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The Spoon

Daily news and analysis about the food tech revolution

delivery

Chipotle Increases Digital Sales 216.3%, Experiments With Delivery Pricing

It seems Chipotle has one-upped itself again in terms of sales numbers. For the quarter ending on Jun 30, digital sales increased 216.3 percent to $829 million. Digital sales made up well over half — 60.7 percent — of Chipotle’s overall sales. More than half of those sales are pickup, with the rest coming from delivery, CEO Brian Niccol said on this week’s earnings call.

As we’ve discussed before, a big reason the brand has managed to not just survive but break sales records during the pandemic is that Chipotle has been aggressively pursuing its digital strategy for a few years now. And between the first quarter’s earnings call and today, the company has doubled-down on its drive-thru lanes for mobile orders, launched a direct-to-consumer farmer’s market for its suppliers, and created a virtual version of its famous assembly line, among other things.

A restaurant breaking sales records during a devastating pandemic is news enough, but Niccol outlined multiple other new developments, most notably around the company’s delivery strategy. He noted that “partnering with all the major third party delivery aggregators has led to an increase in orders, a reduction in delivery time and cancellations and an improvement in overall customer ratings.”

However, for both independent restaurants and mega chains like Chipotle, with third-party delivery come sky-high, controversial commission fees that eat into profit margins. In response to those as well as some higher supply chain costs, Chipotle said it would test raising the prices on items for third-party delivery. “Similar to what many of our peers are already doing, we’re about to experiment with delivery menu prices as a way to potentially help offset this headwind and fully capture the margins expected at this volume,” said CFO John R. Hartung.

Hartung didn’t elaborate much on the call about where those tests would take place, how long they will run, and how much higher items on third-party delivery sites would be compared to ordering for pickup via the Chipotle app.

Chipotle may be one of the undisputed leaders in terms of QSRs aggressively pursuing digital, but it’s hardly alone. Starbucks has said it is reformatting many of its traditional cafe-style stores to be digital-focused to-go locations, Burger King is testing more delivery hotspots, and Taco Bell has launched a brand-new loyalty program.

Niccol said on this week’s call that he expects order-ahead transactions to continue to be a major driver of future growth for the company. Whether that means the chain will break another record come next quarter remains to be seen. 

Asian Food Delivery Platform Chowbus Raises $33M

Delivery platform Chowbus today announced a $33 million Series A funding round. The round was led by The round was led by Silicon Valley-based Altos Ventures and NYC-based Left Lane Capital, with participation from Hyde Park Angels, Fika Ventures, FJ Labs and Silicon Valley Bank. This brings total funding for Chowbus to $38.1 million.

Chowbus’ claim to fame is connecting customers with authentic Asian food from independent restaurants that might not normally be found on the major third-party delivery aggregators. Underscore that word “authentic,” because the company takes the quality of its restaurants very seriously: restaurants must pass a blind taste test for before they are allowed to join the platform. The company offers meals via standard delivery as well as through its Lunch Shuttle, which bundles multiple orders together and delivers them to a central drop-off point Monday through Friday.

The last year has been a big one in terms of growth for the company, which was founded in 2016. At the start of 2019, the company raised $4 million to build out its technology and marketing. According to today’s press release, Chowbus has increased its revenue 700 percent and grown its employee headcount 300 percent.

Chowbus will use the new funds to grow its existing business, launch in new cities, and expand its product line to offer services outside of delivery. For example, it recently released a dine-in feature to its platform that lets restaurant-goers order and pay from their phones while eating at the restaurant.

Right now, Chowbus is available in roughly 20 cities around North America, including New York, Boston, Seattle, Atlanta, the San Francisco Bay Area, and Chicago.

Uber Eats’ New Pilot Offers Commission-Free Orders for Restaurants, with a Catch

Today, Uber Eats launched a pilot program that lets its restaurant parters accept pickup and delivery orders directly through their own websites with no added commission fee for the rest of 2020. 

The program seems to be a bid on Uber Eats’ part to keep restaurant partners entrenched in the third-party delivery service’s ecosystem by offering them the option to process orders via their own digital properties. The catch (because there’s always a catch) is that Uber Eats still powers those orders. The Uber Eats site clearly states that with this new program, restaurants will “leverage best-in-class Uber Eats feature and powerful technology to fulfill orders.”

