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REPORT | 3RD EDITION Take control of third-party delivery to protect your brand 7 food delivery trends + 10 steps to a successful delivery strategy

Background The impact of third-party delivery

“Netflix + chill” changed the shape of the entertainment industry overnight. The restaurant industry is now in the throes of a similar cultural shift, with third-party delivery changing the way people eat food from restaurants — in the comfort of their own home.

With delivery sales projected to grow at more than three times the rate of on-premise revenue through 2023, it’s clear restaurants need a strategy to meet the convenience craving of consumers.1 But in the volatile world of third-party delivery — where things often go wrong and restaurants are struggling to maintain control of the customer experience — how can brands protect their reputation + drive customer loyalty?

Methodology Oct 2017 Feb 2019 Nov 2019 Wave 1 Wave 2 Wave 3

How we got the data 20 Third-party delivery apps included in research key takeaways SMG has been closely following third-party delivery trends and their impact on the restaurant industry since our first published report in 2017. To continue this exclusive longitudinal research, we used SurveyMini® — SMG’s consumer mobile research app — to trigger custom surveys to more than 47,000 users across the largest DMAs in the U.S. 12 47,383 targeted questions unique SurveyMini uses precise mapping technology to per wave respondents trigger visit-detected surveys to an active user base of respondents. In addition to receiving competitive data on more than 6,500 brands across 650,000+ Text analytics on nearly locations, SMG clients can trigger custom surveys like this to get a quick read on changing market 215 1M reviews dynamics — down to the DMA level. DMAs from 11 social sources

We’ll explore 7 food delivery trends by answering these questions Is third-party delivery causing 2 business cannibalization?

Brand protection checklist What are the biggest risks + opportunities? Don’t miss the top 10 steps every 3 restaurant should take when evaluating their third-party delivery strategy.

How are brands tackling 4 food delivery in new ways?

TREND #1 TREND #2 TREND #3 TREND #4

Third-party delivery DoorDash is now the Almost half of users People who use third- awareness + usage leading third-party choose an app because party delivery visit continue to rise delivery vendor it delivers from their restaurants more favorite restaurant

TREND #5 TREND #6 TREND #7

More than half of third- Accuracy remains the If your restaurant isn’t party users order from biggest problem with all available on third-party more than one app providers delivery, 3 out of 4 customers will get their food somewhere else

Aware of Third-Party Delivery Awareness + usage % + % of third-party delivery 80 4 continue to rise — Yes YOY Change though at a slower rate Used Third-Party Delivery in Past 3 Months 4 out of 5 respondents are aware of third-party delivery, while nearly half have used it in the past 3 months 43% + 2% Takeaway Yes YOY Change Though we saw more aggressive growth two years ago, third-party In 2022, third-party sales are delivery continues to expected to comprise 70% of all disrupt the restaurant delivery, up from 37% in 2016.2 industry at a steady rate. 2016 2022

2 Forbes, January 2020 © Service Management Group | Confidential | All rights reserved 7 // 43 East North Third-party delivery Central West North New Central England isn’t isolated to one Pacific Mountain Middle Atlantic region — all areas of the West South Central South country are impacted Atlantic East Usage is highest in the Pacific + New England South Central regions, with East North Central seeing the Third-Party Delivery YOY Usage by Census Division Change largest YOY growth 54% Pacific + 15% 51% New England + 9% Takeaway Nearly every zip code 45% Middle Atlantic + 4% is now serviced by at least Third-party delivery is no longer a “big city thing” % % 45 Mountain + 16 two delivery companies, or a trend impacting certain parts of the country. 45% South Atlantic + 7% a change facilitated by Every region — from coast to coast — has more 42% West South Central + 9% more brands signing customers using third-party delivery apps. 42% East North Central + 19% multi-delivery vendor deals 39% West North Central + 18% versus exclusive deals.3 34% East South Central + 3% 3 Forbes, January 2020 © Service Management Group | Confidential | All rights reserved 8 // 43 Casual-dining, fast-casual, + fast-food concepts make up almost 75% of third-party delivery orders Casual dining, fast food, and polished casual are seeing growth

