Close Ad

The Spoon

Daily news and analysis about the food tech revolution

in-house delivery

Jimmy John’s Deal With DoorDash Boosts the In-House Delivery Concept

In a major about-face, sandwich chain Jimmy John’s this week announced a nationwide partnership with DoorDash to use the latter’s new Self-Delivery service. 

Through that service, Jimmy John’s will use DoorDash’s marketplace to process orders and reach new customers while still maintaining its own driver fleet and control of the last mile of delivery. The nationwide expansion follows a six-month pilot of 100 restaurants. DoorDash has also built a direct integration with Jimmy John’s POS system, so that delivery and pickup orders go straight to the main system rather than to an external tablet.

At one point, Jimmy John’s was famous for its refusal to use third-party delivery services, flatly stating in 2019, “We will never use third party delivery services.”

Two big things have happened since that statement, though: Inspire Brands acquired Jimmy John’s and the COVID-19 pandemic hit, decimating the restaurant experience as we know it.

Inspire, which also owns Arby’s, Sonic, and Buffalo Wild Wings, completed its acquisition of Jimmy John’s in September of 2019. At the time, Jimmy John’s successful in-house delivery program was seen as an attractive asset few other brands could offer. (Domino’s is the other notable example here.)

Then along came COVID-19, and even quick-service brands — which have fared much better overall than other restaurant formats — were forced to shift the majority of their focus to improving the off-premises experience, including delivery. 

Inspire Brands has long had an existing relationship with DoorDash, so given the state of the restaurant biz, it’s not terribly surprising Jimmy John’s would eventually get linked to the third-party delivery service. Reaching new customers via digital channels is a must nowadays, and Inspire acknowledged as much this week in its press release: “As part of a broader brand evolution, Jimmy John’s has been focused on continuing to reach new guests and refining its channels and operations to meet customers where they are while maintaining the unique Jimmy John’s delivery experience.”

The twist, of course, is the Self-Delivery program. Through it, Jimmy John’s can gain access to more customers via digital channels while still keeping high commission fees down by using its own drivers. Keeping the fleet in-house also gives the brand more control over the quality of its orders as they travel from kitchen to customer.

Jimmy John’s is in a unique position in that it has kept an in-house delivery fleet for years and can afford to continue that, even as the fallout from the pandemic continues. Other brands can’t necessarily afford that luxury, so it isn’t certain this deal will motivate other chains to adopt similar delivery strategies. A more common route to hybrid delivery will likely be restaurants processing orders and payments through their own digital properties and letting a third party handle the last mile.   

In-House Delivery Needs to Disrupt Delivery

Some of the talk at last week’s Smart Kitchen Summit revolved around two newish concepts that are especially compelling when it comes to thinking about restaurants: in-house delivery and disrupting third-party delivery. Together, the two could substantially shift the the off-premises meal journey of the future.

Technically, in-house delivery — also called “native delivery” or “direct delivery” — is a decades old practice championed by Domino’s, Jimmy John’s, and other restaurants that have always used their own staff to ferry orders to customers’ doorsteps. But ever since customer demand for delivery went through the roof and then some, most restaurants have found it more economically feasible to offload delivery operations to third-party services like DoorDash and Uber Eats. 

As we cover ad nauseam around here, third-party delivery comes with its own lengthy catalog of grievances, and many restaurants don’t actually make money from those orders. On top of that, they lose control of customer relationships and oftentimes their own branding. 

In-house delivery 2.0, then, is all about restaurants bringing some of that control back under their own rooftops. One SKS panelist mentioned fast-casual chain Panera as a pathbreaker in this area, as the chain still uses its own drivers for many of its orders and only offloads the technical logistics of processing an order to third parties. Bloomin’ Brands, parent company of Outback Steakhouse and Carrabba’s, also handles many of its delivery orders in-house, and Panda Express recently launched its own program that handles the entire delivery journey, from order processing to food transport.

Simultaneously happening is the rise of services like ShiftPixy, which use their technology to power custom-branded websites for restaurants that can process ordering and payments. ShiftPixy also works with restaurants to provide them with drivers, erasing third-party delivery from the process.

All of these approaches to in-house delivery were mentioned during SKS. In a discussion about the rise of ghost kitchens and virtual restaurants, one set of panelists agreed that in the future we will see a wider range of restaurants — major chains and independent mom-and-pop stores — gravitate to in-house delivery as a way of controlling their customer relationships and branding, to say nothing of dodging predatory commission fees from third-party services.

The mention of mom-and-pop shops is important to note. Right now, most can’t afford to build out their own mobile ordering and payments system and pay employees to deliver the food. That territory currently belongs to the Paneras and Panda Expresses of the world, which brings me to our second point: disrupting third-party delivery.

At SKS, more than one person I spoke to predicted that the act of unseating third-party delivery apps’ dominance over restaurants won’t come from imposing more rules and regulations, but from someone bringing a better, cheaper solution to the table. As more restaurant chains with deep pockets take back more of their delivery stack, those solutions might very well surface in the process. 

This is the web version of our weekly newsletter. Subscribe to get all the best restaurant tech news delivered direct to your inbox.