That brings up a whole host of questions around customer data, which we’ll get it shortly.

First, it is worth noting that Uber Eats is waiving commission fees on delivery and pickup orders placed through one of these sites through the end of 2020 (restaurant still pay a 2.5 percent processing fee). The exorbitant commission fees third-party delivery services charge restaurants — as high as 30 percent per transaction in some cases — has been by far the biggest grief restaurants and restaurant advocates have voiced over the last year. The pandemic cranked the volume on that conversation up so high that many cities have introduced mandatory caps on these fees for the time being. The general argument is that restaurants are getting decimated by coronavirus restrictions, and asking an indie restaurant barely surviving to pay 30 percent of each order to a delivery company is a spoonful of salt in an already pretty grievous wound. 

In the short term, a program like Uber Eats’ could give restaurants a much-needed boost when it comes to building out an off-premises strategy that won’t financially gut them at the same time. 

The cost, however, looks to be data. As noted above, Uber Eats is still powering these transactions, which means it ultimately controls access to the data on customers. In fact, a fine-print note buried at the bottom of the new program’s site states that a “restaurant can access customer data subject to opt-in from customer during checkout.” What’s unclear is if that opt-in will be an easy-to-see feature on the consumer-facing app — and if customers would actually use it. We have reached out to Uber to get clarification on this.

Uber Eats sort of addressed this by also announcing today the release of its mobile app for restaurant managers and customer engagement tools. Per the blog post, both of those things helps restaurant managers track sales, respond to customer feedback, and get other insights about customer behavior. 

Like I said before, all of these things could very well help struggling restaurants right now, many of whom never offered off-premises before the pandemic and are now having to learn as they go when it comes to running a delivery and takeout business.

Longer term, however, getting locked into Uber’s ecosystem so thoroughly will limit the amount of control restaurants have over their own data and ultimately their customer relationships. 

DoorDash Partners with Walgreens for Delivery in Select Cities

DoorDash announced today that delivery is now available from Walgreens drug stores in Chicago, Atlanta, and Denver, and will broaden that reach to other markets later this summer. This move marks the latest expansion beyond restaurants for the third-party delivery service.

According to a DoorDash blog post announcing the partnership:

Customers in select cities will have access to more than 2,000 convenience, health, and wellness essentials including beauty products, over-the-counter medications, and grocery and snack foods.

So if you’re hungry for a Snickers and a six-pack of soda but don’t want to leave the house — you’re in luck.

The addition of Walgreens to DoorDash’s roster isn’t too surprising given that the company has already partnered with other non-restaurant stores such as 7-Eleven, WaWa, Casey’s, and CVS Pharmacy.

This type of diversification beyond restaurants is necessary as the global COVID-19 pandemic continues to devastate the restaurant industry. As my colleague, Jenn Marson recently wrote:

As of June 15, roughly 140,000 businesses were listed on Yelp as closed. While retail got hit the hardest, restaurants came in at a close second, with 23,981 businesses closed. And here’s the kicker: more than half — 53 percent — of those restaurants currently closed won’t reopen, according to Yelp.

This isn’t the first delivery partner for Walgreens either. The drug store chain has an existing partnership with Postmates, which recently expanded to 7,000 stores nationwide. For retailers like Walgreens, delivery options allow them to keep selling stuff to people who are stuck at home during these rolling lockdowns.

DoorDash said that the Walgreens deal will reach Cincinnati, Cleveland, Minneapolis, Oklahoma City, Phoenix, Sacramento and Seattle later this summer.

Euromonitor: Ghost Kitchens Poised to Become a $1T Market by 2030

Ghost kitchens could become a $1 trillion market by 2030, according to a Euromonitor webinar from this week (h/t Restaurant Dive). 

The webinar was led by Michael Schaefer, the Global Lead for Food & Beverage at Euromonitor International. During the webinar, he noted that “we’re going to see a lot of new operators looking to fill the void with cheaper concepts . . . more delivery-friendly concepts that require less capital up front.”

Via a series of slides and commentary, Schaefer notes that “global foodservice delivery sales more than doubled from 2014 to 2019” and that 52 percent of global consumers are “comfortable ordering from a delivery-only restaurant (no physical outlet).” The pandemic, too, has made the market for ghost kitchens even more lucrative than it was at the beginning of 2020. 