% of Orders by Restaurant Type

YOY Change +10% - 6% +16% +2% - 9% - 13%

28% 25% 21% 10% 9% 1% 6% other

Casual dining Fast casual Fast food Polished Family Fine (e.g., Chili’s Grill & Bar, Outback (e.g., Chipotle Mexican Grill, (e.g., KFC, McDonald’s, casual dining dining Steakhouse, Texas Roadhouse) Shake Shack, Firehouse Subs) Wendy’s) (e.g., Yard (e.g., Cracker (e.g., The House) Barrel) Capital Grille)

Takeaway Understanding where customers are turning for third-party delivery (i.e., faster, more convenient options) will help your restaurant prepare a sound strategy. © Service Management Group | Confidential | All rights reserved 9 // 43 Previous trends showed a boost in lunch + late-night delivery orders, but now we see a shift to growth in mid-day + dinner Third-party delivery is no longer overly favored by people stuck at work over lunch or partiers in need of a late-night snack — it’s now becoming a dinnertime staple

% of Orders by Daypart YOY Change

6am – 11am 4% Caret-Up 1% Takeaway With an increase in mid-day 11am – 2pm 16% CARET-DOWN 6% and dinner orders, restaurants 2pm – 5pm 13% Caret-Up 3% should review their menu 5pm – 9pm 56% Caret-Up 3% offerings, hours of operation, and staffing availability to 9pm – midnight 7% CARET-DOWN 6% meet customer demands.

© Service Management Group | Confidential | All rights reserved 10 // 43 Are you using third-party delivery more? Third-party delivery isn’t 1 in 4 customers say yes. just gaining more users, Frequency of Third-Party Orders in Past 3 Months ● 1 – 2 ● 3 + it’s seeing more frequent 63% 37% Oct 2017 repeat customers 56% 44% Feb 2019 Gen Z + millennials are the heaviest third-party 55% 45% Nov 2019 delivery users — but boomers saw an 8% increase in usage overall Frequency of Orders in Last 3 Months by Age ● 1 ● 2 ● 3 ● 4 +

31% 25% 19% 25% +2%* Takeaway Under 25 The majority of third-party users aren’t just ordering 28% 24% 20% 28% +2%* once — they’re placing multiple orders over a short 25–34 period of time. And with 1 in 4 customers reporting 31% 24% 19% 26% +1%* 35–44

they’re using delivery more, restaurants have a great % % % % 30 25 20 25 +2%* opportunity to gain repeat business. 45–54 35% 26% 18% 21% +8%* 55+ © Service Management Group | Confidential | All rights reserved * YOY Change 11 // 43 TREND

# of Third-Party KeyBanc’s Not only are customers Delivery Apps by Age research agrees: Most customers have multiple food using third-party delivery < 25 25–34 35–44 45–54 55+ ordering apps 4

● Only app more often, half of App count ● At least 1 other them are using more food ordering app 53% 56% 50% Grubhub 4 61% 56% than one app to do it 17% 83% Seamless Boomers are the only age demographic who 3 39% 61% are more likely to stick with one provider Uber Eats Takeaway 27% 73% DoorDash With so many delivery providers in on the action, 2 % % customers are keeping their options open. Have 26 74 % % % Postmates you logged on to the top third-party apps to see 47 44 50 how your brand is represented? Is it available at 1 39% 44% 12% 88% all? It’s important to understand how your brand Pizza app appears through the eyes of the user. 56% 44% 4 KeyBanc, January 2020

© Service Management Group | Confidential | All rights reserved 12 // 43 TREND And which apps are they using? DoorDash is the new preferred leader Previous customer favorite Uber Eats is now trailing, with Grubhub coming in third

Preferred Provider

0% * Takeaway % 9 When working on a - 3% * 23% third-party delivery strategy, it’s important + 9% * 33% to consider the - 5% * popularity of each 29% provider and which 0% * best fits the needs % 6 Other of your customer.

