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The Spoon

Daily news and analysis about the food tech revolution

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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. 

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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.

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.”