With most restaurants having now been more or less forced into building out off-premises strategies, ghost kitchens provide in many cases a faster, cheaper way to fulfill things like delivery orders. An accompanying slide the webinar breaks down just how much of the restaurant segment ghost kitchens could potentially capture:

  • 50 percent of drive-thru ($75 billion)
  • 50 percent of takeout ($250 billion)
  • 25 percent of dine-in ($450 billion)

That said, ghost kitchens are “one step” in an ongoing evolution, according to Schaefer. “As more and more of the foodservice environment becomes optimized for delivery, a generation of consumers growing up with smartphones becomes accustomed and habituated to being able to order literally anything from their smartphone. That is going to drive ever-more innovation,” he said.

That innovation will in all likelihood touch every aspect of the restaurant experience, from how food gets from kitchen to customer to the types of foods prepared to the underlying technology powering operations. Ghost kitchens are getting a ton of press right now because of the role they could play in helping restaurants keep the lights on as the pandemic wreaks havoc on traditional dining rooms. But, as this week’s webinar suggests, it’s important to remember that things are just getting started as far as ghost kitchens are concerned. 

Uber Launching Grocery Delivery in U.S. Amidst Record-Setting E-Commerce

Uber announced today that it will launch grocery delivery in select cities this month. The announcement comes at a time when the global COVID pandemic has spurred consecutive monthly record-setting grocery e-commerce sales in the United States.

From the Uber blog post announcing the news:

Starting today, in collaboration with our partner Cornershop, customers in select cities in Latin America and Canada can order groceries through both the Uber and Uber Eats apps. And starting later this month, grocery delivery will be available in Miami, FL and Dallas, TX. In those two cities Eats Pass and Uber Pass members will receive an additional benefit, free grocery delivery on orders over $30. 

According to Grocery Dive, the service will be available through the Uber and Uber Eats apps, where users can select a participating retailer and order their groceries. And though Cornershop is fulfilling orders now, Uber drivers will be able to sign up to make grocery deliveries.

Uber announced last October that it was acquiring a majority stake in Cornershop, an online marketplace for on-demand delivery from supermarkets across Chile, Mexico, Peru and Toronto. That deal still hasn’t gotten formal approval from the Chilean government, though Uber believes that will happen in a matter of days.

This grocery expansion news comes just one day after Uber announced that it was acquiring third-party delivery service Postmates for $2.65 billion. Both the Cornershop and Postmates deals show how Uber is bolstering its Eats delivery business at a time when the COVID pandemic and quarantining is hammering its ride sharing business.

The pandemic is also driving a grocery e-commerce boom. According to surveys from Brick Meets Click, online grocery shopping has had month-after-month of record setting sales as restaurants were shut down and people were forced to shelter in place. With the pandemic showing no signs of slowing down here in the U.S., getting into grocery is a smart move for Uber.

Uber is, however, facing stiff and well-funded competition. Last month, Instacart raised $225 million (and has raised $2.1 billion in total) as it has seen a surge in demand. It was also ratcheting its ranks to 750,000 Shoppers (the gig workers who shop and deliver) to increase delivery availability. Not to mention huge grocery retail players like Walmart and Amazon making and expanding their own delivery programs.

For its part, however, Uber does have a large installed user base from ride sharing and restaurant delivery that it can tap into. Now we’ll have to see what kind of an impact it can make when it comes to getting people groceries.

Burger King Doubles Down on Tech, Delivery to Lure Finland Away From McDonald’s

Burger King Finland is at it again. The same QSR chain that brought us the “silent drive-thru” last year is now offering free delivery to Helsinki residents who are physically close to a McDonald’s but instead choose to order Burger King.

The so-called conquesting campaign uses out-of-home advertising and mobile technology to target McDonald’s users in an attempt to win them over to BK’s side of the fence. To do that, BK placed outdoor ads strategically near McDonald’s locations (see image above) and then partnered with local delivery service Wolt to turn these areas into delivery hotspots. The stunt was publicized with an influencer campaign, which ended July 1.

