Restaurants on the hook for third-party errors
Aug. 23, 2016
by Erica Shaffer
A new Technomic report explains why foodservice operators need to understand dynamics of on-demand delivery.
CHICAGO – On-demand services promise consumers delivery of almost anything and at low prices, and the concept has caused disruption across industries including foodservice. But what happens when the disruptors get disrupted? A new report from market research firm Technomic Inc. found it’s the retailer or foodservice operator that gets the bad rap.
In “On Demand Delivery: Disrupting the Future of Foodservice,” Technomic found that 76 percent of consumers hold the restaurant at least partially responsible for any errors, even if those errors were committed by third-party ordering and delivery services.
“This puts operators’ brand reputation at risk each time a customer orders delivery through these services,” Melissa Wilson, a principal at Technomic, said in a statement. “Even if delivery is not a current strategic initiative, operators should educate themselves about and understand the dynamics of the third party delivery market so they can put guardrails in place to maintain quality and brand reputation.”
Foodservice operators must educate themselves on the dynamics of distribution channels that serve on demand delivery businesses, Technomic said. It is necessary to develop a plan that reflects potential impacts on operations, product mix and store design. Foodservice operators also should consider the pros and cons of establishing their own delivery services.
But the benefits of partnerships with third-party delivery services are significant, according to Technomic. For example, the study found that 34 percent of consumers that use third-party services reported ordering meals from casual dining restaurants, while 14 percent reported placing orders from family style restaurants that don’t offer delivery. For example, DoorDash, a Silicon Valley-based technology company, provides delivery of food from Jason’s Deli Taco Bell, 7-Eleven, Dunkin’ Donuts and KFC.
These findings show that third-party delivery services are generating additional traffic for casual dining restaurants and other concepts that don’t already offer delivery. These services also are offering consumers a wider variety of meal options that restaurants have been reluctant to offer for delivery themselves.
Another finding: Two-thirds of delivery orders, or 69 percent, were place directly with a restaurant, while 66 percent of consumers said they placed a delivery order via a third-party service in partnership with a chain restaurant.
Finally, while pizza remains at the top of consumers’ list for delivered meals, 1 in 5 consumers said they used a third-party service to order a hamburger, and burger businesses have taken note. Canada’s Fatburger and SkipTheDishes, a North American food delivery technology company, partnered to bring burger delivery to Vancouver, Burnaby, Edmonton, Calgary and Saskatoon and other major Canadian cities.
And in an earnings call with analysts in May, Jack in the Box Inc. Chairman and CEO, Lenny Comma, confirmed the chain is testing delivery using internal and external resources.