STORE TO DOOR Delivery growth is phenomenal. Build it into your operations and facilities now before your competitors pass you by.

Ever feel like the pace of change is growing so fast that you can’t keep up? Better get ready to experience some serious g-force in the next few years when it comes to food delivery. Delivery orders last year accounted for about 3% of total restaurant sales, according to The NPD Group. Hardly seems like much until you take into ac- count that’s 3% of $541 billion. Restaurant patrons only sat down to eat 37% of the time last year. Carryout visits surpassed that at 39%, and 21% of transactions came from the drive-thru, demonstrating how little time consumers have for Pizza chains used to rule food restaurant dining. Demand for delivery is exploding By Michael Sherer, Senior Contributing Editor By Michael Sherer, delivery but with the Internet and as more services are making it easier than ever for now smartphone apps, operators, consumers—and operators—to have food delivered. chains and independents, large Delivery has been around for about 70 years. Even so, at and small, are getting into the the turn of the century, (doesn’t that sound quaint?), if you game. Looking to get started? wanted to be a couch potato and eat restaurant food at You basically have three options: home, your choices were limited to pizza, Chinese food, in-house delivery, third-party and a few local mom-and-pop restaurants. You either had aggregators (like DoorDash) or to pick it up yourself or fi nd eateries willing to hire driv- a combination of the two. ers to deliver the goods. Most people perused phone directories for restaurants and ordered by phone. As online review sites like Yelp cropped up around 2005, fi nding a restaurant that delivered got easier, and people ordered by both phone and fax. The expansion of the Internet convinced a lot of operators to establish their own online presence, and with that online ordering grew more common after ’10.

48 FEBRUARY 2018 fermag.com fermag.com FEBRUARY 2018 49 The ubiquity of smartphones is what’s now driving both you aren’t offering delivery yet, bet- Consider how you’ll every single touch-point, from the driver’s uniform to the These services assume all the logistics and responsibili- online ordering and the demand for delivery. With a vari- ter gear up now before all the other maintain food qual- giveaways they distribute.” ties of getting food from your store to the consumer as well ety of apps, customers can fi nd a list of food and restaurant kids on the block pass you by. So, ity that last mile of The drawbacks are the high cost of labor as well as insur- as providing a mobile ordering and payment platform for choices at their fi ngertips, select one, choose menu items, what are your options? delivery. Domino’s ance, maintenance and operating costs of vehicles if you customers. All you do is sign up for the service and the pay, and get a meal placed in their hands in 15 to 30 min- In-house. The classic model of has a Chevy with a own the fl eet. aggregator incorporates your logo and menu into its app. utes with just a few taps on a smartphone screen. delivery is the enterprising restau- warming oven to keep Third-party aggregators. The demand for delivery has Even noncommercial outlets like a hospital cafeteria trying rant that hires hourly employees, pizzas hot. The Halal fostered an explosion in the number of services—and to expand its business can sign up and benefi t. Three Models preferably with their own cars, to Guys has changed its smartphone apps—springing up around the world. Those “The biggest benefi t to using a partner,” says Toby Of course, it isn’t just smartphone apps that have driven run orders from the store to the con- food packaging—from that got in early and found fi nancing and/ Espinosa, Head of Business Development at DoorDash, the growth in delivery trend. It’s the general consumer sumer’s door. Perhaps no segment an aluminum tray with or investors to help them San Francisco, “is that we focus on driving incremental trend of shopping online and having everything delivered. has adopted this model as well or as a clear lid for dine-in grow quickly—Seam- volume and superior logistics technology at a much lower Services like Amazon Prime have conditioned consumers completely as pizza chains. Some patrons, to a paper lid less/GrubHub, Caviar, price than it would cost to do in-house. Restaurants are to both expect the convenience of delivery and expect it have even purchased fl eets of their for delivery because it EatStreet, Foodora, then empowered to focus on what they know best, making quickly. And ride services such as Uber have put legions of own vehicles for their drivers to holds heat better. EHungry, Foodler—have delicious food.” The major downsides are being lumped in with a large percentage of the restaurants in your area, the inabil- ity to control the delivery experience itself, and the cost, usually a commission that can range from about 12% to 35%. The high end is often more than a small store’s gross profi t margin. Hybrids. “Operators who want to design and control their own online presence use e-commerce providers like us,” says Marty Hahnfeld, COO of Olo, New York City, “and are adding delivery to the brand’s e-commerce site.” Software logistics platform providers such as Olo, Bringg, Orders2Me and Ordering Inc., develop operator-specifi c online/mobile ordering and delivery logistics software that drives e-com- merce on both the operator’s online and mobile e-commerce sites, and then help the operator contract with expanded into national, one or two delivery services such as UberEats, Postmates,

