It isn’t easy going in the restaurant world these days, especially for some of the largest chains whose efforts to adapt to a new world is more like turning around a cargo ship than deftly changing course in a speedboat. Put simply, as big brands continue to struggle, expect to see even greater interest in delivery, catering and other off-premises channels that are becoming key to maintaining (let alone growing) customer traffic.
Bloomberg’s year-end story about ongoing struggles in the chain restaurant world has gotten a lot of play and retweets in the restaurant industry, and it’s easy to see why. Food costs and wages are rising, large-format restaurants continue to struggle in light of smaller, newer fast-casual upstarts, much-hyped food halls tend to focus on independent chefs and headwinds have never appeared on so many fronts at once.
The story notes two brands that have been standouts, Domino’s, which has been a Wall Street darling for years and Chipotle, which started its own in-house delivery program amid its ongoing recovery from a three-year streak of food safety issues that caused blood to run cold for countless restaurant executives.
As the economy has begun to stumble, enough that talk of recession is now a daily buzz, there is no magic bullet coming to save the restaurant world. Wage growth remains soft at best, interest costs are straining the auto and home markets, consumer confidence has fallen from recent heights and adding delivery isn’t easy if your goal is turning a profit on each order—even if check averages are almost universally higher for delivered orders.
Despite off-the-record warnings that certain third-party delivery brands were nearing the end of their investor runways, cash flowing into big delivery brands has only increased in the last year. There remains significant churn in the food on demand industry, both in M&A and innovation in things like ghost kitchens and new-age catering services.
Every one of these delivery and catering providers have their own niche, however finely differentiated. Brands will rise and fall, there will be more surprising acquisitions and partnerships, like Yum Brands investing in Grubhub, presumably in an effort to get its hands on the much-hailed customer data it collects.
We don’t know how chain restaurants will fare in the coming year, but there’s no doubt that delivery will continue to be a significant portion of earnings calls in the 12 months to come. Looking at my own life, it’s safe to say I’ll be busy trying to keep up, which will likely push me right into the warm, comfortable hands of delivery brands willing to make my life a little easier, even if it adds to the already full plates of war-weary restaurant execs.
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