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Daily news and analysis about the food tech revolution

delivery

More COVID-Related Cuts for Food Delivery: Grab Lays Off 5 Percent of Its Workforce

Singapore-based food delivery service Grab is letting go of about 5 percent of its workforce and “winding down” several projects and functions, according to AgFunder News. 

The layoffs are part of Grab’s ongoing struggles with COVID-19’s impact on the global economy. Grab had previously asked its workers to accept decreased hours or take unpaid leave of absence in an effort to avoid having to reduce its workforce. The company also implemented pay cuts for senior management.

But in a letter to staff that was cited by AFN, Grab cofounder and CEL Anthony Tan noted that after trying everything possible to avoid staff reductions, the company now has to accept this reality. “In spite of all this, we recognize that we still have to become leaner as an organization in order to tackle the challenges of the post-pandemic economy,” he said.

Affected employees will receive “enhanced severance payments, expedited equity vesting, extended medical insurance coverage, and access to career advice and mental health support.”

Softbank-backed Grab bills itself as “your everyday everything app.” The company offers on-demand food delivery as well as ride hailing services in about 300 cities across Southeast Asia. 

And it’s hardly the first food delivery service to announce layoffs in the last few months. In India, the two major players in third-party delivery, Swiggy and Zomato, both announced layoffs in May. U.K.-based Deliveroo cut 15 percent of its workforce in April, citing coronavirus’s impact as the reason, and Uber recently laid off employees, including those working for the company’s Eats division.

At the same time, consolidation has come for the food delivery world, most notably in Just Eat Takeaway’s plans to acquire Grubhub. In 2019, Delivery Hero bought South Korean Woowa Bros.’ food delivery service, and Brazil-based iFood merged with Colombian service Domicillios.com.

Layoffs don’t necessarily signal that a company is about to get gobbled up by an acquisition, but the pandemic has certainly caused many on-demand businesses around the world to struggle, cut costs, and become leaner all around. Competition has long been fierce in food delivery, especially in Southeast Asia, where Grab competes with rival Gojek for dominance. Grab’s announced layoffs this week are hardly the last we’ll see in the coming months as the market for on-demand food delivery becomes even more cutthroat.

San Francisco DA Sues DoorDash Over Worker Classification

San Francisco District Attorney Chesa Boudin is suing DoorDash over misclassifying its delivery drivers and couriers as independent contractors, rather than employees, according to TechCrunch. The lawsuit seeks for DoorDash to stop classifying its workers as such or face a $2,500 fine for each violation.  

According to the suit:

“DoorDash’s misclassification of its Dashers was no mistake, but instead a calculated decision made to reduce the costs of doing business at the expense of the very workers providing the company’s core service of delivery: the delivery of merchandise from merchants to customers.”

The suit comes months after California’s AB 5 was signed into law. AB 5 lays out exactly which types of workers can be classified as independent contractors, using the ABC test as criteria. As the suit outlines, DoorDash’s workers don’t meet the criteria in the ABC test to be considered independent contractors. Instead, they should be assumed to be employees with the same access to healthcare, workers comp, overtime pay, and other benefits W-2 employees receive.

The issue of benefits for gig workers is an especially hot-button one right now, thanks to the pandemic. Gig workers delivering restaurant meals and/or groceries have so far been considered “essential” and allowed to continue making deliveries during shelter-in-place mandates. That put a lot of food on consumers’ tables, but it also put workers’ health at risk. As contractors, those workers don’t have automatic access to healthcare of paid sick leave. As one worker said at the beginning of the crisis, “Staying home won’t pay the bills.”

To be fair, most third-party delivery services responded to the issue back when the pandemic first accelerated, offering some financial compensation for workers affected by COVID-19. Other moves to better protect workers have been the result of government involvement, as when a New York Court ruled that Postmates drivers were eligible for unemployment during the pandemic.

DoorDash itself has been offering financial assistance through its COVID-19 Financial Assistance program. Dashers impacted by the pandemic can submit a claim and be eligible for up to two weeks of assistance. And the company recently entered into a public-private partnership with the Pennsylvania Office of the Attorney General to further expand financial, healthcare, and childcare assistance to Dashers.

