Delivery apps: Are they the future of foodservice and will they change it forever?

As we launched into a new year, leaving a challenging quarter behind us, we once again went to our members to check the barometer of the foodservice industry in Canada. A key focus of the Q1 2019 Restaurant Outlook Survey was the impact of third-party delivery, but we also gained insights into the current state of mind of operators across the nation.

Economic slump continues, but operators still looking to a brighter tomorrow

The financial headaches that defined the end of 2018 continued into Q1, and 39% of survey respondents reported lower same-store sales than in the same quarter last year. Slumping regional economies in Alberta and Newfoundland & Labrador, rising wages, and a winter that overstayed its welcome were all to blame for the lacklustre performance.

However, foodservice operators seem to be an optimistic bunch: 47% of all respondents were either somewhat or very optimistic about the next 12 months, virtually unchanged from the Q4 2018 survey. The top reasons for the rosy outlook were recent renovations, menu innovation, new marketing strategies, and an anticipated rise in tourism come the warmer months.

Of particular interest in our most recent quarterly survey was what effects, if any, third-party delivery apps and websites had on profitability. We also wanted to gauge the level of adoption and overall feelings surrounding order and delivery tech. The results were mixed better than a steakhouse spice rub or a Sazerac in an oak-panelled pub.

Third-party delivery apps are trendy – and divisive

When it came to the bottom line, the consensus was that third-party online ordering for delivery or take-out was profitable. More than half said such offerings were only “slightly” profitable, but nearly a quarter reported them to be “moderately” or “very” profitable.

Total penetration of third-party and own company apps and websites for ordering, take-out, and delivery varied widely depending on the foodservice segment. Adoption was heaviest among quick-service restaurants, with only 15% of respondents reporting they offered no such services. However, 51% of table-service restaurants and 56% of “All Other Foodservice” respondents abstained from participation in the digital ordering revolution.

Amongst those operators who do use third-party delivery services, there were many positive aspects highlighted including ease of use for guests and expanding their customer reach. However, there were several notable issues mentioned, with cost the runaway leader. Commissions on a delivery order may be 30% or more, a number that cuts deep into already thin profit margins.

The top three negative aspects (‘very poor’ or ‘poor’ rating) of third-party delivery services were:

• Commission fees per order (74%)
• Converting third-party delivery to in-restaurant visits for table-service restaurants (53%)
• Quality/service control (44%)

Consumer adoption of third-party delivery is already high and will continue to grow as digital native millennials and Gen Zs continue to supplant baby boomers. The question is, can the foodservice industry adapt and respond to shifting consumer behaviours?

But wait, there’s more!

For detailed insights and data on this topic including a look at in-store cannibalization, plus foodservice operators’ biggest financial pain points and their feelings about the future of foodservice in Canada, get your copy of the 2019 Restaurant Outlook Survey today. It’s a free download for Restaurants Canada members and an integral part of planning your way to success.

The Restaurant Outlook Survey is one of many research reports available exclusively to members of Restaurants Canada on the Member Portal.

Not a member of Restaurants Canada yet?

Visit restaurantscanada.org/community/benefits to learn about membership benefits or call 1-800-387-5649 x 8006 to talk with a Member Service representative.