Localogy 20/20: Eating Out Meets Curbside Delivery Meets Delivery

In this panel session, we discuss the world of restaurant and food delivery. We had Peter Curzon of Yelp, Jon Sewell who has started a co-operative restaurant delivery service, and Carl Osbourne who runs Deliver the Dish, which provides “support to restaurants to become better at delivery and off-premise.” Carl used to lead operations at a large ghost kitchen company. Peter has been doing business development at Yelp for several years. And in addition to running his delivery co-op, Jon owns a calzone restaurant in Iowa City, Iowa.

We talk about the restaurant world from the perspective of the independent restaurant space. Carl talked about forecasts that the U.S. will lose 25% to 50% of restaurants and noted that a lot of this was already happening before the pandemic.

Restauranteurs face a big question. Can they move at the pace of change that is required of them today? Carl suggests the independent restaurants may not be able to adapt quickly enough to the changes. Peter chimed in with data showing that 26,000 restaurants have closed, with about 60% of these being permanent closures. Peter talked about the impact of summer and outdoor dining and how that has helped some businesses survive. But that with winter coming, all restaurants are going to have to turn back to pick-up and delivery as their means of survival. 

COVID-led Restaurants Decimation

Jon, whose business is in a college town, believes the single biggest threat to the restaurant business is the inability to forecast volumes. Jon also believes the independent restaurant owner can’t deal with the massive number of tech solutions that are available. Jon’s main point that independent restaurants could live with the high commission rates the large delivery companies charged when just 25% of their business was delivery. As the pandemic has shifted that percentage well into the 75% range, the 30% commissions could kill a restaurant. 

What Peter has seen in the data is a serious growth in food pick-up as an alternative to delivery. Peter said they used to see a 60/40 split delivery/pick-up and now, since COVID, that looks much more like 40/60 – delivery/pick-up. Carl’s view is that restaurants are having to adopt alternative revenue streams. They must look beyond the profit margins of in-restaurant dining. Carl’s view is that the savvy restaurant owner has to build a relationship with their customers. And they must use the platforms to acquire customers but then use their own technology to connect more deeply with customers.

Be Flexible or Die

Carl thinks the notion of restaurants offering groceries is a great example of being flexible. The concept of the restaurant being a retailer will live on well past the pandemic. This might come in the form of meal kits and other convenience items. 

I asked Jon how hard it would be for a restaurant to integrate grocery items into their model. Whereas Carl thinks it is pretty easy, Jon thinks it is more challenging given all the complexities of restrictions and regulations. Jon also talked about how he changed his hole model and is closing his in-storing dining in favor of only pick-up and delivery.

Carl believes people will return to the dining rooms but only on occasion instead of by habit. He also thinks, on the one hand, the cream of the crop will rise in the face of these challenges, and on the other hand, ghost kitchens will flourish in the coming months and years.

Carl says that when you order food for delivery there are three important factors – quality, speed, and accuracy. And if the food can be made closer to your home, then a ghost kitchen can deliver more successfully on the three key elements. Carl also sees the emergence of the virtual restaurant or food brand. By turning to virtual brands and ghost kitchens, the consumers can better resource exactly what they want – e.g. cauliflower pizza. 

Jon doesn’t think the independent restaurant owner has any interest in the notion of ghost kitchens. Jon points to the UAE and India and how ghost kitchens in those markets have killed the independent restaurant. Jon’s big concern is that the delivery aggregators are using their proprietary data – e.g., who likes cauliflower pizza – to bypass the independent restaurant owner. 

The Two Year View

We close out the session by trying to look to the future – two years out. Peter thinks there will be a permanent shift toward pick-up and delivery. He thinks the grocery concept will probably stick around. For Peter, the big question is that people will continue to need to eat and we will need to supplement what we cook at home with pick-up and delivery. Carl pointed to the fact that the U.S. had the second most restaurants per capita, only second to Japan. So the shake-out is probably necessary.

Carl believes the restaurants need to find a way to work more collaboratively to survive and deliver a better experience. He is quite a believer in the ghost kitchen concept. Carl thinks we will see more personalization and specialization in the coming years. Jon closed the session out by pointing to the cooperative delivery service that he’s built-in Iowa City. Jon is particularly bullish on restaurants working together – leveraging the same technologies – so they can earn better profit margins.  

Eating Out Meets Curbside Delivery Meets Delivery
Every report over the last six months points to a radical change in the restaurant landscape. Some studies indicate that the highest end and the lowest end of the spectrum will do fine and the middle sector of restaurants will fail? From eating inside to curbside pick-up to delivery there are tectonic shifts underway in the composition and structure of the restaurant industry. Can the learnings for retail transformation help power the needs of restaurants going forward? Delivery apps, ordering ahead and shared kitchens were already on the rise. With physical distancing in place and consumers eating more at home, what will the long-term impacts for restaurants be.

Jon Sewell, Chomp
Peter Curzon, YELP
Carl Orsbourn, Deliver the Dish
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