All those efforts are specific to the pandemic, though. Boudin’s lawsuit seems aimed at the long-term situation of Dashers and other gig workers, and what protections they can receive when there isn’t a global health crisis in play.

Not every worker wants to be classified as an employee, though. A slew of responses to one of Boudin’s tweets this week shows that some gig economy workers prefer to be contractors. “Most of us drivers want to remain Independent Contractors because of the flexibility and because [w]e make more than minimum wage,” wrote one. Another responded that “As an independent contractor I’m outraged that you’re taking away my flexibility to barely afford to pay my health bills even though I’m working seemongly [sic] nonstop for the same one or two companies.” And in the words of another, “We didn’t fucking WANT relief. All he will accomplish here is making us unemployed and homeless.”

Plenty of other gig workers are in favor of laws like AB 5 (“Thank you! They stole my tips!” one person responded to Boudin’s tweet).

For third-party delivery services, turning contract workers into employees would be an expensive endeavor — more expensive even than spending $90 million to fight AB 5, which is exactly what DoorDash, along with Uber and Lyft, pledged to do. Having to pay workers health insurance, overtime, and sick leave would further erode these companies’ chances of profitability, which is another major issue in the gig economy world.

It recently came to light that DoorDash is near closing a new round of funding that would value the company at over $15 billion. The company filed to go public last year and, according to sources, is still planning on a listing for 2020. That would make the profitability issue even more pressing for the third-party delivery service, so we can expect DoorDash to continue fighting hard against AB 5.

Panda Express Launches Its Own Delivery Service. Other Restaurants Could Follow

Panda Express has, in its own words, “cut out the middleman” as far as restaurant delivery is concerned. This week, the QSR chain announced it has launched its own delivery service, and also said was planning for 30,000 new hires, according to a press release sent to The Spoon.

The chain, which is owned by Panda Restaurant Group, had actually been planning to launch its own delivery service in a year’s time, according to the press announcement. The pandemic accelerated this timeline. Even with dining rooms reopening, they’re doing so at reduced capacity, and many would rather order takeout or delivery and eat in the comfort of their own home. But fees for using third-party delivery services a la Uber Eats or Grubhub can stack up quickly. For consumers dealing with job uncertainty or unemployment — two widespread things right now, thanks to he pandemic — ordering delivery with any amount of regularly just isn’t financially possible right now.

Panda Express noted the exorbitant fees in its announcement, and said with this new delivery service, guests “will not incur additional fees typically found on third party sites.”

However, a Panda Express spokesperson confirmed to The Spoon that Panda Express will still be available on third-party delivery services, “such as Uber Eats and Postmates.” So this new delivery service could be the start of a slow transition towards bringing off-premises operations back in house.

Which is definitely a post-pandemic trend to watch. Not that we’re post-pandemic yet, one of the many flaws in our food system the COVID-19 crisis put a spotlight on is the relationship between third-party delivery services and restaurants. Sky-high customer fees, even higher commission fees for businesses, shady business practices, and tipping policies for workers are all griefs the restaurant industry has voiced in the past year. To offset some of the high costs of doing delivery, restaurants have to raise their prices for customers. 

Restaurants are being urged by many in the industry to try and pull some of their off-premises strategies back in house in an effort to regain some control over their operations and, more importantly, their customer data and relationships. One analyst recently went as far as to say that “In the longer-term, many restaurants are going to see the value of investing in an in-house system for delivery orders.”

That won’t happen immediately. For many businesses, in-house delivery is actually more expensive than using a service like Uber Eats. But it could well be that the pandemic, the subsequent restaurant industry meltdown, mass unemployment, and a recession spur more restaurant into action in terms of finding ways to take more control back of their off-premises operations. If nothing else, this will definitely be a trend to watch in the latter half of 2020.

As far as the 30,000 new hires, Panda Express told Nation’s Restaurant News that new positions will exist to “execute the new health and safety operations and procedures, such as contactless service, curbside assistance, drive-thru assistance, expediters for to-go and online ordering, as well as new cleanliness protocols.”

