The On-Demand Delivery Revolution

We have just released Technomic’s trend predictions for the coming year. I’d like to take a closer look at No. 10—what we’re calling “The Delivery Revolution”—which may transform the foodservice industry more than the other nine trends put together.

The proliferation of order-and-pay mobile apps and third-party online ordering and delivery services like GrubHub is spurring the on-demand delivery revolution. These developments parallel other transformations in the provision of goods and services enabled by the internet and mobile apps (think of on-demand ride services such as Uber).

Technomic polling shows that Millennials are more likely than other generations to choose delivery, which already represents about a fifth of their foodservice occasions, versus a tenth of occasions for Baby Boomers. Heavier usage by younger consumers is a signal that delivery demand will continue to grow as these consumers move through their peak spending years.

More evidence of the importance of this trend is the capital rushing into the on-demand delivery business. Investments in delivery companies are likely to total almost $1.2 billion in 2015, a doubling of the estimated $600 million invested in these companies in 2014 and 25 times the $46 million invested in 2013, according to TechCrunch.

Chains are upgrading their mobile-ordering and -payment services, and many are adding delivery. Panera Bread, Chipotle and Burger King are expanding delivery, and Dunkin’ Donuts, Taco Bell and Starbucks have conducted trials. Others are forging partnerships with delivery services. FOCUS Brands (whose concepts include Moe’s Southwest Grill, Schlotzsky’s and McAlister’s Deli) has partnered with delivery-on-demand provider Postmates. “Postmates positions us to capture the occasions that we miss today,” FOCUS Brands group vice president Paul Damico told attendees at Technomic’s recent U.K. Trends & Directions conference.

But on-demand delivery also poses a threat. Takeout-and-delivery-only consumers represent additional dining occasions for restaurants to exploit, as Damico asserts. But there are competitors emerging beyond the traditional restaurant space—in particular, a new breed of app-only services like Munchery, Sprig and SpoonRocket that deliver meals to diners from commissaries, not restaurants. As technology-enabled delivery becomes faster, more convenient and more routine, some consumers may be losing touch with the very concept of “going out to eat.”

AS I SEE IT, we can look forward to years of disruptive change as this new paradigm takes shape. Operators in every sector need to be thinking right now about how to realign their operations to deal with new delivery demands—whether that means upgrading consumer-facing technology, trialing delivery or exploring relationships with delivery services. It will also be imperative for suppliers of food, packaging and technology services to partner with their operator customers to make the delivery revolution an opportunity rather than a threat.

Note: This content originally appeared in the October 2015 issue of Technomic’s Foodservice Digest newsletter.

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Darren Tristano

Darren Tristano is President of Technomic Inc. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations.

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Comments

  1. avatar Richard Adams says:

    No doubt delivery will continue to grow. One of the challenges for franchised chains will be – if there’s a problem with the food or the delivery – who’s to blame, the franchisee or the delivery service? If the customer contacts the corporate office to complain who’s held responsible and who will sort things out? Having a third party between the franchisee and their customer will make things a little more complicated.

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