Ever feel like the pace of change is growing so fast

that you can’t keep up? Better get ready to experience

some serious g-force in the next few years when it comes

to food delivery. Delivery orders last year accounted for

about 3% of total restaurant sales, according to The NPD

Group. Hardly seems like much until you take into ac-

count that’s 3% of $541 billion.

Restaurant patrons only sat down to eat 37% of the

time last year. Carryout visits surpassed that at 39%,

and 21% of transactions came from the drive-thru,

demonstrating how little time consumers have for

restaurant dining. Demand for delivery is exploding

as more services are making it easier than ever for

consumers—and operators—to have food delivered.

Delivery has been around for about 70 years. Even so, at

the turn of the century, (doesn’t that sound quaint?), if you

wanted to be a couch potato and eat restaurant food at

home, your choices were limited to pizza, Chinese food,

and a few local mom-and-pop restaurants. You either had

to pick it up yourself or fi nd eateries willing to hire driv-

ers to deliver the goods.

Most people perused phone directories for restaurants

and ordered by phone. As online review sites like Yelp

cropped up around 2005, fi nding a restaurant that delivered

got easier, and people ordered by both phone and fax. The

expansion of the Internet convinced a lot of operators to establish

their own online presence, and with that online ordering grew more

common after ’10.

Delivery growth is phenomenal. Build it into your operations and facilities now before your competitors pass you by.

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48 FEBRUARY 2018 fermag.com fermag.com FEBRUARY 2018 49

Pizza chains used to rule food

delivery but with the Internet and

now smartphone apps, operators,

chains and independents, large

and small, are getting into the

game. Looking to get started?

You basically have three options:

in-house delivery, third-party

aggregators (like DoorDash) or

a combination of the two.

STORE TO DOOR

the pace of change is growing so fast

some serious g-force in the next few years when it comes

about 3% of total restaurant sales, according to The NPD

Delivery growth is phenomenal. Build it into

cropped up around 2005, fi nding a restaurant that delivered

expansion of the Internet convinced a lot of operators to establish

their own online presence, and with that online ordering grew more

The ubiquity of smartphones is what’s now driving both

online ordering and the demand for delivery. With a vari-

ety of apps, customers can fi nd a list of food and restaurant

choices at their fi ngertips, select one, choose menu items,

pay, and get a meal placed in their hands in 15 to 30 min-

utes with just a few taps on a smartphone screen.

Three ModelsOf course, it isn’t just smartphone apps that have driven

the growth in delivery trend. It’s the general consumer

trend of shopping online and having everything delivered.

Services like Amazon Prime have conditioned consumers

to both expect the convenience of delivery and expect it

quickly. And ride services such as Uber have put legions of

potential delivery drivers on the street.

Millennials, especially, see food delivery as a natural

outgrowth of both the technology and societal trends

they’ve grown up with. The big boys are sitting up and tak-

ing notice. McDonald’s is running a TV campaign advertis-

ing its delivery service. Burger King, which jumped the

gun by testing delivery fi ve or six years ago, announced it’s

back in the game. Even fi ne-dining restaurants like Momo-

fuku Má Pêche in New York City now offer food delivery. If

you aren’t offering delivery yet, bet-

ter gear up now before all the other

kids on the block pass you by. So,

what are your options?

In-house. The classic model of

delivery is the enterprising restau-

rant that hires hourly employees,

preferably with their own cars, to

run orders from the store to the con-

sumer’s door. Perhaps no segment

has adopted this model as well or as

completely as pizza chains. Some

have even purchased fl eets of their

own vehicles for their drivers to

use. Pizza Hut is well known for its branded hot boxes on

the back of motor scooters as well as its emblazoned Smart

Cars. Domino’s unveiled its DXP—a converted Chevy

Sparks with a warming oven that holds up to 80 pizzas—

two years ago.

“Owning the supply chain all the way to the customer

enables businesses to control the entire customer expe-

rience,” says Raanan Cohen, CEO of software logistics

platform Bringg, Tel Aviv, Israel, “leveraging their brand at

50 FEBRUARY 2018 fermag.com fermag.com FEBRUARY 2018 51

every single touch-point, from the driver’s uniform to the

giveaways they distribute.”

