Does the rise of delivery signal the demise of the traditional restaurant?

May 15, 2018

Does the rise of delivery signal the demise of the traditional restaurant?

Food Delivery services or sit down?
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If you’re anything like me, you love having food delivered. It isn’t that I don’t enjoy the experience of going out to eat. I do enjoy it; it is a great time to catch up with friends, take a night off from cooking, and take a break from the regular routine. But, there also comes the time when the last thing in the world I want to do is be social. Why would I want to ruin a perfectly good Sunday afternoon by putting on pants or showering? In the past, my food delivery options were limited to Jimmy Johns, pizza, and Chinese, which was all well and good. Beggars can’t be choosers. But now, thanks to the internet and the ubiquity of smartphones, we have seen the disruption of many services like hospitality (Airbnb) and travel (Lyft and Uber) and now we are seeing that same disruption in the restaurant industry.

Why would I want to ruin a perfectly good Sunday afternoon by putting on pants or showering? Click To Tweet

Today, thanks to restaurant delivery services like UberEats and Postmates and DIY cook at home services like Hello Fresh and Blue Apron, we now have access to a plethora of options when it comes to the kind of food we want to be delivered. As a consumer, this is awesome. I now can have Taco Bell delivered to my work at 10 in the morning (remember, just because you can, doesn’t mean you should). But as food delivery services make up a larger portion of overall restaurant sales, the question then becomes, is this good for restaurants? And if not, are we eventually going to have to sacrifice variety for convenience?

Delivery can be awesome

At this point, you’re probably asking, “How can an increase in sales be bad for a restaurant?” And indeed, that is a great question to ask. It would seem that with added convenience and ease of use, sales would skyrocket. And I’m sure that happens in some cases. In response to the growing demand for delivery, many restaurants are finding success by changing their menus to create more delivery-friendly meals. For example, according to EAT.com, an Italian-America restaurant in LA called Cosa Buona made sure that everything on the menu, with the exception of a semifreddo dessert, “is available for delivery, including mozzarella sticks, meatball and chicken parm sandwiches, and white clam pies. [In 2017,] takeout and delivery combined [made up] as much as one-third of its business.” Certainly, that number has only gone up since then.

For some restaurants, another positive aspect of accommodating to the increasing use of food delivery services is the access they may have to a new audience: Millenials. I know.

Many millennials are less inclined than their parents were to spend an evening going to out to a fancy restaurant. Or stand in line waiting for a table. We (yes, I’m one of them. I’m sorry) simply would rather have food delivered than to fight traffic only to wait for a table and risk a bad dining experience. I imagine it is the same principle that has driven the hordes of people to adopt Netflix in lieu of the traditional cinema experience. I don’t want to sit and watch a movie surrounded by people checking their phones, munching on popcorn, or chasing their kids (shudder) around. It is much easier to wait for the movie to get to Netflix and watch in the sanctity of my own home. That and I don’t have to put on pants.

But I digress. My point is that restaurants that were previously off-limits to the entitled millennial throng can make delivery friendly meals and adapt their messaging. This keeps tables open for those who prefer a more traditional dining experience while simultaneously fostering brand awareness with a new audience eager to spend their money.

#Restaurants that were previously off-limits to the entitled millennial throng can make delivery friendly meals and adapt their messaging. Click To Tweet

But it isn’t all good news.

However, this isn’t the case for every restaurant attempting to embrace delivery. There are also the cases where delivery becomes a burden and actually begins to chip away at profit, which could potentially force great restaurants to close their doors. Here’s an example from The Atlantic.

When New York chain Mulberry & Vine opened its first restaurant in 2013, delivery wasn’t even on its radar. Today, however, delivery orders account for a substantial thirty percent of its sales. Nevertheless, despite the growth of delivery, Mulberry & Vine is losing money.

‘“We know for a fact that as delivery increases, our profitability decreases,’ said owner Michelle Gauthier. For each order that Mulberry & Vine sends out, between twenty and forty percent of the revenue goes to third-party platforms and couriers. Calculating an order’s exact profitability is tricky, Gauthier said, but she estimated that in the past three years Mulberry & Vine’s over-all profit margin has shrunk by a third, and that the only obvious contributing factor is the shift toward delivery. ‘I think it’s a far bigger problem than a lot of operators realize… I think we are losing money on delivery orders, or, best-case scenario, breaking even.”’

In another example, one restaurant attempted to bypass the traditional dine-in experience by going to a delivery-only system, but found “the cost of delivering food was too high.” There are many reasons for this. For one, the increasing courier costs in response to rising minimum wages and a tight labor market. Eventually, the restaurant closed and its team and technology were acquired by Uber Eats. In response, the owner said, “I don’t think a pure delivery model can be profitable.”

Variety vs. Convenience

What will the future hold? Will we see more and more restaurants limiting their menus to a more delivery friendly model? Sure it is convenient, but would we lament the loss of options? Some people may suggest that the rise of delivery will eventually kill the restaurant culture much like Netflix contributed to the demise of Blockbuster and that this loss will have far-reaching cultural implications beyond the economics of a closed restaurant. Maybe I’m just waxing nostalgic, but I miss going to my local Blockbuster and getting a personal recommendation on a great movie or video game. There was a social aspect of going to the video store that we don’t get from on-demand movies.

I miss going to my local Blockbuster and getting a personal recommendation on a great movie or video game. There was a social aspect of going to the video store that we don't get from on-demand movies. Click To Tweet

On the other hand, food has always been social. Food brings people together and maybe these delivery services, instead of fostering an anti-social society, are just facilitating the move to a more intimate environment where you can actually hear your friends and you aren’t frustrated because your waiter is taking forever with your meal and screwed up your order. Are we willing to sacrifice a well-thought out and intricate menu that can only happen inside a restaurant for the convenience of a more simple, delivery friendly menu? Is there room for both platforms to peacefully coexist? Can delivery and sit down live together in a perfect harmony of mutual appreciation?

I’m curious to hear what you have to say. Are you a fan of food delivery services or do you prefer to go and sit down and go through the whole dining experience? Hit us up on Twitter and let us know what you think.

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Episode 3: The National Restaurant Association Conference and the Future of Food Delivery
Episode 2: The importance of amazing customer service and social insights from the Kentucky Derby
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