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? 1 L.E.K, February 2019 © Service Management Group | Confidential | All rights reserved 2 // 43 Longitudinal study 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 © Service Management Group | Confidential | All rights reserved 3 // 43 SurveyMini What’s the update on third-party What’s inside 1 delivery + app performance? 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? © Service Management Group | Confidential | All rights reserved 4 // 43 What we found 7 food delivery trends you need to know Before we dig into the details, here’s a quick preview. 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 © Service Management Group | Confidential | All rights reserved 5 // 43 1 What’s the update on third-party delivery + app performance? © Service Management Group | Confidential | All rights reserved 6 // 43 TREND 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.