Gaming, Glass Houses, and Other Signals of Restaurant Recovery

Everyone’s talking about Just Eat Takeaway’s acquisition of Grubhub this week, so let’s talk about mannequins in restaurants instead.

At a virtual workshop for The Spoon this week, Max Elder, a Research Director at the Institute for the Future, referenced restaurants that are currently using mannequins to fill up tables left empty by social distancing rules. The example is what he calls a “signal.” Signals are, as Elder explained, “small or local innovations happening today, with potential to grow in scale and geographic distribution.” They are one small thing happening right now that can eventually accelerate into a widespread trend that changes an industry or, as Elder suggested, the entire food system.

The restaurant industry is full of these signals right now as businesses struggle to adjust to the new reality of reduced capacity in the dining rooms, an emphasis on to-go orders, and social distancing guidelines. Some things, like curbside pickup, have already become full-on trends everyone is doing. But plenty of restaurants are innovating on a much smaller scale, whether it’s through a new technology, product, or creative approach to social distancing. See the mannequins example above.

Will all of the signals currently out there in the restaurant industry become widespread trends? It’s too soon to tell, but they all provide some specific, granular detail on about new restaurant experiences and unique ways businesses are working to change the way we eat. In the spirit of that, here are a few noteworthy signals that may or may not become widespread but show us that innovation is alive and well in the restaurant biz.

Gaming gatherings. Fancy a little D&D with your to-go latte? Hex & Company, a board game cafe in NYC, set up an online gaming service to keep customers in touch with its brand (and also probably give them something to do) during shelter-in-place restrictions. 

People in glass houses. A shoutout to virtual workshop attendee QQ for bringing this up during the session. A restaurant in Amsterdam is making it safer for diners to eat out by enclosing them in tiny greenhouse-like glass structures while they eat. (See image above.) The concept is compelling because it serves up a unique restaurant experience that’s socially distanced at the same time.

Virtual tip jars. We’ve written about this one before. Out-of-work servers and bartenders can receive Venmo tips from folks they may never have served, thanks to efforts like this one in Chattanooga. The contactless aspect of these virtual tip jars could make the concept at attractive sell even once we’re past the pandemic.

Restaurant relief kitchen. When fine-dining restaurant Alma Cocina Latina had to close its doors because of the pandemic, owner Irena Stein turned it into a relief kitchen for food-insecure individuals around Baltimore. The concept was so attractive it eventually got the backing of José Andrés’ World Central Kitchen.

If eating inside a glass greenhouse or playing Magic the Gathering via your local coffeeshop’s server seems kind of strange, that’s good. One of my favorite moments of this week’s workshop was when Elder said, “Any useful statement about the future should at first seem ridiculous.” As the restaurant industry enters a new era, we’ll need as many left-of-center ideas as we can possibly get.

Another Day Another Grubhub Rant

OK let’s actually talk about Grubhub. Or rather, let’s talk about what Just Eat Takeaway inherits if its deal to acquire Grubhub is approved by shareholders and goes through.

To quickly sum up the news, this week Amsterdam, Netherlands-based Just Eat Takeaway confirmed its $7.3 billion deal to acquire Grubhub. The sale creates a combined 360,000 restaurant clients across 25 countries, and roughly 70 million customers. 

Just Eat Takeaway, which is itself a newly formed company, also gets an automatic in with some of the strongest food delivery markets in the U.S., New York City and Grubhub hometown Chicago among them. It gets access to other markets across North America and therefore can take a hefty swipe at U.S. market leader DoorDash, and it will become the largest food delivery service in the world outside of China.

The deal, which is expected to close in the first quarter of 2021, also means Just Eat Takeaway will inherit the many (many, many) highly controversial aspects about Grubhub.

Over the last year alone, Grubhub has been accused of using misleading websites and phone numbers to charge restaurants extra fees, listing restaurants on its site with which the service doesn’t even have a deal with, and it’s stood behind the arguably unethical commission fees it charges restaurants. When he pandemic struck the U.S. in full force and restaurant dining rooms closed down, Grubhub didn’t waver from those fees. It merely offered a vaguely worded announcement about deferring fees for a temporary period, and the company spoke out against the mandatory caps many city governments have placed on those fees.

