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To Deliver or Not To Deliver

TO DELIVER or NOT TO DELIVER – THAT IS THE QUESTION

I’ve been chipping away at this article about delivery in restaurants for a couple months now, and I just read an article in Forbes written by Alicia Kelso, a senior contributor, that push me to action, so thanks to Alicia, here it is…


Delivery is one of the hottest topics in the American restaurant scene today. In fact 60% of restaurant meals served are now consumed off premise – that’s amazing. According to the NRA, that’s The National Restaurant Association, the off premise segment is expected to grow by another 80% between today and 2025, WOW!


I know some restaurant operators who have doubled their sales with delivery. Everybody is diving in to this new and wild frontier. I see it like the Gold Rush of 1849 and the Dot Com Boom of the late 1990’s. Here’s my question - is delivery the right option for you and your restaurant?


To Deliver or Not to Deliver that is the question. Today we are going to discuss Restaurant Delivery. I will share my thoughts on FOUR Things which are:

1. The companies that deliver

2. The problems with delivery today

3. The customers who buy the stuff and why they do it.

4. The future of delivery


THING ONE:

The companies that deliver restaurant food today are:

  • Grub Hub

  • Door Dash

  • Uber Eats

I was in Tampa in January of 2019 and one of my Uber drivers told me that there were 80,000 Uber drivers in the Tampa, St. Pete area. Wow! That’s an amazing number. These people drive passengers and they deliver STUFF from all kinds of places like Walmart, Publix Grocery Stores, Drug Stores, Liquor Stores and yes even restaurants.

There are also little local companies in the delivery business, in my city we used to have Order Up, but they were bought out by Grub Hub, and then we got a new local company called Chomp. I think the local guys are doing ok today, but I think the best they can hope for is to be bought out by a bigger player, kind of like little banks that get swallowed by BIG banks - like the Bank of America and Wells Fargo. I also know that Amazon is playing around in this segment too - and it will be very interesting to see what happens when they jump in full blast… I predict there will be lots of dead bodies floating around like in the dot com crash or 1999.


STEP TWO:

This brings us to Thing Two - The problems with delivery today – which are:

  • The menu

  • Food quality

  • The delivery containers

  • The system and business interruption.

First we have the menu:

Some food is better for delivery than other food. For example Pizza and sushi work pretty well, but what about a burger and fries, the burger is usually just ok and the fries really suck, that’s why we always eat them in the car on the way home - right?


For delivery we need food that travels well, I call it Industrial Strength. Lasagna and Garlic Bread are industrial strength. You can make it, pack it up and send it across town and it will still be pretty good provided that it was well made to begin with.


Then, we have the containers, there are two problems with containers.

First is Styrofoam, it is like public enemy number one. Everybody HATES Styrofoam, and some people will black ball your restaurant if they catch you using it. BUT- the alternative, the compostable, sustainable ones start to deteriorate almost immediately AND they can be downright disgusting the next day – IF you don’t transfer the food from them, when you get home. The other problem is that most delivery containers don’t keep the food HOT or COLD and it is usually tepid when it arrives at the house or delivery site.


This is a HUGE opportunity for the people who make to go containers.


Then, we have a timing problem sometimes we (the restaurant) get a delivery order at noon and the driver doesn’t show up for 45 minutes, and other times we get the order at 1pm and the guy walks in 2 minutes later, it’s craziness.


Next, is that some delivery companies charge 30% of the sale – That’s a LOT of money.

Think about it like this, Grub Hub charges the customer for delivery, so the driver gets paid. The 30% - they charge the restaurant is to cover their expenses and make a profit. I think restaurants can make some money on delivery, but it depends on the business model.


Also – there is a big debate brewing about whether the drivers are independent contractors or employees of UBER? If UBER and Grub Hub have to start paying payroll taxes – it will force them to raise the 30% Fee to what? 40 or 50 or 60%?


Just for fun… Here are a couple other bad things that can happen with delivery in no particular order.

  • When the food quality is BAD your restaurant gets a bad reputation.

  • When it is good - UBER gets high marks.

  • There is an increased possibility of food borne illness

  • And one of my favorites - tampering. Hey, I we like to nibble on the fries on the way home and so do UBER, Grub Hub and Door Dash drivers.

  • Does anyone really know who any of these delivery drivers are, who’s vetting them?


STEP THREE: The customers who buy the stuff and why they do it.

  • People use delivery because of the speed of life, everybody is too busy.

  • We have more money than we do time. Time is the most precious thing on Earth.

  • We do it for convenience and sometimes when we entertain at home.


Here’s on for ya –

The people who order delivery from your restaurant – ARE NOT YOUR CUSTOMERS…

That’s RIGHT - They belong to Grub Hub, Door Dash, Uber Eats and pretty soon – Amazon.