DOMINO’S Courtesy of Midland Reporter-Telegram; photo by Tim Fischer HALAL GUYS even international Caviar, DoorDash or GrubHub depending on the market. (Deliveroo, Just Eat), And new concepts are cropping up all the time. Olo, potential delivery drivers on the street. use. Pizza Hut is well known for its branded hot boxes on entities. Others such as UberEats, Amazon Restaurants, for example, was originally designed as an “order ahead” Millennials, especially, see food delivery as a natural the back of motor scooters as well as its emblazoned Smart DoorDash, Postmates, and Eat24 (Yelp) simply added food system. Its trademarked “Skip The Line” slogan was ad- outgrowth of both the technology and societal trends Cars. Domino’s unveiled its DXP—a converted Chevy or delivery on to other services they already offered. opted by operators like Starbucks, whose typical order is they’ve grown up with. The big boys are sitting up and tak- Sparks with a warming oven that holds up to 80 pizzas— But the restaurant scene, especially independents, is too small for delivery. Instead, Starbucks customers place ing notice. McDonald’s is running a TV campaign advertis- two years ago. local, and many markets are too small or too remote for orders on the chain’s e-commerce site for the store nearest ing its delivery service. Burger King, which jumped the “Owning the supply chain all the way to the customer coverage by the big names. Which means that a plethora of them, and the order is waiting for them when they go to gun by testing delivery fi ve or six years ago, announced it’s enables businesses to control the entire customer expe- other services like Waitr, WaiterOnTheWay, Dine-InDeliv- pick it up. back in the game. Even fi ne-dining restaurants like Momo- rience,” says Raanan Cohen, CEO of software logistics ery, BringMeThat, MyTown2Go, SkipTheDishes, Zomato Ritual, a new social media app, allows employees in fuku Má Pêche in New York City now offer food delivery. If platform Bringg, Tel Aviv, Israel, “leveraging their brand at and Swiggy cover territory others haven’t yet reached. the same company to fi nd out what others in their “circle”

50 FEBRUARY 2018 fermag.com fermag.com FEBRUARY 2018 51 want for lunch, for example, ees to assemble orders for delivery drivers as same time. At peak times now, we may have two or three handle digital orders as well as catering. And Starbucks is pick a restaurant and gang they arrive, or beef up staffi ng in the kitchen employees dedicated to delivery orders.” looking into something similar to better manage its queue the orders for the res- to keep up with production at busy times. of in-house and “Skip The Line” digital orders. taurant. It also alerts Space, too, may come at a premium Reconfi guring Your Space “We are fortunate to have two kitchen lines in every one people in a group when you add delivery orders to your The San Francisco store already had a warming cabinet for of our restaurants since we have inside business and drive- when one of them normal mix. Panera Bread Founder delivery and take-out orders, but moving it closer to the thru business at every location,” says Nick Scarpino, V.P. is placing an order; and former CEO Ron Shaich once pick-up area saved employees valuable time and reduced of Marketing and Public Relations, Portillo’s Restaurant people can then referred to the mass of people in congestion behind the counter. In newer stores the com- Group, Oak Brook, Ill. “The second line has the capacity to ask that person to the order pick-up area near the pany is adding more counter space with a separate area for handle delivery orders even during our busiest times.” pick up an order cash register as “the mosh pit.” delivery drivers. “With hand-off of orders happening at the counter, curb- for them at the Panera has reduced wait times and “We don’t assemble orders until the drivers are there,” side and at the drive-thru, the prep system has to clearly same time. traffi c jams with its mobile order- Hjorth says, “because we don’t want to put cold sauces in delineate who the hand-off goes to,” says Olo’s Hahnfeld, “The social ordering feature, Ordering app Ritual called Piggyback, (from l.) connects co- enables consumers to workers by encourag- easily connect with their ing them to pool lunch network of colleagues and join orders so only one their orders, making purchases of has to pick up. Sweet- low-ticket items sustainable,” says Robert green better handles Kim, Co-Founder and COO, Ritual, Toronto. “With Ritual, delivery orders by our partners are able to offer their entire menus, driving splitting the front-of- incremental revenue.” house into one area for on-site customers First Things First and another for orders Before committing to one of the many delivery options that come in online, available, however, you have to think it through from an either for pickup or operational standpoint. delivery. Portillo’s “Focus on what’s going to be the best fi t for your budget delivery is one part and your staff,” says Rafi Cohen, Co-Founder, Orders2Me, in-house, one-part Brooklyn, N.Y. “Can you afford to keep delivery quality of SWEETGREEN PORTILLO’S trusted partners. service high while keeping your waitstaff and your kitchen staff happy? Delivery food prep means less time for in- ing app and touchscreen ordering, which control the fl ow with warm food until the last minute.” To save time assem- “a customer, a delivery driver, or a take-out customer. house prep, especially since delivery customers have an of orders, and by installing a simple shelf to hold digital bling orders, staff in each unit wrap hundreds of bundles of And there are hundreds of these orders per day at many expected delivery window. Waitstaff or counter staff will orders. utensils and sauces in napkins at the beginning of each day restaurants.” have customers in front of them awaiting an order while “The trick is to manage the incremental volume,” says so they’re ready to grab when orders are assembled. deliveries go out fi rst, and that can add a great deal of Renè Hjorth, Director of Operations, Fomo Eats Cater- Sweetgreen, the salad and grains bowls chain that got its All About The Food stress on top of a server’s existing responsibilities.” ing, Las Vegas, which operates The Halal Guys in three start in Washington, D.C., and is now headquartered in Los Operators want food to arrive at each customer’s door as Signing up with a third-party delivery service is a rela- franchise stores. “We had the luxury of testing delivery Angeles, has redesigned new stores with the front split into hot and as fresh as possible. After all, food is what differen- tively inexpensive way to test the potential strains delivery by opening a delivery-only commissary in San Francisco two areas, one for customers and one for delivery that’s ser- tiates you from others and is the primary representation of can put on your operation. What you want to look for is while we built our fi rst store there (since the permitting viced by a separate prep line. Digital orders now account your brand. While you can set an expectation for the time what impact the incremental volume from delivery orders process took less time). Once the store opened, we tested for about a third of the company’s sales. Chipotle, too, is it takes either in-house or third-party drivers to deliver will have and where. You might have to add extra employ- ways to handle delivery orders and in-store orders at the adding a separate assembly line in some of its new stores to food, you can’t control it. (Remember some of the problems

52 FEBRUARY 2018 fermag.com fermag.com FEBRUARY 2018 53 a large pizza chain faced when it guaranteed delivery in And Denny’s has designed its delivery packaging in such create its own mobile ordering platform with the help of a market shakeout.” 30 minutes or less?) a way that pancakes sit on top of warmer food so rising vendor that lets customers order ahead for pick-up. A drawback for restaurants that sign up with multiple No doubt, certain foods travel better than others. Pizza, steam keeps them soft. A smaller chain like The Halal Guys, with less visibility delivery services (in addition to the lack of marketing sushi, Asian food, even Italian food all travel pretty well, When it gets right down to it, however, customers who in new markets, may rely entirely on third-party delivery oomph when lumped in with hundreds of others) is the and can be quickly re-heated in a microwave or oven if order food for delivery know what they’re getting. services to build its business. To do so, however, may logistics of keeping orders straight. The three stores that they aren’t as hot as expected. (OK, so maybe you don’t “I think French fries were the industry’s original con- mean signing up with several. Hjorth presently oversees have a tablet from each delivery want customers to zap their sushi.) And many third-party cern,” Hahnfeld says. “As far as we can tell, consumers “We use a half-dozen services,” says Hjorth. “We vetted service for incoming orders. “To keep them straight, we delivery companies provide insulated bag or box carriers reset their expectation when ordering delivery. They know our delivery partners by the ease of use of their put in a separate receipt printer for each one to help for drivers (some branded, like those from DoorDash). the fries won’t be great. Convenience trumps quality.” platforms, the number of drivers in each orders move down the line more smoothly,” Packaging plays a big part, too. In most cases, if you’re market to assure quick delivery and he says. already using take-out packaging for pick-up orders it will Vetting Vendors hot food, and the fi nancial con- If you already have an online work for delivery, too. In others, you might make changes. With so many options to choose from, where do you start? siderations—what they charge presence capable of taking cus- “We tested delivery for more than a year,” says Portillo’s Look at your business from four perspectives. First, what’s in commissions and whether tomer orders, a mobile platform Scarpino, “and we’ve made several tweaks to our packag- your menu mix and check average? How visible are you in they add a