The drawbacks are the high cost of labor as well as insur-

ance, maintenance and operating costs of vehicles if you

own the fl eet.

Third-party aggregators. The demand for delivery has

fostered an explosion in the number of services—and

smartphone apps—springing up around the world. Those

that got in early and found fi nancing and/

or investors to help them

grow quickly—Seam-

less/GrubHub, Caviar,

EatStreet, Foodora,

EHungry, Foodler—have

expanded into national,

even international

(Deliveroo, Just Eat),

entities. Others such as UberEats, Amazon Restaurants,

DoorDash, Postmates, and Eat24 (Yelp) simply added food

or delivery on to other services they already offered.

But the restaurant scene, especially independents, is

local, and many markets are too small or too remote for

coverage by the big names. Which means that a plethora of

other services like Waitr, WaiterOnTheWay, Dine-InDeliv-

ery, BringMeThat, MyTown2Go, SkipTheDishes, Zomato

and Swiggy cover territory others haven’t yet reached.

These services assume all the logistics and responsibili-

ties of getting food from your store to the consumer as well

as providing a mobile ordering and payment platform for

customers. All you do is sign up for the service and the

aggregator incorporates your logo and menu into its app.

Even noncommercial outlets like a hospital cafeteria trying

to expand its business can sign up and benefi t.

“The biggest benefi t to using a partner,” says Toby

Espinosa, Head of Business Development at DoorDash,

San Francisco, “is that we focus on driving incremental

volume and superior logistics technology at a much lower

price than it would cost to do in-house. Restaurants are

then empowered to focus on what they know best, making

delicious food.”

The major downsides are being lumped in with a large

percentage of the restaurants in your area, the inabil-

ity to control the delivery experience itself, and the

cost, usually a commission that can range from about

12% to 35%. The high end is often more than a small

store’s gross profi t margin.

Hybrids. “Operators who want to design and

control their own online presence use e-commerce

providers like us,” says Marty Hahnfeld, COO of

Olo, New York City, “and are adding delivery to

the brand’s e-commerce site.”

Software logistics platform providers such

as Olo, Bringg, Orders2Me and Ordering Inc.,

develop operator-specifi c online/mobile ordering

and delivery logistics software that drives e-com-

merce on both the operator’s online and mobile

e-commerce sites, and then help the operator contract with

one or two delivery services such as UberEats, Postmates,

Caviar, DoorDash or GrubHub depending on the market.

And new concepts are cropping up all the time. Olo,

for example, was originally designed as an “order ahead”

system. Its trademarked “Skip The Line” slogan was ad-

opted by operators like Starbucks, whose typical order is

too small for delivery. Instead, Starbucks customers place

orders on the chain’s e-commerce site for the store nearest

them, and the order is waiting for them when they go to

pick it up.

Ritual, a new social media app, allows employees in

the same company to fi nd out what others in their “circle”

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Consider how you’ll

maintain food qual-

ity that last mile of

delivery. Domino’s

has a Chevy with a

warming oven to keep

pizzas hot. The Halal

Guys has changed its

food packaging—from

an aluminum tray with

a clear lid for dine-in

patrons, to a paper lid

for delivery because it

holds heat better.

DOMINO’S HALAL GUYS

that got in early and found fi nancing and/ Espinosa, Head of Business Development at DoorDash,

San Francisco, “is that we focus on driving incremental

volume and superior logistics technology at a much lower

price than it would cost to do in-house. Restaurants are

then empowered to focus on what they know best, making

delicious food.”

The major downsides are being lumped in with a large

percentage of the restaurants in your area, the inabil-

ity to control the delivery experience itself, and the

cost, usually a commission that can range from about

12% to 35%. The high end is often more than a small

store’s gross profi t margin.

Hybrids.

control their own online presence use e-commerce

providers like us,” says Marty Hahnfeld, COO of

Olo, New York City, “and are adding delivery to

the brand’s e-commerce site.”

Software logistics platform providers such

merce on both the operator’s online and mobile

e-commerce sites, and then help the operator contract with

want for lunch, for example,

pick a restaurant and gang

the orders for the res-

taurant. It also alerts

people in a group

when one of them

is placing an order;

people can then

ask that person to

pick up an order

for them at the

same time.