Uber, a former Grubhub suitor, reportedly balked at these shady business practices, which were one reason among many that deal went south. Just Eat Takeaway hasn’t made any mention of them in official statements or interviews so far, though in an interview with NRN this week the company said it was attracted to Grubhub’s business model. It’s too soon to know what that means for restaurant clients, but it doesn’t exactly instill confidence that things will change.

Unless consumers themselves opt out of using those services. One of the things Elder mentioned in his talk today was that everyone has a stake in the future of food. For restaurants and delivery, that means customers can help dictate the direction of the industry by the places where they eat and and the services they order from. No, every consumer that reads about the above controversies won’t delete their Grubhub and/or Just Eat Takeaway apps. But it’s worth remembering, as we’re forced to redesign the food system, that everyone’s actions, right down to the $5 sandwich order, will have lasting impact on the future of food.

Tune Into The Spoon’s Startup Pitch Session

Let’s end on a non-rant this week by highlighting the wealth of startups out there working around the clock to help change the food system for the better. Next week, The Spoon will host a Startup Pitch Session you can tune into via CrowdCast to see what some of these companies are up to.

For this first-ever Food Tech Pitch Sesh, Better Food Ventures’ Brita Rosenheim and Sansaire founder Scott Heimendinger will judge three food tech startups pitching their products. It’ll be great fun, with lots of constructive feedback you’ll likely be able to take and apply to your own business.

Join us next week, on June 18 at 10 a.m. PST. Register here to save your spot.

This is the web version of our newsletter. Sign up today to get updates on the rapidly changing nature of the food tech industry.

Working From Home is Adding to Some Restaurants’ Struggles

The uptick in telecommuting could be contributing to a decline in foot traffic for some restaurants as the industry slowly enterers a recovery phase. Jack Li, founder of research firm Datassential, said at NRN’s recent Restaurants Rise conference that the effectiveness of remote work for many companies could lead to a dramatic shift in foot traffic for restaurants located in commercial areas. Think lower traffic volume at lunchtimes and some sales at breakfast.

“If you pull consumers out of an area because they’re not going to offices to work, you make it very challenging for restaurants,” he said.  “That will have a very large impact on what recovery looks like,” Li said.

He also cited some telling restaurant industry stats during the talk. Right now, 11.5 percent of U.S. restaurants are not open. Of those, 3.3 percent are permanently closed and 8.2 percent are temporarily closed. Li said some of those temporary closures could turn into permanent closures.

While those figures aren’t completely the result of more folks working from home, telecommuting has at least some impact. As NRN noted: “This will be especially harmful to restaurants where office workers outpace residents. And, it also explains the high rate of temporary closures in urban areas where restaurants rely on office or commuter traffic.”

One thing that could help is the rise of a new kind of corporate catering. Today, Uber Eats announced Vouchers, an extension of its corporate meal program that lets companies customize meal plans for both individual workers and large-scale events. Those meal plans rely on restaurants to provide the food.

For some businesses, that could add incremental revenue at a time when dining rooms are open at reduced capacity. But that depends on where the restaurant is located. Those in more residential areas stand to benefit from the mass telecommuting happening now. For those in financial districts or areas where office workers outpace residents, closures may remain longer and recovery will come slower. 

Report: Restaurant Transactions are Inching Towards Improvement for Major Chains

Restaurant transactions are improving — for some. Today, the NPD Group said customer transactions at major U.S. restaurant chains saw a slight uptick for the week ending May 31. Transactions at these chains declined by 18 percent compared to the same period one year ago. That’s a 3 percent week-over-week improvement.  

NPD has been providing regular updates on restaurant transactions for a number of weeks now as dining rooms slowly reopen and the restaurant industry as a whole continues to grapple with the unprecedented disruptions caused by the COVID-19 pandemic. 