customer de- is your next step. ing to maintain the quality of the food as well as possible. the marketplace? How tech-savvy is your operation? And livery charge. The Halal “We considered sev- This is an ongoing project for us as we keep making incre- how much profi t margin do you have to work with? Guys rolled out its own eral options,” Scarpino says, mental improvements over time.” McDonald’s, for example, has tremendous visibility and delivery app nationwide, “everything from handling The Halal Guys stores use an aluminum tray with a clear lots of heavy users, so the tack the chain took with delivery but it’s really for high-use all deliveries ourselves to lid for dine-in customers, but use a paper lid for delivery was screening and selecting a last-mile delivery service to customers. As a franchisee outsourcing the entire delivery orders because it holds heat better. Sweetgreen packages its partner with. Starbucks has similar visibility, but due to the still gaining awareness, we experience. Ultimately, we locally sourced salad greens, toppings and dressings sepa- fact that customers are unlikely to pay a delivery charge on actually may have to add ended up with a great blend of rately so fl avors and textures are the way they’re intended. a latte and they have good saturation, the chain chose to more partners until there’s a accepting delivery orders on our own platforms and delivery partner sites, and outsourcing the delivery Virtual? Or Ghost? aspect to trusted partners.” “Nothing makes customers want to With the growing popularity of food delivery and the mobile up on the Seamless delivery service. By opening a commis- campuses. Presently, Good Uncle services the Syracuse order takeout or delivery more than the convenience apps that make it easy for customers, the industry is experi- sary instead of a restaurant, the thinking goes, the operation University campus. of a mobile app,” says Orders2Me’s Cohen. “It’s a fast, encing a tremendous amount of experimentation. Food trucks can focus on food production and generate enough volume to Interesting concepts all, but is the market ready for convenient way for customers to order without re-entering have been food fashion trendsetters for some time. Pop-up bring down the cost of delivery. them? Maple in New York City closed last May. Green Sum- personal information every time. And integrating your app restaurants that give operators a chance to test new concepts “With just a kitchen, production is more effi cient because mit got support from GrubHub (which bought Seamless) to with your POS system eliminates the potential for human or menus are old hat. Food delivery apps make it possible for staff is dedicated to production not interfacing with custom- expand to Chicago, but closed its Chicago operations last error when it comes to transferring orders from a separate a restaurant to exist without seating or even a storefront. ers,” says Peter Schatzberg, Founder of Green Summit. “Food fall, and founder Schatzberg is no longer with the company. system to the kitchen or the register.” A number of entrepreneurs—both well-known foodies and for all nine concepts was designed to be cooked and held “I left,” he says, “because I want to get into a new space With your own mobile app tied into your own POS techies who see a niche—are playing in this “virtual” or ready to assemble—no cook-to-order.” where I can make more than $6 billion. When I got into system, you control the entire customer experience except “ghost” restaurant space. Home meal replacement compa- The food truck craze prompted serial entrepreneur Chris food delivery, labor was $5 per hour for delivery. Now it’s last-mile delivery. To fi nd a partner for that piece, experts nies like Blue Apron, Munchery, Plated, HelloFresh, and Purple Baggott to open ClusterTruck in Indianapolis two years ago. between $9 and $15 per hour. I won’t get back into food recommend assessing both the fi nancial ramifi cations and Carrot deliver meal kits or prepared meals to solve the dinner The company licenses recipes from local food trucks, which unless it’s fully automated and labor falls to fi ve percent of delivery experience. “Really fi nd out how those external dilemma. David Chang of Momofuku fame, invested in Maple, it then produces for delivery in a commissary kitchen. He’s sales.” delivery services will ensure they’re aligned with your a New York food delivery start-up focused on the offi ce lunch since opened a kitchen in Bloomington, Ind. Even if the virtual restaurant concept ends up leaving brand’s values and standards,” says Bringg’s Cohen. business. Good Uncle does something along the same lines, licens- ghost restaurants in its wake, entrepreneurs in both the Whether the market shakes out or not remains to be Green Summit took the concept even further, opening nine ing menu items from popular restaurants and making in its food and tech worlds will continue to look for ways to marry seen, but delivery will only become a larger piece of the non-existent restaurants in New York simply by signing them own vans for delivery only to specifi c drop-off spots on college the two. foodservice business. “Sitting on the sidelines is no longer an option,” Hahnfeld says. fer

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