“The social

ordering feature,

called Piggyback,

enables consumers to

easily connect with their

network of colleagues and join

their orders, making purchases of

low-ticket items sustainable,” says Robert

Kim, Co-Founder and COO, Ritual, Toronto. “With Ritual,

our partners are able to offer their entire menus, driving

incremental revenue.”

First Things FirstBefore committing to one of the many delivery options

available, however, you have to think it through from an

operational standpoint.

“Focus on what’s going to be the best fi t for your budget

and your staff,” says Rafi Cohen, Co-Founder, Orders2Me,

Brooklyn, N.Y. “Can you afford to keep delivery quality of

service high while keeping your waitstaff and your kitchen

staff happy? Delivery food prep means less time for in-

house prep, especially since delivery customers have an

expected delivery window. Waitstaff or counter staff will

have customers in front of them awaiting an order while

deliveries go out fi rst, and that can add a great deal of

stress on top of a server’s existing responsibilities.”

Signing up with a third-party delivery service is a rela-

tively inexpensive way to test the potential strains delivery

can put on your operation. What you want to look for is

what impact the incremental volume from delivery orders

will have and where. You might have to add extra employ-

ees to assemble orders for delivery drivers as

they arrive, or beef up staffi ng in the kitchen

to keep up with production at busy times.

Space, too, may come at a premium

when you add delivery orders to your

normal mix. Panera Bread Founder

and former CEO Ron Shaich once

referred to the mass of people in

the order pick-up area near the

cash register as “the mosh pit.”

Panera has reduced wait times and

traffi c jams with its mobile order-

ing app and touchscreen ordering, which control the fl ow

of orders, and by installing a simple shelf to hold digital

orders.

“The trick is to manage the incremental volume,” says

Renè Hjorth, Director of Operations, Fomo Eats Cater-

ing, Las Vegas, which operates The Halal Guys in three

franchise stores. “We had the luxury of testing delivery

by opening a delivery-only commissary in San Francisco

while we built our fi rst store there (since the permitting

process took less time). Once the store opened, we tested

ways to handle delivery orders and in-store orders at the

same time. At peak times now, we may have two or three

employees dedicated to delivery orders.”

Reconfi guring Your SpaceThe San Francisco store already had a warming cabinet for

delivery and take-out orders, but moving it closer to the

pick-up area saved employees valuable time and reduced

congestion behind the counter. In newer stores the com-

pany is adding more counter space with a separate area for

delivery drivers.

“We don’t assemble orders until the drivers are there,”

Hjorth says, “because we don’t want to put cold sauces in

with warm food until the last minute.” To save time assem-

bling orders, staff in each unit wrap hundreds of bundles of

utensils and sauces in napkins at the beginning of each day

so they’re ready to grab when orders are assembled.

Sweetgreen, the salad and grains bowls chain that got its

start in Washington, D.C., and is now headquartered in Los

Angeles, has redesigned new stores with the front split into

two areas, one for customers and one for delivery that’s ser-

viced by a separate prep line. Digital orders now account

for about a third of the company’s sales. Chipotle, too, is

adding a separate assembly line in some of its new stores to

handle digital orders as well as catering. And Starbucks is

looking into something similar to better manage its queue

of in-house and “Skip The Line” digital orders.

“We are fortunate to have two kitchen lines in every one

of our restaurants since we have inside business and drive-

thru business at every location,” says Nick Scarpino, V.P.

of Marketing and Public Relations, Portillo’s Restaurant

Group, Oak Brook, Ill. “The second line has the capacity to

handle delivery orders even during our busiest times.”

“With hand-off of orders happening at the counter, curb-

side and at the drive-thru, the prep system has to clearly

delineate who the hand-off goes to,” says Olo’s Hahnfeld,

“a customer, a delivery driver, or a take-out customer.

And there are hundreds of these orders per day at many

restaurants.”