This isn’t the first time BK has employed tech to lure would-be McDonald’s customers away from the Golden Arches. In 2019, the chain used geolocation technology to prompt customers already inside McDonald’s to leave within a certain timeframe and get a 1-cent whopper. That promotion featured a whole tie-in with Pennywise the clown and the release of It Chapter Two, further gamifying the experience.

The Finland campaign comes at a time when  many places in the world are just now easing up on their lockdowns. Prior to this, out-of-home advertising hasn’t been all that effective since everyone’s been at home. One research firm predicted a decline in out-of-home advertising over the next few years, since this particular ad type relies on places like subway cars and bus shelters. But on that note, Adweek noted in April that brands were shifting their out-of-home advertising spend to focus on areas still getting foot traffic. Given the uncertain trajectory of the coronavirus and the threat of another lockdown ever present, it remains to be seen how effective this style of advertising will be over the long term.

One thing that could have a major effect: dining rooms shutting down again. McDonald’s has already announced it is halting its reopening plans for another three weeks in the U.S. BK’s contesting campaign is only focused in Finland right now, and wouldn’t actually rely on in-restaurant foot traffic at McDonald’s to work. Nonetheless, it’s another example of the pandemic’s far-reaching effects on the restaurant industry, right down to its advertising tactics.

In the meantime, the Finland campaign is at least an amusing tactic to lift the spirits. It’s also a way for restaurants to promote delivery at a time when many dining rooms are still shuttered and customers are still wary about actually setting foot in a restaurant. 

The Good, the Bad, and the Ugly of Deliveroo’s New Table Service Feature

U.K.-based food delivery service Deliveroo launched a new feature this week that sounds convenient on the surface but could cause some problems for more than one party in the restaurant biz. This “Table Service” feature, as it’s dubbed, is meant “to help restaurants reopen safely to dine-in customers and help the recovery of the sector,” according to a company blog post. The feature is available on July 15.

In terms of how it works, the feature is simple: Customers sit down at the cafe, restaurant, or bar, pull up the existing Deliveroo app, and order their food with the Table Service feature, rather than directly interfacing with a server. Payment also happens in the app, so that all the restaurant staff (theoretically) have to do is cook the food and bring it out to the table.

Here’s the good of this new way of operating dining rooms:

If you’re an existing Deliveroo user, it’s convenient. You don’t have to download yet-another mobile ordering app, and since this is table service, not delivery, the extra fees third-party services tack onto orders should be minimal. Deliveroo also said in its blog post it will charge zero commission fee to the restaurant on these orders.

Without a doubt, there is also a level of social distancing built into this concept that will be safer for both restaurants and customers. Being able to sit down and order a meal from your phone gets rid of long lines and crowding near a cash register, and it does, to a degree, minimize customer-to-server interactions.

But on that note, here’s what’s less awesome about Deliveroo’s new feature:

It’s not as socially distanced as the hype would have you believe. Someone has to run the food and be available to refill drinks or assist if there is a problem with the meal. (“I said fries, not salad!”)

This isn’t a Deliveroo-specific problem. All restaurants and restaurant tech solutions have to account for the fact that in any sit-down dining experience, you can’t get away from at least some customer-to-staff interactions. I don’t think Deliveroo, or any company, is promising to completely eradicate those interactions. The company blog post specifically says “minimising in-person contact.” Even so, it’s something to keep in mind as more companies come to market with these contactless solutions for dining rooms. 

More worrying is what a feature like Deliveroo’s Table Service means for restaurant tech companies. Like I said, tech companies, and even non-tech companies, offering contactless dining room solutions have multiplied in the last several weeks. Sevenrooms, Presto, Zuppler, this signage company, and many others offer restaurants the technical means to let guests order and pay from their phones in the dining room. Paytronix has a system that even lets you keep your virtual “tab” — that is, ticket — open so you can order another round of drinks or dessert without making multiple transactions.

If third-party delivery starts offering order and pay features for the dining room en masse, it could be a serious competitive threat for these companies. 

Most alarming about this new feature is what it means for customer data. Ownership of customer data is already seen as a huge issue with third-party delivery services. If restaurants can’t see data about what their customers are ordering, when they’re doing it, etc., they’re less able to cater to exactly what those customers want when it comes to food. 

Deliveroo owning the customer data in the dining room could potentially mean restaurants wouldn’t get the feedback they need to deliver good service that’s enjoyable and simultaneously safe in this pandemic-stricken era. 