* Indicates % change between February – November 2019 © Service Management Group | Confidential | All rights reserved 13 // 43 Preferred Provider by Region + YOY Change DoorDash’s success ● DoorDash ● Uber Eats ● Grubhub ● Postmates

0% - 1% 0% is consistent across + 4% + 18% + 8% the country 0% - 1% - 7% East North East South Middle Except in New England where users prefer Central Central Atlantic Grubhub and growth is the highest - 2% - 10% - 2% + 2% - 7% - 3% + 7% + 7% + 5% - 5% + 13% - 4% Takeaway New Mountain Pacific When we conducted our first third-party England delivery research in 2017, DoorDash - 3% - 8% + 1% wasn’t even mentioned. Now, it’s the - 1% - 3% 0% provider customers most prefer across the + 13% + 13% + 7% country. This proves how quickly trends can - 2% - 6% - 3% shift, and only agile brands — ones that are South West North West South quick to evolve + adapt — will stay on top. Atlantic Central Central - 10% - 2% - 5% © Service Management Group | Confidential | All rights reserved 14 // 43 “Who, me?” It’s no longer a question — third-party delivery is affecting your brand

Though the groundbreaking growth we saw with And that strategy cannot be static. The third-party delivery third-party delivery in 2017 has steadied slightly, space is constantly evolving and only brands who embrace customer awareness + usage are still increasing. This (and act on) change will survive. Case in point: when we isn’t a new concept anymore — it’s now a staple in the published our first report on third-party delivery three restaurant industry. Every kind of customer in every years ago — DoorDash wasn’t even mentioned as one of part of the country is using third-party delivery — and the top providers, with Uber Eats and Grubhub dominating using it more often, at all times of the day. Restaurant the field. Today, DoorDash is customers’ most preferred brands — particularly fast-casual, fast-food, + casual- vendor, in most age groups across the country. dining concepts — must implement an air-tight third- New providers are entering the arena. Apps are constantly party delivery strategy to beat out the competition evolving. Consumer expectations continue to rise. and win with all generations. Restaurants are responsible for staying on top of these trends and being educated on what their customers want. If they don’t, they’re leaving their reputation in someone else’s hands. © Service Management Group | Confidential | All rights reserved 15 // 43 2 Is third-party delivery causing business cannibalization?

REALITY CHECK 24% Make a meal What would you have done if third-party If your restaurant isn’t available delivery was not an option the last time you on third-party delivery, wanted food from 3 out of 4 customers will get a restaurant? 23% Carry out or drive thru their food somewhere else at another restaurant Only 24% of customers will choose another option to eat from your restaurant 18% Carry out or drive thru at same restaurant I ordered delivery from

Takeaway 8% I would not have eaten anything Customers want the convenience third-party delivery offers them. 6% Dine in at same restaurant Only 6% of customers would dine in at your restaurant if it wasn’t I ordered delivery from available with third-party delivery — with 8% saying they just wouldn’t eat 6% Dine in at another restaurant

at all! That bears repeating: more customers would rather go hungry than 6% Something else

dine in at a restaurant. The game has changed, and delivery is winning. 5% Carry out prepared meal from grocery store

4% Carry out prepared meal © Service Management Group | Confidential | All rights reserved from convenience store 17 // 43 TREND Third-party delivery users visit restaurants more There was a 5% increase in restaurant visits from people who weren’t using third-party delivery but now are

Third-Party Delivery Users + Do you use third-party delivery? Their Restaurant Visits ● Yes ● No Takeaway Wave 2 Though there were Feb 2019 increased visits across the + + + + board, third-party users are more frequent restaurant Wave 3 customers. Business Nov 2019 cannibalization is a myth — the existence of third-party Increase in % % % % delivery actually increases restaurant visits 3 5 2 6 your chance that customers will come to your restaurant.