Other notable numbers from this latest report include:

  • Restaurants in states where dining rooms are still closed had the steepest declines [—DECLINES OF WHAT?—]. For New York and California, that was negative 34 and negative 27 percent, respectively. 
  • By contrast, transactions in Kentucky, which was allowed to reopen on May 11, saw a 2 percent decline.
  • Full-service restaurant chains saw a negative 37 percent decline, which is a 15 percent increase from the prior week.
  • QSR chains saw a 16 percent decline in transactions versus 18 percent in the previous week.

David Portalatin, NPD food industry advisor noted in the release that the foodservice industry is “solidly in the re-start phase,” and that it will only be in a true recovery phase when all states reopen their dining rooms. Only then can we start to make “a detailed assessment of how many permanent restaurant closures there are and how that will affect what the industry will look like as it re-emerges.”

At least 3 percent of restaurants have already permanently shuttered due to the pandemic. Many of those have been independent restaurants, though some chains have also had to shut down locations.

And while we may not know exactly what the future restaurant industry looks like, one thing we can count on is more off-premises orders. Pretty much everyone, from family sit-down chains to fine-dining restaurants, are encouraged to continue offering to-go options to customers. Some chains are even launching to-go-focused concepts, while others are turning to the ghost kitchen concept to fulfill more delivery orders.

How big a role off-premises will play remains to be seen, and we likely won’t have a clear idea of that until more states reopen dining rooms. For now, delivery, ghost kitchens, virtual restaurant concepts, and other off-premises strategies have yet to prove themselves as real lifelines for businesses.  

Third-Party Delivery Suspends Services to Comply With Curfews

Minneapolis, Los Angeles, Nashville, Philly, Atlanta . . . the list of cities under curfew goes on, and if you live in one of those places and were counting on some food delivery for your supper, you’ll have to look elsewhere. DoorDash recently told The Verge it is “pausing” operations to comply with those local curfew orders. 

From The Verge:

DoorDash, which has seen an increase in orders as restaurants have been forced to suspend eat-in dining during the pandemic, told The Verge it is pausing operations to abide by curfews. Its spokesperson did not provide details about which cities were affected as of Monday.

Uber has also suspended service in some cities, which extends to its Eats food delivery business. An Uber spokesperson told Business Insider that customers should use the app to learn more about these suspensions, and that they should use Uber/Uber Eats “for emergency purposes only during this time.”

Postmates, which is the biggest service in Los Angeles, is also abiding by local curfews. Grubhub said it is “pausing operations when needed.”

Delivery companies aren’t being specific about which cities have suspended which services. Even in places where an order goes through, they are then cancelling orders. For ones that actually go through, some drivers are having trouble actually getting the food to customers:

How long these suspensions and changes to service last will, most likely depend on when the unrest subsides. To find out if food delivery is a realistic prospect in your city, best to check for updates directly in these services’ apps.

Imperfect Foods Raises $72M to Expand Delivery of Ugly Produce and Pantry Goods

Imperfect Foods, the company that delivers surplus and “ugly” food directly to consumers, announced today that it had closed a $72 million Series C funding round. The round was led by Insight Partners with support from existing investors, including Norwest Venture Partners. This bumps the total amount raised by Imperfect up to $119.1 million.

You may have seen Imperfect Foods (formerly known as Imperfect Produce) boxes sitting on stoops around your neighborhood. Since 2015, the company has been delivering boxes of surplus and cosmetically imperfect produce — that is, fruits and vegetables that would normally go to waste — to consumers in curated boxes. The produce is discounted up to 30 percent compared to grocery store prices.

In an intriguing pivot, last year the company diversified into other grocery categories, like dairy, meat, and pantry items. Some of these were still “imperfect” products, like coffee beans that were too small or misshapen almonds, but others were not. Last year the company also launched a pilot program to pick up their delivery boxes for reuse.

With its new funds, Imperfect will continue to bring its grocery delivery to more areas across the country and add on to its fulfillment centers.