All About The FoodOperators want food to arrive at each customer’s door as

hot and as fresh as possible. After all, food is what differen-

tiates you from others and is the primary representation of

your brand. While you can set an expectation for the time

it takes either in-house or third-party drivers to deliver

food, you can’t control it. (Remember some of the problems

52 FEBRUARY 2018 fermag.com fermag.com FEBRUARY 2018 53

Ordering app Ritual

(from l.) connects co-

workers by encourag-

ing them to pool lunch

orders so only one

has to pick up. Sweet-

green better handles

delivery orders by

splitting the front-of-

house into one area

for on-site customers

and another for orders

that come in online,

either for pickup or

delivery. Portillo’s

delivery is one part

in-house, one-part

trusted partners.SWEETGREEN PORTILLO’S

want for lunch, for example,

pick a restaurant and gang

the orders for the res-

enables consumers to

easily connect with their

network of colleagues and join

their orders, making purchases of

ees to assemble orders for delivery drivers as

they arrive, or beef up staffi ng in the kitchen

to keep up with production at busy times.

Space, too, may come at a premium

when you add delivery orders to your

normal mix. Panera Bread Founder

a large pizza chain faced when it guaranteed delivery in

30 minutes or less?)

No doubt, certain foods travel better than others. Pizza,

sushi, Asian food, even Italian food all travel pretty well,

and can be quickly re-heated in a microwave or oven if

they aren’t as hot as expected. (OK, so maybe you don’t

want customers to zap their sushi.) And many third-party

delivery companies provide insulated bag or box carriers

for drivers (some branded, like those from DoorDash).

Packaging plays a big part, too. In most cases, if you’re

already using take-out packaging for pick-up orders it will

work for delivery, too. In others, you might make changes.

“We tested delivery for more than a year,” says Portillo’s

Scarpino, “and we’ve made several tweaks to our packag-

ing to maintain the quality of the food as well as possible.

This is an ongoing project for us as we keep making incre-

mental improvements over time.”

The Halal Guys stores use an aluminum tray with a clear

lid for dine-in customers, but use a paper lid for delivery

orders because it holds heat better. Sweetgreen packages its

locally sourced salad greens, toppings and dressings sepa-

rately so fl avors and textures are the way they’re intended.

And Denny’s has designed its delivery packaging in such

a way that pancakes sit on top of warmer food so rising

steam keeps them soft.

When it gets right down to it, however, customers who

order food for delivery know what they’re getting.

“I think French fries were the industry’s original con-

cern,” Hahnfeld says. “As far as we can tell, consumers

reset their expectation when ordering delivery. They know

the fries won’t be great. Convenience trumps quality.”

Vetting VendorsWith so many options to choose from, where do you start?

Look at your business from four perspectives. First, what’s

your menu mix and check average? How visible are you in

the marketplace? How tech-savvy is your operation? And

how much profi t margin do you have to work with?

McDonald’s, for example, has tremendous visibility and

lots of heavy users, so the tack the chain took with delivery

was screening and selecting a last-mile delivery service to

partner with. Starbucks has similar visibility, but due to the

fact that customers are unlikely to pay a delivery charge on

a latte and they have good saturation, the chain chose to

54 FEBRUARY 2018 fermag.com

create its own mobile ordering platform with the help of a

vendor that lets customers order ahead for pick-up.

A smaller chain like The Halal Guys, with less visibility

in new markets, may rely entirely on third-party delivery

services to build its business. To do so, however, may

mean signing up with several.

“We use a half-dozen services,” says Hjorth. “We vetted

our delivery partners by the ease of use of their

platforms, the number of drivers in each

market to assure quick delivery and

hot food, and the fi nancial con-

siderations—what they charge

in commissions and whether

they add a customer de-

livery charge. The Halal

Guys rolled out its own

delivery app nationwide,

but it’s really for high-use

customers. As a franchisee

still gaining awareness, we

actually may have to add

more partners until there’s a

market shakeout.”

A drawback for restaurants that sign up with multiple

delivery services (in addition to the lack of marketing

oomph when lumped in with hundreds of others) is the

logistics of keeping orders straight. The three stores that

Hjorth presently oversees have a tablet from each delivery

service for incoming orders. “To keep them straight, we

put in a separate receipt printer for each one to help

orders move down the line more smoothly,”

he says.

If you already have an online

presence capable of taking cus-

tomer orders, a mobile platform

is your next step.