“‘McDonald’s says 70 percent of the orders it gets through its partnership with Uber Eats are customers it might not have gotten otherwise, particularly late at night.’ McDonald’s has also reported that Uber Eats has increased “Farm Burger, an Atlanta-based grassfed their traffic by 10%.” 5 burger chain with 12 locations, has limited marketing resources, so it’s grateful for the business that delivery services bring in. After DoorDash featured the chain in a December promotion, it saw an all-time monthly high of 2,942 orders, says Dawn Law, the chain’s marketing director. ” 5 5 Associated Press, February 2019 © Service Management Group | Confidential | All rights reserved 19 // 43 And when customers do visit, We now have a consumer convenience is still the top priority culture of convenience And this shift is expanding the Customers are 2X more likely to use the drive-thru at your restaurant competition: It’s not just a battle between restaurants. C-store than dine-in or order to-go + grocery have entered the fresh-and-prepared food space. And what’s more is younger Average Number of Visits in Last 3 Months by Dine Type generations are gravitating toward these options. UTENSILS Dine-in 6 Read this report to learn why more customers are turning to c-stores 16 car-side Drive-thru for their food + beverage needs. mortar-pestle Carry-out 8

Takeaway When third-party users visit a restaurant, they are favoring drive-thru considerably over dining in. These customers want the convenient option. Ensure your brand is providing an exceptional drive-thru experience from start GET THE REPORT ⊲ to finish — one focused on efficiency, accuracy, + most importantly, speed.

Motivation for How do you typically choose...... which delivery app to order from? selecting delivery It delivers food from my favorite specific restaurant % Third-party delivery 42 motivation is I’ve had a previous positive experience 41% apps + restaurants mostly based on It features lots of coupons and deals delivery from 34% is similar — it’s all favorite restaurant, It provides a good selection of my favorite cuisine experience, and 29% coupons + deals about the food It is easy to navigate 28% Customers want food from their favorite restaurant or a specific type of food, ...which restaurant to order from? but cost + previous experience matter, too I have a specific cuisine craving and seek it out 35% Restaurant I look for a place with free/low cost delivery % Takeaway motivation is 35 Customers who like your food will still mostly based on I look for a place that I’ve had a good experience from 31% specific menu order from you on third-party delivery I look for a restaurant available on the app I’m ordering from item, cost, apps — and make sure the experience is 25% + experience a good one to keep them coming back. I look for a place with quick delivery 24%

© Service Management Group | Confidential | All rights reserved 21 // 43 All third-party delivery How do you typically choose...... which delivery app to order from? customers, regardless It delivers food from my favorite specific restaurant of frequency, pick a I’ve had a previous positive experience delivery app if it has their It features lots of coupons and deals It provides a good selection of my favorite cuisine favorite restaurant It is easy to navigate

0 10 20 30 40 50 ...which restaurant to order from? Takeaway I have a specific cuisine craving and seek it out Infrequent third-party delivery Frequency I look for a place with free/low cost delivery customers are more apt to I’m using third-party choose restaurants with lower delivery: I look for a place that I’ve had a good experience from delivery costs — brands can ● More ● About the same I look for a restaurant available on the app I’m ordering from entice these customers with ● Less lower fees + delivery specials. I look for a place with quick delivery

You’ve likely heard rumblings that third-party delivery is The truth is only 6% of customers will opt to dine in at cannibalizing business. That instead of offering delivery, your restaurant if they can’t get your food from third-party you should be drawing in customers to eat at your delivery. The majority are taking their business elsewhere. restaurant — where they are more likely to spend more Today’s customers prefer more convenient options over money with drink orders, upsells, etc. That in the end, dining in restaurants. And the best way for you to stay you’re losing money with third-party delivery. relevant is to provide them with more convenient ways That’s a myth. to get food. Yes, third-party delivery can hurt your brand and negatively affect business outcomes if you refuse to get in the game. But if you’re telling yourself it’s best to stay out, you have a lot to lose.

© Service Management Group | Confidential | All rights reserved 23 // 43 The phenomenal growth of third-party delivery indicates customers will put up with some hiccups for the convenience and variety 3 delivery apps provide.6 What are the biggest risks + opportunities?