I received Imperfect boxes for a little over a year but discontinued them since, as a single person, I couldn’t use enough of my box to justify the cost. But ever since the pandemic has had me sheltering in place and dreading trips to the grocery store, I’ve missed my weekly boxes of produce and staples.

In fact, COVID-19 actually presents a valuable opportunity for Imperfect Foods. Surveys show that up to 60 percent of consumers are “fearful” of shopping inside grocery stores, while sales of online groceries are skyrocketing. Imperfect can provide the online grocery experience with a side of good conscience since you’re also cutting down on food waste.

Imperfect isn’t the only company to deliver ugly fruits and vegetables to consumers. Misfits Market also ships boxes of cosmetically flawed produce to consumers. Theirs is all organic, but the key difference is that you can’t choose what’s in your box, while Imperfect offers customization options.

In a time when consumers are relying on convenience and valuing their health perhaps more than ever, it’s a prime time for delivery services like Imperfect. Clearly investors feel the same way.

Report: Uber Wants to Buy Grubhub

Uber has made an offer to buy Grubhub, according to a report from Bloomberg. A potential deal could be reached as early as this month and would be an all-stock takeover where Uber would absorb Grubhub into its overall operations.

Details on this story are still forthcoming. 

Food delivery has been a booming business for Uber of late, with its Eats business seeing a 52 percent increase in gross bookings for the first quarter of 2020. However, the company remains committed to its strategy of only operating in markets where it is the number one or number two player. That has led Uber to exit certain global markets — India, South Korea, a bunch of Middle Eastern countries — where local delivery apps are far more popular.

That strategy is much tricker in the U.S., though, where DoorDash leads in terms of market share and Grubhub comes in second in many cities, according to recent numbers from Second Measure. Sticking to its strategy of only operating in markets where it is the number one or two service would mean Uber would have to exit many U.S. cities.

Hence a potential deal with Grubhub. The combined forces of the two would in all likelihood knock DoorDash out of the top spot in many places, and give Uber a larger share of major metropolises like New York City and Chicago. 

This kind of market consolidation was already in the works before the pandemic hit. Last year, Just Eat and Takeaway.com announced a merger that was finally recently approved. Delivery Hero bought South Korean service Woowa Bros. for $4 billion. And Brazil-based iFood announced, also in 2019, that it was merging with Colombian delivery heavyweight Domicillios.com, to corner more of the Latin American market. All of which is to say, it was only a matter of time before third-party food delivery consolidation came for the U.S. markets. 

Update (May 12): Grubhub released the following statement today:

“While our policy remains to not comment on specific market rumors, we want to reiterate our views with respect to M&A-related matters given the current level of recent speculation.

“We remain squarely focused on delivering shareholder value. As we have consistently said, consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”

Tim Horton’s Secures Investment to Expand Its Tech-Centric Coffee Model in China

Canadian coffee chain Tim Horton’s has secured an undisclosed amount of funding from Chinese tech company Tencent, according to AgFunder News. The company originally announced the news via a post on Weibo.

Tim Horton’s China unit will use the new funds to build up its digital assets and infrastructure as well as expand its number of locations in the Chinese market. Currently, it operates about 50 stores in that country and says the investment from Tencent will let the company hit its target number of 1,500 stores sooner than originally planned, though a specific time wasn’t named. 

Tim Horton’s first entered the Chinese coffee market in February of 2019. 

Digitizing the coffee market in China is a big business right now. Tim Horton’s faces competition from Luckin, which has always pursued a digital-first model that emphasizes mobile ordering, AI-powered self-service coffee terminals, and delivery. (Side note: Luckin is currently at the center of an accounting scandal that is raising questions about future growth.)

Starbucks is also a major competitor in China, having partnered with Alibaba’s food delivery platform Ele.me to grow its delivery footprint. Starbucks has also partnered with Alibaba’s Heme supermarkets to operate its own ghost kitchens, and launched its very first to-go-centric Express store in Beijing last year. 

Tim Horton’s new investment funds come at a time when all these companies will need to double down on their tech investments to make the coffee experience as to-go-centric as possible. The COVID-19 pandemic has placed things like contactless payment, delivery, and mobile orders into the center of future restaurant operations. Major chains that want to keep growing will need to spend more on these technologies in order to meet consumer demand for both convenience and safety, not only in China but in the rest of the world, too.

