Fast-food's next frontier?

by Monica Watrous
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Fiery Doritos Locos taco
Taco Bell, other chains to test delivery service..

IRVINE, Calif. – Doritos Locos Tacos may be coming to a doorstep near you. As part of ongoing efforts to woo millennial consumers, Taco Bell, a subsidiary of Yum! Brands, Inc., revealed plans to test a delivery service sometime this year.

Taco Bell has been taking aggressive action to stay ahead of the curve in the quick-service restaurant industry. The company this past October became the first fast-food chain to launch its mobile ordering and payment app at participating restaurants nationwide for both drive-thru and dining room orders. The free Taco Bell mobile ordering app for iOS and Android gives consumers complete access to every Taco Bell ingredient to create what they want, when they want it. The chain also plans to introduce catering in 2015, too.

While many pizza chains and sandwich shops are in the delivery business, few other fast-food companies have ventured from the drive-thru to the doorbell. But that may be changing.

Burger King began testing its BK Delivers initiative in 2012 and has since expanded the service to markets across the country, including Washington, DC, San Francisco Bay Area, Boston, Chicago, Minneapolis and Miami. Delivery is available in the markets for a minimum food order of $10, and customers may choose from various established menu items as well as new limited-time menu items. Orders must be placed within designated hours, which vary by location.

Starbucks grilled cheese sandwich and sliced turkey sandwich
Starbucks plans to offer food and beverage delivery.

Starbucks Corp. also is planning food and beverage delivery in select markets later this year, and Panera Bread Co. said it may pursue the option as well.

“We may have the best name in soups, salad and sandwiches, but we need to have the infrastructure and we need to have the capabilities in place to effectively go after the large-order delivery and small-order delivery opportunities,” said Ron Shaich, chairman and CEO of Panera, during a conference call in mid-February. “Simply put, we can’t attack these markets from the back of already constrained high-volume cafes.”

Panera tested delivery hubs in 2012 and 2013 and removed catering from some of its busiest cafes.

“We also found that when retail operators focused on retail, when they did not have to serve two masters, they did a better job,” Shaich said. “For these reasons, delivery hubs are potentially a powerful addition to our system. They offer the necessary capacity, the necessary capabilities, and they enable focus needed to grow catering, at the same time they relieve the pressure of two masters on our retail cafes. They also offer the potential to ultimately serve the small-order delivery market.”

Even Olive Garden executives are considering delivery. The casual-dining chain has seen a surge in to-go orders after introducing mobile and on-line ordering.

“This growth is very important as a check averages 30 percent higher when guests order on-line,” said Gene Lee, chief executive officer for Olive Garden’s parent company, Darden Restaurants, this past December. “Takeout represents 8.6 percent of our total sales. Given the increasing trend for convenience, we believe we can drive takeout sales above 12 percent over time.”

Delivery is not a new concept for Yum! Brands. The company has invested heavily in digital technology for its Pizza Hut business to drive more on-line and mobile orders for carryout and delivery, which executives expect will result in higher ticket and increased ordering frequency.

But for Taco Bell, a value-oriented brand, delivery may not be such a profitable proposition. Though millennials crave convenience, they may not be willing to shell out enough cash to justify the company’s investment.

Furthermore, maintaining the ingredient quality of Taco Bell’s menu items is more complicated than keeping a pizza hot. Preserving the elements of an in-transit taco, for example — the crunch of the shell, the crispness of lettuce and the warm juiciness of ground beef — may require some sophisticated packaging solutions. To avoid serving wilted Whoppers and melted milkshakes, Burger King developed special packaging for delivery. Taco Bell — and other chains considering delivery — may need to do the same.

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