It’s not just about ordering out for pizza anymore. Food delivery companies including DoorDash, Grubhub, and Uber Eats are at the forefront of this $10 billion retail services category. Food delivery activity shows no signs of letting up as the service speaks to hungry consumers’ appetite for convenience and immediacy.
But some restaurants, especially independents, are getting heartburn from delivery vendor fees that are too high for their taste. It can be a tough choice for restaurant operators to decide whether to handle delivery fulfillment in-house or go with a third party service. The major delivery players provide value-added services as they have built finely-tuned delivery networks.
Right now, there is cut-throat competition among delivery vendors, leading to heavy discounting that favors consumers. Food delivery companies will see continued growth entering 2020, but their business growth could turn out to be very unappetizing for their restaurant partners.
A CNBC article discusses more on this topic, which is excerpted below:
In this decade, more and more consumers have shifted to ordering their food online through delivery aggregators like Uber Eats and DoorDash.
Consumers looking for convenient meals ordered $10.2 billion from third-party delivery services in 2018, according to Technomic.
Restaurants adapting to the changing landscape will likely have new challenges in the next decade, including a focus on food quality and increased consolidation of third-party delivery providers.
McDonald’s, Starbucks and Chipotle Mexican Grill are among the many national restaurant chains that have partnered with delivery services. But for some, the extra sales from delivery also mean lower profit margins and major operational changes.
Chipotle, for example, started adding second kitchen lines to locations in 2016 to handle online orders. Employees assemble digital and delivery orders on the second line to speed up service. The chain completed the project this year.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