Report: Digital Orders and Delivery Driving Restaurant Sales, Full-Service Still Struggling

Digital restaurant orders and delivery orders were up for the month of March, according to new numbers from The NPD Group. Despite — or more likely because of — state-mandated dining room closures, NPD reported digital orders for restaurant meals increased by 63 percent and delivery orders by 67 percent.

Quick-service restaurants (QSRs) represented the majority of the increase in digital and delivery orders. That’s no big surprise, as many of these types of restaurants were already primed for off-premises ordering before the pandemic ever hit. In fact, as far back as November of 2019, the National Restaurant Association predicted that off-premises orders would drive the bulk of QSR restaurant sales over the next decade. Chains like McDonald’s and Chipotle were already running $1 billion-plus digital businesses, and Starbucks said recently that 80 percent of its U.S. orders were to-go orders before the pandemic.

The bigger hit was taken by full-service restaurants. According to NPD, full-service restaurants “realized traffic declines of 35 percent in the month of March compared to year ago March.” The firm also noted that “On-premise traffic share prior to the pandemic represented 80% of the FSR business and off-premise 20%.” 

Shelter-in-place orders obviously changed those numbers. Many full-service restaurants have tried to pivot to off-premises strategies. NPD notes that “FSRs able to offer carry-out and delivery were able to lift the segment’s off-premise traffic share by 31%.” But as we’ve covered before, switching from a model that’s built primarily around dine-in traffic to one that relies on things like delivery and curbside pickup can be a complicated process that restaurants aren’t operationally equipped to handle. Meanwhile, some restaurants, unable to weather the current storm, have closed permanently. Others have ceased operations citing health concerns for their staff. 

Even as states slowly begin to reopen, businesses won’t be pivoting back to their former dine-in models. Most restaurants will have to operate at reduced capacity — down to 25 percent in some cases — and consider implementing things like reservations systems and store redesigns to accommodate social distancing guidelines. 

That said, transactions at full-service restaurants have improved slightly, declining only 67 percent for the week ending on May 3 compared to 71 percent the previous week. This is the third consecutive week these declines have improved, according to NPD. Dine-in restrictions have lifted for roughly 192,000 restaurant units in the U.S., though many more challenges remain for the coming weeks. Those include adopting technologies to enable more digital orders, setting up contactless payments, and preparing for another possible wave of pandemic at some point in the future. 

NPD’s numbers echo what the firm’s Executive Director Susan Schwallie mentioned last week at The Spoon’s virtual fireside chat. “COVID has been an accelerator for everything online and digital,” she said at the online event. In addition to online ordering, ghost kitchens are another tech-driven initiative that will stick around in the restaurant world over the long term. 

Welcome to Burger King. Did You Have a Reservation?

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Things I never thought I’d live to see: a global pandemic shutting down the economy, the McDonald’s snuggie, and fast food restaurants requiring reservations to dine in. But with the restaurant biz on the brink of catastrophic meltdown and businesses slowly reopening under strict social distancing practices, we can expect lots of new versions of the on-premises experience over the next few months — and probably a total redefining of what it means to be a restaurant. 

News landed this week that Burger King is testing an app for dine-in reservations at three stores in Milan, Italy that are expected to fully reopen on June 1. Reuters reports that the app lets customers order food and book a table before ever setting foot in the restaurant, which will operate at less than half its pre-pandemic capacity. During peak hours — 12–2 p.m. and 7–9 p.m. — roughly one-third of those tables will be reserved for customers using the app.

The company says it expects the new booking system to keep its revenue stable in the face of reduced in-house seating. Previously, BK in Italy got about 70 percent of its revenues from dine-in customers. Social distancing won’t allow for that now, and BK said it hopes to make up some of those lost sales with drive-thru.