6 Associated Press, February 2019 © Service Management Group | Confidential | All rights reserved 24 // 43 TREND Problems are happening more often — and it’s usually due to an inaccurate order The high rate of problem occurrence was alarming in 2017 + it’s only gotten worse — now almost half of customers are experiencing an issue

Experience a Problem? What’s the Problem? Takeaway Problem occurrence % % % 40 17 14 continues to increase Caret-Up + accuracy by far Accuracy of order Freshness Delivery time % % % remains the biggest 58 42 22 issue. Arm your staff No Yes Since % % % % with best practices to Oct 2017 8 8 7 6 ensure they’re prepping Friendliness Order Appearance Appearance of driver experience of food of driver accurate orders.

© Service Management Group | Confidential | All rights reserved 25 // 43 Newsworthy Third-party delivery is blowing up the Internet — and it’s not all good news. With all the negative attention third-party delivery is getting, it’s no wonder restaurants aren’t sure how to best navigate the space. But these headlines are the reason brands must regain control of the customer’s delivery experience.

NATION’S TODAY PALM BEACH POST RESTAURANT NEWS 1 in 4 delivery Riviera police: Shake Shack sales drivers admit to Threat of bad hurt by exclusive tasting your food food-delivery review Grubhub partnership before delivering it led to car chase, assault charge

VIEW ARTICLE ⊲ VIEW ARTICLE ⊲ VIEW ARTICLE ⊲

© Service Management Group | Confidential | All rights reserved 26 // 43 More apps, more problems An increase in problem occurrence is in part due to more third-party delivery customers using multiple apps; more than half of customers with 4+ apps experience an issue with their order

Average Problem Occurrence by Number of Apps

Takeaway 1 APP 2 APPS 3 APPS 4+ APPS Few third-party users are loyal to one app. And because no app is delivering % % % % a perfect user experience, 40 39 48 55 customers are facing issues with each. Restaurants Average Problem Occurrence by Preferred Provider % % 61 % 56 % need third-party delivery % 53 % % 55 50 50 50 % % 46 43 % strategies that translate % % % % 40 37 38 36% 35% 39 39 across multiple apps.

© Service Management Group | Confidential | All rights reserved ● DoorDash ● Uber Eats ● Grubhub ● Postmates 27 // 43 When issues happen, Problem Attribution users are still most likely Not sure CARET-DOWN 13% since Oct 2017 to blame the restaurant 12% Problems are happening with almost half of Restaurant third-party delivery orders — and 62% of customers 35% CARET-DOWN 5% since Oct 2017 put at least part of the blame on the restaurant 26% Delivery Takeaway CARET-DOWN 9% since Oct 2017 % Even if your brand isn’t at fault, customers 27 % are likely to blame you. And if you don’t have 62 a way for customers to contact you directly about issues, your brand will suffer. Restaurant + Delivery * New selection, Nov 2019 * The decrease in blame specific to restaurant or provider is largely due to the addition of the “both” option we added in 2019. We are beginning to see trends that point to customers expecting brands + providers to work together.

© Service Management Group | Confidential | All rights reserved 28 // 43 But who customers blame can vary by problem type More than half of customers attribute inaccurate orders to the restaurant, but are more likely to fault the delivery service for speed issues

Primary Problem by Problem Attribution ● Restaurant ● Restaurant + Delivery ● Delivery ● Not sure 57% Takeaway Your restaurant will 38% likely take the fall for

27% 27% inaccurate orders, 23% 20% 21% 21% which is a problem % % 17 % 15 12% 13% 14 you have to solve since % % 10% % 9 % % 9 % % % 7 8 % 8 % % 7 6 6 4% 6 5 % 5 3 2% it’s the issue customers cite most often. Accuracy Time to Freshness or Appearance Order Friendliness Appearance of order receive order temperature of food experience of driver of driver of food

