You're Destroying Your Favourite Restaurant
Updated: Jun 10, 2020
As a consumer we've never had it so good. You can get your favourite restaurants delivered to your door, with only a few selections from your phone. The variety is amazing, the cost is peanuts, and you barely need to lift a finger. It's not just Uber Eats anymore, there's Menulog, Skip the Dishes, Foodora, Deliveroo, and probably a dozen more depending on where you live. It really is amazing, and so convenient. Everyone wins right?
Unfortunately no. I would say for the vast majority of restaurants, every home delivery meal hurts their business. People used to go out for a meal more often, and when you did, you'd order a drink
to start, maybe 2, maybe an appetizer, dessert, etc. More on that later.
While people still do go out, Forbes has reported that the home delivery market has boomed, driven by millennials. In this case, we are seeing not just the convenience of restaurant meals being delivered to the home but the hugely popular meal kit delivery to the door. One article on Mckinsey had the top 3 restaurant delivery platforms valued at over 1 billion each, with annual growth expected at 3.5% for 5 years. That is some serious growth for an industry which did not really exist 5 years ago.
The smartphone has revolutionised home delivery from what it once was. Consumers love convenience, avoiding having to speak to people on phones, and they love being in control. Most home delivery apps tell you exactly where your food is on a map. So while you may think this must be great for restaurants with all this extra business they are getting the reality of your convenience comes at a cost.
The billion dollar platforms are definitely winning, consumers are winning, but your favourite restaurant isn't. As I mentioned earlier, when people dine in they buy drinks and other products with higher margins than the food you are eating. Food is a tough thing to make money on. People make mistakes, your chef is having an off day, people don't like their meals for whatever reason, restaurants are expected to cover those costs. Most well run places will have that under control. Most places will run at about 30% cost of goods, 30% labour, then comes your rent, electricty and utilities, marketing... throw another 30% in costs into the mix and you're not left with very much. This is just a generalization, but it's not far off most places. I worked as a contractor running all the food and beverage in a big arena. With all the top dollar prices you pay for a beer in most venues, you'd expect a nice little profit at the end. The reality was, that we made a 4% profit, arguably not even worth getting out of bed for.
Uber Eats walks onto the seen, and it seems like a great idea for incremental sales, until you do the maths. Uber Eats generally take 35% for the service they provide. THIRTYFIVE PERCENT! So 30% is gone to food cost, 30% is gone to labour, 35% goes to the delivery platform, which leaves the restaurant barely anything to pay the rent and other expenses. Many restaurateurs I know will shrug their shoulders and say, well at least it's marketing. Unfortunately, the more home delivery orders a restaurant gets, the more they are losing.
I don't think the experience of dining out is dead. But I would say it is in sad decline, and with it
the profitability of an industry. The skills to prepare quality innovative food are becoming less and less important, next to the skills of being able to produce instagramable food. Something I have been guilty of in the past. It's cheap marketing, and can get you customers through the door, but what a lot of places have had to do to keep up, almost replaces what they started out as to begin with. The gimmick has taken over. The need to be seen above your competition, with a ridiculous food offer, I would argue is damaging. No one needs a 5 pound cheeseburger or with 8 patties, or the stupid "Freak Shakes", with enough sugar per serving to immediately induce Diabetes.
I'm going off topic, but it is sad decline that many segments of an industry are facing. More competition, more mimicking of trends to be noticed on instagram. And less passion and skill that goes into creating culinary moments for customers. Throw in food delivery platforms, taking the profits out of a lot of restaurants, what you have left is dark days for an industry.