Reservations are one way to keep crowds at bay in QSRs. Another is to build social distancing features into the actual store layout and operations, as McDonald’s has done in The Netherlands. The mega-chain is trialing a few initiatives at one store in the city of Arnhem, including table service, where burgers are delivered on trolleys, designated waiting spots for the line, and hand sanitizing stations at the store’s entrance. There may also be a host behind a plexiglass-shielded station, directing people where to stand in line.

There’s no word yet on whether this McDonald’s prototype will make its way to the U.S., though I wouldn’t be surprised if some social distancing elements wind up in the chain’s ongoing Experience of the Future store remodels. Burger King, meanwhile, has said if the trial of its app is successful in Italy, it could be used in other countries. 

And while QSRs are busy adopting features we’re most used to seeing at casual dine-in joints, the latter continues to adjust its format to be more to-go friendly. This was already happening B.P. (before pandemic). Now, sit-down restaurants are accelerating the addition of things like drive-thru lanes and self-service kiosks to keep business moving and socially distant at the same time.

All this suggests some seriously blurring lines between the normally siloed types of restaurant experiences. Going to a McDonald’s might suddenly feel like a more formal affair, while family dinner night at The Melting Pot might feel strangely casual without the usual person-to-person formalities. Tech tools that automate the order and pay process, and redistribute the tasks of servers, food runners, and cashiers, will only further change the now-fluid definition of the restaurant. 

We’re only at the start of things when it comes to these new dining out formats. Expect many more iterations of the restaurant to surface in the coming weeks. 

Grubhub Responds to Commission Fee Caps.

Meanwhile, I’d be remiss if I didn’t mention the ongoing smackdown between third-party delivery services and governments mandating caps on the commission fees these tech companies charge restaurants. That was a hot topic this week as more cities joined the list of those either considering caps or already implementing them. 

Grubhub responded this week via its Q1 2020 earnings call. CEO Matt Maloney said these fee caps force the company to increase fees for consumers, lessen marketing spend, and are ultimately resulting in fewer orders for independent restaurants. “Our preliminary data shows that on average, our independent restaurants are seeing over 10% fewer orders since the fee cap and many of these orders have shifted to a large brand or QSR restaurants that were not impacted by the emergency ordinance,” he said.

Note that he said “orders” not “revenues.” There’s no question that being on a platform like Grubhub makes a restaurant more visible to more potential customers. That in turn would hopefully fuel more orders for, say, your local pizzeria instead of Papa John’s.

But with Grubhub et al. taking an up to 30 percent commission of each restaurant transaction, more orders does not translate into significantly more revenues for restaurants. See this gem of a receipt, courtesy of one independent business, as proof of how little restaurants make on third-party platforms. 

On the call, Maloney said one-size-fits-all model “will not work.” And yet one independent restaurant owner who testified at a public hearing last week about NYC fee caps suggested there was virtually no negotiability when it comes to commission fees, suggesting Grubhub runs its own one-size-fits-all model when it comes to food delivery.

The debate around commission fees has been building momentum for some time. The pandemic has effectively stripped any remaining gloss off the facade of third-party food delivery and put its unsavory insides on full display. That the sector will need to make a pivot of its own if it wants to stay relevant seems more and more a question of “when,” not “if.” 

Amazon Returns to Restaurant Delivery. Sort of

But let’s end the week on a less-infuriating note, like Amazon running a makeshift third-party delivery service for restaurants in its corporate buildings. Drivers that used to transport the Seattle tech giant’s corporate employees are now running food from restaurant to customer, according to Eater Seattle.

Deliveries are contactless, meaning the restaurant packages up the order and sets it in the delivery driver’s trunk. Said driver then leaves the food on the customer’s doorstep. 

Once upon a time, Amazon ran a restaurant delivery service, which it shuttered in June of 2019. At the time, Amazon cited competition from the likes of Grubhub, Uber Eats, and other third-party delivery services. The new endeavor doesn’t appear to be a play by the company to get back into that space. Rather, it seems to be a temporary lifeline for local restaurants, not to mention a way to keep drivers who once ran corporate employees around working now that those employees are under stay-at-home orders.

On that note, have a good weekend, and don’t forget to tip your drivers.

Jenn