© Service Management Group | Confidential | All rights reserved 29 // 43 When it comes to negative Problem Type by Preferred App Provider ● Accuracy of order ● Appearance of food mentions, accuracy remains ● Freshness or ● Order experience temperature of food ● Friendliness of driver the biggest problem — ● Time to receive order ● Appearance of driver 43% 38% 37% regardless of app used 34% Though DoorDash is leading the charge overall,

% 17% 18 18% 17% 16% it has the worst reputation for accuracy % 12% 13 12% % % % 10 % 10 10 9 % % % % 8 9 9 9 % % 7% 7% 8 7 7% 5% 5% 5% Opportunity #1: Order accuracy DoorDash Postmates Uber Eats Grubhub The bad news is accuracy is a big problem. Accuracy Mentions from Customers The good news is this is one area where restaurants Percent mentions Negative sentiment can regain control. Implement multiple accuracy Postmates 28% Postmates 76% checks in the prep process, include a copy of the DoorDash 26% Average 81% receipt, + staple the bag after it’s checked to make Average 22% Uber Eats 81% sure no mix-ups happen in the delivery process. Uber Eats 19% Grubhub 82% Grubhub 13% DoorDash 84%

© Service Management Group | Confidential | All rights reserved 30 // 43 Service Mentions from Customers Percent mentions Negative sentiment Text analytics revealed Postmates 44% Uber Eats 43% DoorDash 41% Average 51% customers mention Average 35% Grubhub 51% Uber Eats 31% Postmates 55% service most often, Grubhub 25% DoorDash 55% but comments on speed Speed Mentions from Customers Percent mentions Negative sentiment are more often negative Postmates 28% Postmates 54% DoorDash 27% Uber Eats 60% Again, though DoorDash is a customer favorite, it has Average 24% Average 61% the most negative mentions about speed and service Uber Eats 22% Grubhub 64% Grubhub 18% DoorDash 65%

Takeaway Taste Mentions from Customers Though some elements are out of the restaurant’s Percent mentions Negative sentiment Uber Eats 42% DoorDash 24% control, you can do your part by implementing seamless DoorDash 38% Grubhub 31% communication with the third-party provider for quicker Postmates 33% Average 32% delivery and tastier food. Average 32% Postmates 36% Grubhub 16% Uber Eats 36%

SITUATION INSIGHT ACTION RESULTS

In order to withstand third-party Data showed that while Accuracy 01 | Made accuracy top priority McDelivery customers: delivery disruption and the of Order held less weight with for delivery orders evolved needs of customers, traditional visit types (since ppts 02 | Held franchisees + Accuracy McDonald’s UK rolled out its dine-in/drive-thru guests can 6 of Order accountable, by ensuring partnership with Uber Eats in see if their orders are wrong restaurants contributed towards August 2017. Over the course of and get it quickly fixed), it was ppts refunding inaccurate orders + Overall 2 years, SMG’s CX data showed much different for delivery. 7 Satisfaction lower customer satisfaction Accuracy was one of the top key with delivery orders, compared drivers for delivery customers — ppts Likelihood to other visit types. To better and also one of the lowest + 3 to Return understand what drives OSAT performing measures, with a for McDelivery customers, the significant number of orders brand requested deeper delivery being reported as incorrect. analysis from its SMG team.

© Service Management Group | Confidential | All rights reserved 32 // 43 More than half of third-party users are concerned about their food being safe to eat Food concerns are highest among less frequent users

How concerned are you wth the food you have delivered being safe to eat? I’m using third-party delivery: ● More ● About the same ● Less Opportunity #2: Food safety Restaurants can’t control what 21% 25% 24% 10% 20% a driver will do, but you can implement processes to help 31% % % % protect the order and signal to 27 % 27 27 % 26 25 customers the food hasn’t been % % 20 % 18% 19 19 tampered with. Food should 13% 15% 13% 11% arrive in a clean (no grease 8% stains or spilled condiments), well-packaged, + closed Not at all Not very Somewhat Concerned Very concerned container with a branded seal. concerned concerned concerned

