Integrating third-party delivery into restaurant operations is an ongoing challenge, but some of the largest franchised restaurants are seeing significant gains in overall delivery volume and average check sizes. According to the latest Restaurant Delivery Update from research firm Stephens, chains McDonald’s, Wendy’s and Wingstop are among several brands seeing consistently positive results as delivery becomes increasingly ubiquitous.
Starting with the biggest players, McDonald’s now offers delivery in more than 40% of all locations in the system, with average check sizes for delivery coming in at 1.5x to 2x larger than dine-in customers. By year-end, the company expects third-party delivery to be up and running in 65% of its U.S. restaurants.
“Delivery is becoming an increasingly meaningful contributor to comp sales. And in several top markets such as the U.K., Australia and France, delivery now represents as much as 10 percent of sales at restaurants offering delivery,” McDonald’s said in its 3Q18 earnings call.
After integrating delivery into its point-of-sale software, McDonald’s said both speed and accuracy are improving as it continues integrating delivery into its mobile app, as well as investing in new packaging to protect the quality of its food.
Wendy’s is now offering delivery in approximately 50% of its North American restaurants versus 40% at the end of 2Q18. It expects to hit 60% by the end of 2018. It is also working with DoorDash to integrate delivery into its own POS.
“Average check sizes have been 1.5 to 2 times higher on delivery orders, and we continue to see solid customer repeat,” the brand reported in its latest earnings call.
Wingstop, which recently signed a large contract with DoorDash, is in the early stages of its national delivery rollout, beginning with 20 Denver-area restaurants during the previous quarter. Stephens noted that the brand’s “sales lift and incrementality from delivery in Denver is encouraging, and that it is performing similar to what the company experienced in its three test markets (Las Vegas, Austin and Chicago) over the past year. It expects to add delivery to 80% of its U.S. locations by the end of 2019.
“Nearly 80% of WING’s entire domestic restaurants now generate more than 20% of sales from digital channels,” Stephens reported. “WING continues to see an average digital check that is $5 higher than its normal non-digital average check of $17, as well as 75% of its total business continuing to come from takeout.”
Jumping around to a few other brands included in the Stephens report, compiled by analysts Will Slabaugh and Hugh Gooding, California-based BJ’s Restaurants saw its off-premises sales rising to the highest levels in its history, now accounting for approximately 8.7% of total sales in 3Q18.
“We believe that it’s incremental to our business, it’s driving comp sales,” the company said during the Stephens Fall Investment Conference. “A delivery occasion does not cannibalize with a dine-in occasion. It’s just a different thinking.”
Casual-dining staple Denny’s now has approximately 70% of its domestic locations actively engaged with at least one third-party delivery provider equating to an off-premises mix that’s approximately 10.5 percent at its company-owned locations. “These to-go transactions continue to be highly incremental, over indexed to the late-night and dinner day-parts and skewed toward the younger 18- to 34-year-old demographic,” the company said in its earnings call last quarter.
One of the brightest notes in the report, which includes several other national restaurants and multi-brand companies, was Red Robin Gourmet Burgers that saw its off-premises sales growing nearly 23% during the quarter, more than 10% of its total sales.
Compared to the herd mentality just a year or two ago, third-party delivery seems poised to grow quite significantly in the coming years, as more brands determine that it’s not cannibalizing dine-in business or hurting overall sales growth in a challenging U.S. restaurant market.
More information from the report is available at Stephens.com.
