort zone of Netflix and PJ’s and eat out for a change.
But wouldn’t it be better to do both? Well the average charge to a restaurant for these delivery services is approximately 35% of every order with the restaurant taking on all the risk for failed delivery, 35% is almost the entire profit a small restaurant business will make in one good day, so the model does not suit everyone but businesses who are not positioned in prime spots will struggle to pull in the covers and compete with out delivery.
Prime location is not the only thing that they will need to address, people order in because they are time poor and no longer want to spend their nights savouring a lengthy meal at a white linened table, the rise in delivery has seen a boom in fast- casual food, offering seemingly healthy food made with good quality ingredients at a fraction of the cost and time of a sit-down dinner. The consumer is more discerning. If they are forgoing pyjamas then they want good food made with good ingredients. No longer content with the same old Parma they want a point of difference that will stand out on their Instagram page.
So how will this shape the food service industry?
We will likely see an increase in the number of Ghost restaurants, restaurants that are not restaurants at all but virtual eateries often owned and operated by a central company that operates several deliveries only brands. These ghost restaurants skip the storefronts entirely and rely 100% on food delivery services, the benefits of this style of corporatized “restaurant” are plenty, multiple brands and cuisine types operating out of the same kitchen, this reduces their over heads and broadens their reach. These businesses can operate out of a central kitchen with zero space devoted to customer seating and waiting area resulting in lower rent, Why is this so good? On average a restaurant will dedicate over 65% of their space to seating but for restaurants selling ideal delivery food like burgers will often have customers grabbing their food and going straight back out the door leaving 65% of their footprint wasting money. In a Ghost restaurant the footprint is dedicated to value production. An area with a grill, people working and portioning, and a room where orders are assembled, stations are set up by category a sandwich area producing sandwiches for multiple brands. All the ingredients across brands are in the same areas, but you get specialization in staff where they focus on making salads and sandwiches, that’s all they do. All of this ties in to economies of scale.
Logistics is becoming central to the food service industry
Good Uncle is a New York-based startup which is currently test-marketing a system where it sets up agreements with established restaurants with limited or no delivery service to license their recipes and then recreate them in their central kitchen. Users then order meals through the app and pick them up from one of several stops along a predetermined delivery route.
Good Uncle’s cooks use the exact same ingredients as the restaurants they license menu items from and train with those outlets’ own cooks so dishes can be replicated as precisely as possible. The company keeps costs low through bulk delivery. Drop-off points are presented to users on a map showing the next delivery time and point essentially a bus route for the food.
Does this mean the death of restaurants in Australia?
No, Australians are notorious foodies and there is no doubt that the food you get delivered to your house does not taste as good as the food that is delivered fresh to you in the restaurant. We will start to see a shift in menu items and the ingredients used. Businesses that rely on delivery will focus on menu items and ingredients that travel well, anyone who has ordered a cheddar cheese burger for delivery knows the disappointment of unwrapping that burger and finding the cheese greasy and congealed as opposed to an American burger slice that stays nice and creamy. A good quality Mozzarella will also maintain a good texture for longer on a cooling pizza as opposed to a shredded tasty blend covered in food starch.
The Australian public will still go to restaurants when the desire for their favourite dish drives them out of the house but restaurants will have to up their game. Almost a quarter of all restaurants fail in their first year of operation. While online delivery-only services might have lower overheads than a conventional restaurant, they miss out on the significant cash infusion that alcoholic beverage purchases provide… as well as the loss of walk-in foot traffic. Setting up a ghost restaurant relies on a significant capital investment and relies entirely on reviews and ratings, whilst as a physical establishment is tactile and feeds all the senses, where would Betty’s Burgers be without their eye-catching restaurants and the welcome you get at the door.
Consolidation on both fronts is inevitable no restaurant will survive if it fails to compete and maintain the standard expected by the general public, with social media driving the popularity of sales restaurants can no longer rely on location alone. The dining experience is changing but like everything there is no one size fits all approach. There will be a growth in fast food delivery followed by a consolidation there will also be greater innovation in foodservice from technology to ingredients and in restaurants that step away from delivery, a greater focus on service and making sure that their dishes are visually appealing and stand out from the crowd.