A brand’s social reputation 3.8 takes a big hit when customers Without third-party mention 2.4 post about their third-party With third-party mention delivery experience -1.5 On average, social ratings decline by 1.5 stars when third-party is mentioned at all Difference in Social Scores by Provider Opportunity #3: Online reputation -1.7 -1.7 With online ratings + reviews, customers are more likely DoorDash Grubhub to air their grievances with your brand, not the third-party delivery service. To protect your brand, you need a solution that integrates your other CX data and allows for easy access to reviews, seamless engagement with customers, and swift -1.5 -1.1 problem resolution. Postmates Uber Eats

Your mistake could go viral Take action on customer reviews this place. first of all, where the are my ranches? and no Online4 reviews are a foundational napkins? who the works here. i got this delivered cause partLeverage of your brand’s online presence and reputation. Read this best practice a er is tired from work. the dlivery was made by doordash. engagement to increase guidesearch for steps engine to keep visibility, you ahead idk if that delivery just didn’t check the items properly or didn’t of drivethe competition store traffic, and drive more new+ proveand repeat ROI customers to bother. why dont the employees do correctly. check the your business. ing ranch. you have one ing job. the you give me a bunch of ketchup for anyways. next time, check your before shipping it off.

This real review by a really unhappy This type of viral post is all it takes to customer named Timmy has the potential do serious brand damage and make to reach thousands of people. And potential customers choose someplace given its colorful context, it’s also likely else — one that won’t dare to forget their others will share — extending its reach to ranch dressing. countless consumers. GET THE GUIDE ⊲

Third-party delivery is not a new concept anymore, but But here’s the good news: there are several steps the kinks in the process have yet to be ironed out. With restaurants can take to improve the process. With the problem occurrence on the rise — and happening nearly highest number of delivery issues coming from inaccurate half the time — there is a lot of room for improvement. orders, restaurants should implement best practices by What’s worse (for restaurants) is customers default to double checking and sealing all orders. During peak times, blaming them for mishaps, even if it’s not their fault. dedicate a team member to delivery orders — someone who is responsible for every piece of the order from fulfilling special requests to including dipping sauces. Those little details matter to customers. The proof is on Yelp.

“DoorDash is implemented directly “The restaurant industry has long into Popeyes’s point-of-sale system. complained about the lack of access Through DashPass, subscribers can get to crucial consumer buying habits favorite Popeyes menu items through that are often held hostage by third- DoorDash without delivery fees. For party delivery companies. With the $9.99 a month, DashPass offers its partnership, Grubhub will provide Shake members unlimited $0 delivery fees on Shack with ‘guest data insights’ that both orders of $12 or more from participating companies will use to jointly market to restaurants.” 7 customers.”8

7 QSR Magazine, January 2020, 8 NRN, August 2019 © Service Management Group | Confidential | All rights reserved 38 // 43 ...while others are choosing to forego partnerships + strengthen their own delivery options

“The company announced that it ‘will “The pizza chain says it can provide never authorize third-party companies delivery at a far better rate than the like Uber Eats, DoorDash or Grubhub delivery providers can. There’s also to deliver sandwiches to its customers.’ this: It controls the information from those orders.” 10 ‘We want to control the experience from the fresh prep to the hand off Takeaway to the customer,’ said James North, Determining if a provider partnership is 9 CEO of Jimmy John’s.” right for your brand is one of the first steps to your third-party delivery strategy.

