The next big competition in online delivery might be for exclusivity with large, national chains.
— Kristen Hawley
As the delivery market grows and third-party delivery services take off, national fast food chains are increasingly looking to the existing delivery players to perform delivery operations.
According to a 2016 study by McKinsey worldwide food delivery is a nearly $100 billion market. In the U.S., according to a 2017 Morgan Stanley report, just over half of all delivery orders are placed via digital channels, with 18 percent placed through a third-party delivery service’s website or app. (The other half of digital orders come via a restaurant’s website or app, though those are often powered by one of the third-party companies.)
White Castle is the latest fast food chain to offer delivery through a partnership with Grubhub, announced today. About 80 of White Castle’s 450 restaurants offer delivery now, with another 45 scheduled to come by the end of the month.
“We’re generally very excited about all the restaurants on our marketplace and when we’re able to find a beloved brand like White Castle that’s been around for a long time, still family-owned and operated, we love that story, and we love them being on the platform,” Grubhub chief operating officer, Stan Chia, told Skift Table.
“Grubhub has been as passionate about a great launch as we have. The team has also been great to work with — people who care about their mission as much as we care about ours,” wrote White Castle vice president Jamie Richardson in an email. “Their coverage is also a great fit for our footprint, and the quality of their drivers is exceptional.”
The number of fast food restaurants offering delivery is growing quickly. Uber Eats’ partnership with McDonald’s alone spans a reported 10,000 locations, growing from just 200 in late 2016. In December, San Francisco-based DoorDash announced an exclusive partnership with Wendy’s that includes 1,400 stores with more planned to come. It’s the largest chain partnership for the four-year-old delivery service, which currently operates in over 50 North American markets. These arrangements, and others like them, underscore the popularity and importance of digital delivery services to a restaurant’s bottom line.
Delivering to a National Audience
Most delivery services partner with national chains (Grubhub works with over 100, according to Chia). Some, like McDonald’s and Uber Eats, are exclusive arrangements; other restaurants work with multiple providers. Generally, nothing limits a restaurant’s ability to use more than one service.
Practically, accepting orders through several different channels — which traditionally come in via a separate tablet dedicated to the service and must be re-entered into the point-of-sale (POS) system — can complicate operations inside a restaurant, hence a move toward a single delivery partner.
“I think there’s going to be more exclusives or de facto exclusives than the industry may believe today,” DoorDash chief operating officer Christopher Payne told Skift Table in an interview last year. Quality is often a restaurant’s number-one priority, he explained, and engaging one company for delivery can help control the process. “A large company wants to know that you’re delivering across their entire system at the level they want. If something goes wrong, they want you to systemically make it right.”
That attention to systemic operations and standardized process are what makes delivery companies’ work with chains different. Meaning, when a company like Grubhub works to integrate into operations at While Castle, for example, it’s able to come up with a process that works at scale. In this case, Chia took his product and technology teams into a Chicago White Castle, featuring a new store layout, to understand how to best integrate into the chain’s process in their new space. “We want to build solutions that will consider everything they’re investing in,” he said.
Uber Eats does this too: “McDonald’s has spent a lot of time understanding best practices for restaurant operation in general,” Uber Eats product manager Chetan Narain told Skift Table last fall. “A lot of the changes we’ve made for McDonald’s are actually things that are good for all restaurants on the platform.” He cited the inclusion of nutritional information for individual menu items and building an optimized workflow for all restaurants that produce food quickly as examples.
Optimizing for physical operations is one priority for delivery companies; building comprehensive technical solutions is another. Grubhub integrates directly with several popular POS systems, including NCR’s Aloha, which the company announced yesterday. This means that orders placed via Grubhub are fed directly into the restaurant’s existing order system, with no need to re-enter the information. This is both time-saving and controls quality, erasing potential human error as the orders are input from one system to another.
Both DoorDash and Uber Eats have acknowledged POS integration is both technically complicated and important to operators, but don’t offer integrations — yet. “It’ll be a multi-year journey to get that done and done well,” said Payne.
Delivery services seem to be assuming a there’s-room-for-everyone strategy. During Grubhub’s most recent earnings call, founder and CEO Matt Maloney said, “This is not a zero sum situation. There’s significant room for us to grow as well as there is to everyone.”
This happens on a global scale. At a December Q&A session organized by London’s Courrier Media, Toussaint Wattinne, general manager of Uber Eats London, said, “Our approach is very much: test us, test others, see what works for you and tell us how we can do better,” adding that Uber Eats tends to see exclusive arrangements when a specific element of the partnership — cost, streamlining operations, or go deeper into technology integrations.
Still, the emergence of key players in the delivery space reflects the evolving competitive landscape, and chains’ excitement about offering delivery means a whole lot of potential business for these companies.
Additional reporting by Patrick Whyte in London.