Online-only brands allow restaurants to promote products that travel well for delivery, such as sandwiches and wings, helping turn the service from a burden into an competitive advantage. (EAT), owner of Chili’s and Maggiano’s Little Italy, has two virtual brands so far: It’s Just Wings and Maggiano’s Italian Classics. The pandemic prompted these chains and others to set up online-only concepts designed specifically for delivery.Īpplebee’s launched Cosmic Wings, which serves Cheeto-flavored chicken wings. That’s especially important for casual dining brands such as Applebee’s and Chili’s, which are designed to serve diners primarily in their restaurants. One way to tackle the delivery challenge is to separate the service from regular restaurant operations, and use it mainly to attract new customers. Ultimately, the disruptions meant “a rapid increase” in costs.Ĭheeto-flavored wings are on the menu at Cosmic Wings. “This required us to greatly increase the use of much more expensive … alternative delivery solutions in order to meet strong customer demand,” he added. “Our third-party delivery providers had Omicron-related staffing shortages, impacting their ability to fulfill a portion of our distribution needs,” he said. (SBUX) CEO Kevin Johnson walked analysts through a recent scenario that increased costs for the coffee chain during a February call. Others pass costs onto consumers.Īnother problem with outsourcing delivery is that when circumstances outside of a restaurant’s control go wrong, their own costs can spike. Some restaurants are able to negotiate lower rates directly. Third-party providers have also started offering lower rates for limited services, allowing restaurants to opt into more affordable, if less extensive, services. Cities have been capping fees at lower rates. For some, delivery fees can mean operating in the red.Ĭertain measures have been put in place to help make delivery less expensive for restaurants. Restaurants, particularly independent ones, already have thin margins. Third-party providers charge fees which can be as high as 30%. “They didn’t necessarily do the most efficient adjustment,” Bailey noted.ĬhowNow CEO weighs in on the future of food delivery, potential IPOįor some restaurants, the economics of delivery simply don’t add up. Now, restaurants “have to figure out what to do to make it profitable.”įor restaurants, fixing delivery means not only making it work better, but also finding ways to convince customers to choose carryout or drive-thru instead.ĭuring the pandemic, restaurants had to shift to a delivery or takeout model to survive, said Tom Bailey, senior consumer foods analyst at Rabobank. “Consumers have become accustomed to getting products delivered to their homes,” said Joe Pawlak, managing principal at Technomic, a food service consulting company. So whether restaurant owners like it or not, delivery is here to stay. After a spike in 2020, it settled at nearly 9% in 2021, according to Euromonitor’s forecast for last year (The company’s 2021 foodservice data has not been published.) In 2019, delivery accounted for about 7% of total US restaurant sales, according to Euromonitor International. It’s usually pretty fast, and perhaps best of all, they can do it through an app - without ever having to talk to a person.Īlthough dine-in restrictions in most places have eased, delivery rates remain higher now than they were pre-Covid. Tayfun Coskun/Anadolu Agency/Getty ImagesĬustomers, on the other hand, don’t see it that way. Restaurants aren't huge fans of delivery.
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