Contributing editor, Peter Backman is a long-term foodservice sector guru and founder of theDelivery.World, a platform that connects the delivery sector and makes sense of the myriad changes and challenges that affect the sector across the globe.
In the early days, restaurant delivery was simple. The model was, and still is, the same in whichever country you look. The aggregator created the order, the restaurant cooked the food, and the aggregator delivered it and charged a fee for its service.
All went swimmingly for a while, and for many restaurants it still does. But for plenty of operators there are problems. The search is on—and ongoing—for solutions to those problems.
The problems are deeply embedded in the original model of restaurant delivery in which the aggregator acts both at the front end of the order and at its back end.
Two issues stand out: the fees charged that have steadily increased over the years and is now at about 30 percent for many restaurants in many countries. The other standout issue is that restaurants have no contact with their delivery customers. Consequently, they don’t know who those customers are, what they like, what’s going well and more.
The solution is, on the face of it, very simple: take back control of the order capture process.
But aggregators have created three seemingly insurmountable operational challenges that restaurants must face in order to take back control.
Those challenges are, in reverse order: First, how to manage the last mile at a reasonable cost? Second, how to replace the many, generally tech-enabled, processes that manage the flow of orders from customer to restaurant kitchen, and then to the rider? And third, how to capture the order?
The first of these challenges—last-mile delivery, is not too much of a problem for restaurants that want to take back control. They can build their own fleet, or they can use one of the available last-mile services such as those provided by last-mile delivery specialists like Stuart—active in France, Poland, in some south European countries, and in the UK—or Bringly based in the Netherlands.
There are several ways to overcome the second challenge—replicating the required information processes—but in essence they all require the operator to build the required tech system.
For some years now, restaurateurs around the world have attempted to replicate these processes but they aren’t technology businesses. On the other hand, software companies, including many entrepreneurs and start-ups, have created the technology, but they are not restaurateurs. The consequences of this are that there are too many sub-scale tech solutions chasing a complex market.
The third challenge—capturing the order—is considerably more of a problem for restaurants who want to take back control. It’s simple to create an appealing website, or mobile app. The challenge is to get customers to visit the site or the app.
Basically, aggregators have large marketing budgets against which any individual restaurant company must compete if they are to reach their customers. For most operators this is a case of shouting against companies with large budgets like Just Eat Takeaway, with a marketing budget equivalent to $790 million (even though not all of this is customer-facing) in 2022, or the DeliveryHero marketing budget of $1.6 billion in 2022.
Domino’s is one of a handful of companies that can compete effectively, but even it recognizes that the challenges of getting heard are becoming ever more pronounced and are shifting to a third-party order generation model.
Around the world, restaurants—chains, individual outlets, and those in-between—have embraced delivery. But aggregators control the significant levers. The search goes on for ways for restaurants to win back control.