A while back, one restaurant tech CEO told me that the COVID-19 pandemic should be treated as “a wakeup call” for restaurants when it comes to their data. In his view, these restaurants need to “to rethink how they’re connecting digitally with their customers.” This is likely to become even more important going forward as governments encourage contactless technologies in restaurants and more customers gravitate towards using their phones for browsing and buying from restaurant menus.

So before you restaurants go signing up for Deliveroo’s new model for the dining room, consider first your digital relationship to your customers, how you treat your customer data, and, most important, how willing you are to part with it when it comes to the newly reopened dining room. 

Square Launches New Service So Restaurants Can Take Delivery Orders Directly

Payment processing company Square announced today the launch of its new On-Demand Delivery for its customers using the Square Online Store. The service allows restaurants and other sellers to take and fulfill delivery orders directly through their own websites, rather than going through a third-party delivery service.

Off-premises eating had been a growing portion of the restaurant industry’s revenue before the pandemic hit. Once restaurants were forced to close down dine-in operations out of COVID-19 concerns, delivery and curbside pickup became the only way restaurants could stay afloat.

But typically if restaurants want to offer delivery, they need to sign up for a third-party delivery service like DoorDash or Uber Eats. Those third-party delivery services charge high commissions and fees that basically gobble up most of the money a restaurant earns and drives up the price for consumers.

Square is letting restaurants bypass some reliance on those third-party delivery services by letting restaurants accept delivery orders directly on their own websites. From a Square blog post today announcing the new feature:

When an order is placed on the seller’s online store, a courier from the restaurant’s delivery partner is dispatched to the business location, picks up the order, and delivers it to the buyer. The buyer receives text updates with links to live maps to track delivery progress. Sellers pay a flat fee of $1.50 per order to Square, plus a fee to their delivery partner that is calculated in real-time based on distance and other factors. Sellers can pass this fee entirely to the buyer or offer custom delivery promotions. When applied across hundreds of delivery orders each month, sellers can save a significant amount on per-order costs.

There are some devils in these details. For instance, Square’s On-Demand delivery is now powered by Postmates, which itself a third-party delivery service (Square says more courier services will be added). Per Square, the restaurant is still paying Postmates a fee “based on distance and other factors.” The question then is, how much cheaper is it for a restaurant to take the delivery order directly and just use Postmates as a courier than it is to take orders via Postmates? Because part of what you pay for with a third-party delivery service is access to their large marketplace of customers looking for something to eat. Will abandoning third-party services save enough money?

Regardless, this is another example of the continuing evolution of the restaurant industry trying to navigate this pandemic and beyond. Third-party delivery services were a hero, then the villain. Restaurants that had once outsourced delivery are now looking to bring it back in-house, or create some type of hybrid solution.

Square’s On-Demand feature is more fuel for even more change.

U.K. Regulators Grant Provisional Clearance to Amazon’s Highly Scrutinized Deliveroo Investment

The U.K.’s Competition and Markets Authority (CMA) has provisionally cleared Amazon’s 16 percent investment in Deliveroo on the basis that the deal would not likely “damage competition in either restaurant delivery or online convenience grocery delivery,” according to a statement from the CMA.

Amazon was set to be the largest contributor to a $575 million investment announced in May 2019. By July of the same year, British regulators were scrutinizing the deal, claiming there were “reasonable grounds” to suspect that Amazon and Deliveroo would “cease to be distinct” were it to go through. Many months and a pandemic later, the CMA provisionally approved the deal in April 2020. Grounds for approval were that, thanks to the pandemic decimating the restaurant industry, Deliveroo would have had to exit the food delivery market without Amazon’s investment.

Though it seems the stakes are actually less dire for Deliveroo. The CMA said today that it has revised its provisional findings from April and found that “Deliveroo would no longer be likely to exit the market in the absence of this transaction.”

Even so, a lot has changed in the third-party since Amazon first announced its plans to invest in Deliveroo. The biggest development (besides COVID-19) has been Takeaway.com’s acquisition of Just Eat that was approved in April and created one of the largest food delivery companies in the world. That deal alone makes the U.K. food delivery market more competitive, and renders Amazon (a little) less of a behemoth come to gobble up marketshare. Uber Eats also operates in the U.K., as do a handful of smaller players. 