9 QSR Magazine, February 2019, 10 Restaurant Business, October 2019 © Service Management Group | Confidential | All rights reserved 39 // 43 STREAMLINING PARTNERSHIPS Some third-party delivery providers are making efforts to create a more seamless process with restaurants

“In an effort to solidify its status “Chowly partners with DoorDash, as a leader in the $250 billion enabling restaurant partners U.S. takeout market, Grubhub has to use third-party delivery launched Ultimate technology, drivers while still taking orders a hardware and software solution through their native channels. that integrates all restaurant ordering Will streamline delivery channels into one system.” 11 operations during peak times.” 12

11 Fast Casual, January 2020, 12 Restaurant Drive, September 2019 © Service Management Group | Confidential | All rights reserved 40 // 43 Ghost kitchens — or “cloud kitchens” — offer lower real estate + menu innovation costs for restaurants willing to experiment

Ghost, or cloud, kitchens — restaurants “The growth of virtual kitchens is outpacing conceived only for delivery or takeout — our projections and I expect this to continue are quickly becoming the next big thing. as the rise of millennial consumers continues With benefits like closer proximity for to drive innovation and demand for off- delivery routes and lower operation costs, premise dining options,” said Arman Narang, these spaces are gaining popularity. co-founder of POS provider Toast.12

Brands like Halal Guys, Sweetgreen, and Chick-fil-A have partnered with leading Takeaway ghost-kitchen brand Kitchen United to offer There are pros and cons to setting delivery out of a shared commercial kitchen. up a ghost kitchen. Not every brand And with the “Chipotlelane” — a secondary has the means or space, but with prep line dedicated to fulfilling out-of-store delivery orders increasing so rapidly, orders — Chipotle can still provide the same it’s worth exploring the option. fresh food customers expect, but also not 12 CNBC, December 2019 © Service Management Group | Confidential | All rights reserved bottleneck frontline operations. 41 // 43 BRAND PROTECTION CHECKLIST Corporate strategy Field improvements ■ Compare providers to determine ■ Address 3PD problem occurrence + Do your research. which app(s) best meet the needs of refine your close-the-loop process for What’s best your customers. 3PD customers. ■ Optimize internal operations ■ Determine the level of control you to accommodate third-party have, if any, over updates to your for your brand? delivery (3PD). location’s information on 3PD app(s).

From provider partnerships to ghost + ■ Improve CX for customers ■ Implement food safety protocols cloud kitchens, there’s no one-size-fits-all buying through native to address customer concerns + convenience options. drive trust. approach to food delivery. But this is no longer a question of if you need a third- ■ Evaluate 3PD data management ■ Decide which menu items should be party delivery strategy — it’s about finding + ownership strategy, including offered via 3PD app based on times of which provider(s) will give you highest demand. the right one. access to customer feedback. Convenience options To get started, work through this top 10 ■ Segment 3PD data as a separate ■ If you opt out of 3PD, define a checklist of items to address for your dine type to better understand delivery strategy that will capitalize the specific experiences of your corporate strategy, field execution, and on convenience expectations without 3PD customers — especially when long-term success. sacrificing CX. using ghost kitchens.

© Service Management Group | Confidential | All rights reserved 42 // 43 Change the way you do business. The longer you wait to implement or fine-tune your third-party delivery strategy, the more you stand to lose

Today’s customers have high Third-party delivery is now the king expectations and more options than of convenience and instead of trying to ever when it comes to food delivery. dethrone it, brands must learn how to For restaurant brands to survive, you optimize it. SMG partners with must make operational and partnership 85% of NRN’s Top 20 restaurants To learn more on how we can decisions that will meet + exceed and 75% of QSR’s Top 20 concepts, help you implement a winning customer demands — providing superior helping them use real-time customer delivery strategy, drive changes experiences that will drive customer feedback to adapt to changing market that boost loyalty, and improve loyalty and, ultimately, business dynamics and tackle complex operational business performance, visit outcomes. challenges — like third-party delivery. smg.com/contactus.

About Service Management Group smg.com SMG inspires experiences that improve people’s lives. We are a catalyst for change, providing actionable customer, Connect with us patient, and employee insights that boost loyalty and drive business outcomes. Our unique model puts a dual Kansas City: +1 800 764 0439 focus on platform technology and professional services — making it easier to collect, analyze, and share feedback London: +44 (0)20 3463 0700 and behavioral data across the enterprise. To learn more about our customer experience management, employee Tokyo: +81 (0)3 6432 0871 experience, and brand research solutions, visit www.smg.com. 43 // 43