Here are a few examples:

Sysco recently made a very bold move – They stopped selling Heinz ketchup and went 100% with their own Private Label. When I heard this - My first though was – what an interesting move. I have always used Heinz ketchup and thought if I changed brands it would screw up my recipes that had ketchup in them. I also thought my customers would have a problem. Then I thought, why should I be loyal to Heinz, what have they ever done for me… I realized the answer was nothing - So I switched and I haven’t looked back.


Today we are seeing this same thing played out with many World Wide Brand Names.

For example, I was recently at Costco and was looking for Nestle’s Chocolate Chips which I buy often, and couldn’t find them. Then, I saw Kirkland Brand chocolate chips (that’s the Costco house label for those of you who don’t shop at Costco). We also see this at Walmart with their Great Value Brand, no more Kraft Macaroni & Cheese folks, Walmart only sells Great Value Macaroni & Cheese – AND it’s almost identical to the Kraft stuff - and they don’t have to pay Kraft a premium for their BRAND NAME!


It’s the same thing in Yankee Stadium, there are NO Coke cups or Budweiser Cups, beer comes in a blue and white pin stripe Yankee cup. There is only ONE logo in Yankee Stadium and that’s the New York Yankees.


We see a similar version of this with the reservation platform Open Table. They charge us a quarter for OUR customers - the people who come to our website to make a reservation

and charge us $1 for the people who come from their web site. Another way to say that is they charge us 25 cents for OUR customers and charge a dollar for THEIR customers.


Here's what this means and why it's important.

The people who go to Walmart and Costco are NOT Nestle or Kraft customers, they are Costco and Walmart Customers. AND the people who use Grub Hub and Door Dash and Uber Eats are not your customers – they are UBER and Door Dash Customers…


So what does this mean for you? This means that the BIG boys will build their brand with your sweat and hard work – AND as soon as they can – They will switch to their House Brand and squeeze your ass right out.


STEP FOUR: This brings us to things #4 - The future of delivery.

  • Ghost Kitchens

  • Virtual kitchens.

A full service restaurant is NOT the ideal environment for delivery, because it was designed to serve customers in a dining setting. Another way to say that is that when the restaurant is busy AND delivery is busy we have to make a choice, who gets FIRST priority - the customer in the dining room or the delivery customer.


I have Two restaurants. One is a high end steak house and I see delivery as an interruption of the flow of our food and service. I do not want a $10, delivery to screw up the system and have me mess up a $500 - four top. You know it happens, and just about every time. I know the goal is to augment our business, but both things usually happen at the same time. We get the delivery order for a burger and fries and an appetizer at 7:00, then. We get a four top of $40 steaks. We get so damned busy putting out $10 delivery orders that we over cook the $40 steaks and piss off our REAL long term LOYAL customers.


I think we have to make a decision. We have to be one or the other, we cannot be both. We cannot have a high end steak house or any type of good restaurant with delivery coming off the same line with the same cooks. We will always screw up one or the other.


Therefore, I believe the future of delivery is in the HUB & SPOKE Model with Virtual Kitchens and Ghost Kitchen. Imagine that UBER or AMAZON are playing in your market, what will they be smart to do?


I believe they will build ghost kitchens in a warehouse in the center of town so they can distribute their stuff quickly around town. Retail is dying and there will be many large vacant building is the near future. I see the big chains going together and building central kitchens with NO customer service. Imagine, McDonalds, Wendy’s, Burger King, Taco Bell, KFC and Starbucks all operating under ONE roof. And imagine the delivery drivers cruising in, picking up their stuff and driving out the other end… Wow!


The big guys have the money to capitalize on this trend… Just watch.


IN CONCLUSION:

The UBER, Grub Hub and Door Dash customers are NOT your customers, they belong to a third party vendor who doesn’t give a rats ass about you. If you really LOVE the idea of the delivery business - why not find a large building and build a GHOST kitchen with 20 Virtual restaurants. Maybe all by yourself or with some other local restaurants. Then, build your own delivery force and really kick some ass…


I think the delivery model is great for SOME restaurants and not so good for others, you have to think about it before you jump in with both feet. There as a cause and effect relationship to each and every action.


The future is here… It’s time to think, it’s time to look across the great abyss and take a leap of faith . TO DELIVER – or not to deliver – that is the question.


My Name is Peter Harman, I am the Food Guru. My goal is the teach restaurant owners and managers like you, to focus on Eight Basic Fundamentals that lead to a better life and financial freedom. My goal is to start a restaurant revolution where every restaurant owner and manager who joins us has the information they need to earn a 10% Profit, create financial freedom and live the life of their dreams.


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