Another concern of the CMA’s was that through its investment, Amazon would cease to be competitive with Deliveroo. Thanks in large part to the Just Eat-Takeaway.com deal, that appears to no longer be the case.

“Looking closely at the size of the shareholding and how it will affect Amazon’s incentives, as well as the competition that the businesses will continue to face in food delivery and convenience groceries, we’ve found that the investment should not have a negative impact on customers,” Stuart McIntosh, Inquiry Chair for the CMA, said in a statement.

The CMA will now ask for views on the new findings by July 10. From there, it will make its final decision, which is due by August 6, 2020.

Arcimoto and HyreCar to Make the Deliverator EV for Rent in LA

While the “Deliverator” sounds like something out of a Strong Bad cartoon, it’s actually a three-wheeled electric vehicle made by Arcimoto that could help speed up food deliveries.

Today Arcimoto and HyreCar, which allows people to rent cars they can drive for ridesharing services like Uber and Lyft, announced that the Deliverator will be available to rent in Los Angeles starting this summer.

The Deliverator features a 102 city mile range, can go up to 75 mph and has 20-plus cubic feet of cargo space. Because of its narrow footprint, it can be nimble and temporarily park in spaces where full-sized car can’t fit.

Gig workers in LA who want to get into grocery, restaurant or other delivery will be able to rent a Deliverator through the HyreCar platform starting this summer. Prices weren’t mentioned in the press announcement emailed to The Spoon, but a screengrab on the HyreCar website shows that renting a Toyota Prius for the day costs $35. A delivery driver would need to do the math to make sure they’d make enough revenue to make the Deliverator rental worth it.

Depending on the actual economics, adding the Deliverator seems like a smart play for HyreCar. The COVID-19 pandemic has meant increased restaurant delivery and record-setting grocery e-commerce. So there is more of a demand for delivery drivers than ever, and providing a small, zippy vechicle that can practically park anywhere could actually help speed up service.

The pandemic is accelerating the adoption of a lot of different delivery technologies. Postmates’ rover robot is now rolling around Los Angeles, making food deliveries. Refraction’s autonomous REV-1 is doing restaurant and grocery delivery in Ann Arbor, MI. And Nuro’s pod-like low-speed vehicle is now testing in California.

Getting Arcimotos into action to make deliveries is actually easier than some of these solutions because there is a person driving the vehicle rather than an AI. So there aren’t self-driving regulatory hurdles to overcome.

We’re looking forward to see how people take to the Deliverator’s not-quite–a-full-size-car option down in LA, and whether the program will expand to other cities. The program could wind up being a real homestar runner.

Report: DoorDash Raised $400 Million Amid Surge in Demand and Costs

DoorDash has raised $400 million in new funding, giving the third-party delivery service a $16 billion post-money valuation, according to a report in Axios’ Pro Rata newsletter. This latest round was led by Durable Capital Partners, with participation from Fidelity and existing investor T. Rowe Price.

Today’s Axios story follows a Wall Street Journal article last week that said the company was close to getting funding that would value the company at $15 billion. This round would bring the total amount of funding DoorDash has raised to $2.5 billion.

Back in February of this year, DoorDash had confidentially filed to go public. Around that same time, the COVID-19 coronavirus erupted into a global pandemic. With shelter-in-place orders instituted around the world, demand for food delivery skyrocketed. As Axios points out, along with this surge in demand came increased costs for DoorDash, which needed to implement new contactless delivery features and provide PPEs to its delivery drivers.

In addition to rising costs, DoorDash’s new funding comes amidst new regulatory and competitive issues. Just yesterday the San Franciso DA sued DoorDash over how the company classifies its workers as contractors and not employees (which would give them overtime pay and other worker benefits, which would cost DoorDash a lot of money). There has also been some consolidation in the third-party delivery space as last week Just Eat Takeaway acquired Grubhub.

There are still a lot of unknowns about how this pandemic will or won’t permanently alter our relationship with restaurants. A recent spike in coronavirus cases where states have re-opened may keep patrons away from dining out and drive them deeper into delivery. The question now is whether the massive amount of money DoorDash has raised is enough to keep it going through all of this change.