The restaurant business is being disrupted by new, digitally-enabled competitors. In 2016, delivery transactions made up about 7% of total U.S. restaurant sales. Predictions are that restaurant delivery could eventually reach 40% or higher.
Third-party delivery services such as UberEats, GrubHub, Amazon Restaurants, and Deliveroo have emerged, and while they can increase brand awareness for some restaurants, their fees can be as high as 30% of the transaction. Many restaurants can’t survive that kind of margin hit.
Ambitious food delivery services now want to get more involved in food preparation. UberEats recently acquired Ando, a delivery-only ‘restaurant’ founded by Momofuku chef David Chang.
TGI Fridays, the iconic casual dining chain with 500 locations, is up to the challenge. In the first year they introduced online ordering, take-out sales grew 30%, online order size was 7.2% higher than in-restaurant, and more than 70% of online orders came from new customers. They’ve also recently announced a partnership with Lash, a startup in Dallas, to deliver alcohol and food. The company is also working on an at-home bartending service to offer a more complete TGI Fridays experience outside of the restaurant.
What’s next: How restaurants can survive digital disruption
So, what’s next? Restaurants can survive digital disruption, right?
There are success stories of restaurants preparing for and staying ahead of the disruption in their industry. But there are also lessons to be learned from other retailers’ false starts, e.g.:
- Taking the fast and easy route of partnering with a third-party provider for your online delivery business, only to have them acquired by one of your biggest competitors
- Over-investing in an elaborate warehouse and distribution system for an initial foray into selling online, rather than using existing store assets to build scale
- Building a supply chain system from scratch that results in empty shelves and unhappy employees, rather than choosing a best-in-class, time tested solution
For restaurants to succeed in the face of industry disruption, they need to:
- Have leadership vision and commitment
- Look outside your industry to fill resource and experience gaps
- Explore what the world has to offer in terms of business models and solutions
- Be open to coopetition partnerships and acquisitions
- Select a technology partner that has: (1) The industry expertise, resources, and tools to help you create your vision and build your strategic plan and roadmap; (2) Market-leading “innovation to execution” pre-integrated modular solutions; (3) Long-term financial stability to invest in new technologies such as IoT, artificial intelligence, machine learning, conversational commerce, blockchain, and more; (4) Global experience with local presence and expertise