Del Taco Is Launching a Drive-Thru-Only Concept

Following in the footsteps of KFC, Chipotle, Burger King, and other chains, Del Taco is doubling-down on the drive-thru as an important source of sales in the future. The Lake Forest, Calif.-based chain announced on its recent Q3 earnings call it will build a drive-thru-only prototype that can be placed at Del Taco locations with a smaller physical footprint. CEO John Cappasola said during the call this prototype will include “a modernized design, improved functionality, and other operational enhancements,” though he didn’t get more specific than that.

If this story sounds somewhat familiar, it’s because other chains have made similar announcements in the recent past. Most notable among them is Burger King, who several weeks ago announced its own drive-thru-centric design prototype meant to take up less physical space and serve more drive-thru orders in a shorter amount of time. 

Drive-thru has been the most important sales channel for QSRs during 2020’s lockdowns and continued uncertainty over the dining room. However, QSR Magazine’s recent 2020 Drive-Thru Study found that drive-thru times are nearly half a minute slower than they were last year, so it’s not a surprise more chains are redoubling their efforts to make the experience faster and more efficient. With winter fast approaching, outdoor dining is about to get way less appealing to consumers in many regions. Chains will need every order they can get from drive-thru, curbside, and other off-premises channels to make up for lost sales in the dining room/patio over the next several months.

Restaurant Tech ‘Round the Web

A wider slowdown could erase up to 2 million jobs restaurant and retail, according to new research from Gusto cited by Restaurant Dive. The losses could total roughly $190 billion.

Following openings this year of three off-premises stores in Chicago, P.F. Chang’s will expand its to-go-concept to 27 locations by 2021. The company is also testing an in-house delivery service at 10 of its locations in the U.S.

As we reported this week, Burger King is piloting reusable cups and sandwich containers in New York, Portland and Tokyo next year. The program is being done in partnership with TerraCycle’s Loop, which is also doing the McDonald’s reusable cup trial in the U.K.

Panera’s Hybrid Approach to Delivery Could Be a New Standard for Restaurants

Panera is one of those increasingly rare restaurant chains that’s not a pizza company and has still managed to successfully keep its delivery program an entirely in-house operation — until now, that is. Yesterday, the St. Louis, MO-based bakery and sandwich chain announced its first-ever partnerships with third-party delivery services.

Customers will now be able to order Panera goods from DoorDash, Grubhub, and Uber Eats along with the company’s own website and apps. However, these third-party delivery service partnerships are for online ordering only; Panera will still use its own fleet of drivers to handle the actual delivering of the food from restaurant to doorstep.

Panera has dubbed this the “bring your own courier” model, and the approach appears to be about maintaining quality and brand integrity throughout the whole of the delivery process — an issue more and more restaurants, large chains in particular, are now addressing.

Setting aside the ongoing concerns around commission fees a moment, one of the biggest benefits of working with third-party delivery services is that restaurants get easy access to a highly streamlined online ordering platform. Developing an in-house system that holds menus, processes orders and payments, and gives users status updates on their orders is an expensive, time-consuming undertaking. Third-party delivery services handle this work for the restaurant, and also offer the increasingly popular option of direct-to-POS integration with restaurant systems, where an order from, say, Grubhub, goes directly to the main POS system.

But restaurants get little in the way of branding when they’re listed on Grubhub et al. or, for that matter, where they show up in terms of users’ searches. And they get pretty much zero control over the quality of food and customer service once a meal leaves the restaurant in the hands of a third-party driver. For example, they can’t control that one out of four drivers apparently sample your food en route to your home. Sure, the risk of that or of an order being late/cold/incorrect doesn’t disappear when you bring delivery in house, but at least Panera has more control over who to hold accountable in those situations.

Continuing to use its own drivers as well as maintain an in-house ordering program also lets Panera exercise more control over branding and customer service while still giving the company access to a wider user base via Grubhub, Uber Eats, and DoorDash.

The nature of this new partnership also makes Panera an early adopter to what could become a major trend among national restaurant chains. Just yesterday, we looked at Toast’s “Restaurant Success in 2019” report, which suggests that having both a robust in-house online order system and a presence with all major third-party delivery platforms “could be a boon to your business” when it comes to major multi-unit chains.

Most brands, however, can’t or don’t want to incur the economic burden of maintaining a driver fleet, which is one reason we’re also seeing reverse versions of this hybrid strategy. Denver, CO fast-casual chain Teriyaki Madness is a good example: the company still works with third-party delivery services, using their drivers, but is trying to originate more orders through its own in-house app. A company called Shift-Pixy, meanwhile, acts as a middleman between restaurant and delivery service and provides its own drivers to drop the food.

Those approaches may help restaurants with brand credibility, but Panera’s approach is so far the only major one to both take advantage of the continued popularity of third-party delivery while still owning that last mile. “We believe this partnership model helps differentiate us from our competitors and will take our already successful delivery business to new heights,” Dan Wegiel, Panera’s EVP Chief Growth and Strategy Officer said in a statement.

This hybrid approach could indeed prove fruitful for Panera, though it would have to be yielding some pretty big returns to influence other chains to go as far as investing in their own drivers in order to adopt similar strategies.

Regardless of whether that happens, the industry will see plenty more of these hybrid approaches to delivery along with many more questions who should really own that last mile.