“We considered sev-

eral options,” Scarpino says,

“everything from handling

all deliveries ourselves to

outsourcing the entire delivery

experience. Ultimately, we

ended up with a great blend of

accepting delivery orders on our

own platforms and delivery partner

sites, and outsourcing the delivery

aspect to trusted partners.”

“Nothing makes customers want to

order takeout or delivery more than the convenience

of a mobile app,” says Orders2Me’s Cohen. “It’s a fast,

convenient way for customers to order without re-entering

personal information every time. And integrating your app

with your POS system eliminates the potential for human

error when it comes to transferring orders from a separate

system to the kitchen or the register.”

With your own mobile app tied into your own POS

system, you control the entire customer experience except

last-mile delivery. To fi nd a partner for that piece, experts

recommend assessing both the fi nancial ramifi cations and

delivery experience. “Really fi nd out how those external

delivery services will ensure they’re aligned with your

brand’s values and standards,” says Bringg’s Cohen.

Whether the market shakes out or not remains to be

seen, but delivery will only become a larger piece of the

foodservice business. “Sitting on the sidelines is no longer

Virtual? Or Ghost?

With the growing popularity of food delivery and the mobile

apps that make it easy for customers, the industry is experi-

encing a tremendous amount of experimentation. Food trucks

have been food fashion trendsetters for some time. Pop-up

restaurants that give operators a chance to test new concepts

or menus are old hat. Food delivery apps make it possible for

a restaurant to exist without seating or even a storefront.

A number of entrepreneurs—both well-known foodies and

techies who see a niche—are playing in this “virtual” or

“ghost” restaurant space. Home meal replacement compa-

nies like Blue Apron, Munchery, Plated, HelloFresh, and Purple

Carrot deliver meal kits or prepared meals to solve the dinner

dilemma. David Chang of Momofuku fame, invested in Maple,

a New York food delivery start-up focused on the offi ce lunch

business.

Green Summit took the concept even further, opening nine

non-existent restaurants in New York simply by signing them

up on the Seamless delivery service. By opening a commis-

sary instead of a restaurant, the thinking goes, the operation

can focus on food production and generate enough volume to

bring down the cost of delivery.

“With just a kitchen, production is more effi cient because

staff is dedicated to production not interfacing with custom-

ers,” says Peter Schatzberg, Founder of Green Summit. “Food

for all nine concepts was designed to be cooked and held

ready to assemble—no cook-to-order.”

The food truck craze prompted serial entrepreneur Chris

Baggott to open ClusterTruck in Indianapolis two years ago.

The company licenses recipes from local food trucks, which

it then produces for delivery in a commissary kitchen. He’s

since opened a kitchen in Bloomington, Ind.

Good Uncle does something along the same lines, licens-

ing menu items from popular restaurants and making in its

own vans for delivery only to specifi c drop-off spots on college

fermag.com FEBRUARY 2018 55

an option,” Hahnfeld says. fer

campuses. Presently, Good Uncle services the Syracuse

University campus.

Interesting concepts all, but is the market ready for

them? Maple in New York City closed last May. Green Sum-

mit got support from GrubHub (which bought Seamless) to

expand to Chicago, but closed its Chicago operations last

fall, and founder Schatzberg is no longer with the company.

“I left,” he says, “because I want to get into a new space

where I can make more than $6 billion. When I got into

food delivery, labor was $5 per hour for delivery. Now it’s

between $9 and $15 per hour. I won’t get back into food

unless it’s fully automated and labor falls to fi ve percent of

sales.”

Even if the virtual restaurant concept ends up leaving

ghost restaurants in its wake, entrepreneurs in both the

food and tech worlds will continue to look for ways to marry

the two.

our delivery partners by the ease of use of their

platforms, the number of drivers in each

market to assure quick delivery and

hot food, and the fi nancial con-

siderations—what they charge

put in a separate receipt printer for each one to help

orders move down the line more smoothly,”

he says.

If you already have an online

presence capable of taking cus-

tomer orders, a mobile platform

is your next step.

ended up with a great blend of

accepting delivery orders on our

own platforms and delivery partner

sites, and outsourcing the delivery

aspect to trusted partners.”

“Nothing makes customers want to