The Delivery Dilemma

Meal delivery represents three percent of all restaurant orders, and, on average, fast food and fast casual chains leverage up to three different third-party delivery services, such as GrubHub, Doordash or Postmates.

So how is the restaurant industry rethinking its business model to capture this growth and adapt to the new desire for food on demand?

Investment in Integrated Technology

According to the National Restaurant Association, 70 percent of QSR operators plan to devote more resources to customer-facing, service-based technology this year—and for good reason. While food delivery apps are awesome for consumers, they are not typically connected to the restaurant’s POS or back-of-house systems.  

So, restaurants getting serious about delivery are investing in technology that can connect delivery providers with front- and back-of-house systems. Several solutions, such as OrderOut and Chowly, serve as single-point solutions to integrate multiple third-party service providers with restaurant POS systems.  

Other operators are investing in their own mobile technology that not only allows them to integrate with POS and back-of-house software, but also allows them to offer additional benefits to consumers, such as order-ahead and loyalty programs. Starbucks and Dunkin’ are among the most popular. McDonald’s is also betting big on mobile, investing $3.7 million in mobile app developer Plexure to enhance its mobile app capabilities. They also purchased Dynamic Yield to personalize menu recommendations based on weather and time of day. 

Rethinking ‘Physical’ to Accommodate ‘Digital’

Digital delivery can’t be ignored, so many operators are rethinking the in-store experience to facilitate both delivery and dine-in customers.

Chipotle and Roti have designated separate production lines to process pick-up and delivery orders. In June of 2018, Chipotle began testing a new pick-up model for order-ahead customers and couriers by installing a wooden shelving unit near the front door with orders bagged and ready to pick up.

Others are opting for more high-tech solutions, such as digital pick-up shelves through vendors like eatsa. Beyond providing a designated area for pick-up and courier orders, the shelves light up with a customer’s name and smart shelves sense when food has been placed on or taken off the shelf. This system can even alert a manager when an order sits too long, giving the restaurant an added layer of quality control that is sometimes lacking with delivery orders.

Ghost Kitchens

While some operators are grappling with incorporating on-demand orders into their existing footprint, others are establishing physical stand-alone kitchens to get in the on-demand game. Yet, these physical locations are quite different from the traditional restaurant storefront in that there is no storefront. (Hence “ghost.”) No seating or servers, no bar or bartenders … No customer-facing location at all. These virtual “ghost” or “headless” kitchens exist solely for the fulfillment of digital orders. The Halal Guys, Wetzel’s Pretzels and Famous Dave’s BBQ are just a few restaurants testing virtual kitchens as an extension of storefronts. A burgeoning market of solution providers, such as Kitchen United and Kaetz, have emerged to help restaurants meet the demand for ghost kitchens.

Ghost kitchens have their perks. They reduce high real-estate costs, alleviate the burden of delivery orders combined with dine-in orders, open the door for high-volume catering and allow chains to expand into new markets with limited risk. Further, delivery sales tend to be 75 percent higher than restaurant sales, so ghost kitchens may seem like a no-brainer.

However, this solution requires a new type of managerial talent—a combination of on-premise and off-premise expertise. In the case of a chain brand extension, restaurants need to ensure continuity of the brand experience between dine-in and delivery when they’re physically disconnected. Those chains that can get it right will have a viable solution to pave the way for growth.