Struggling restaurant chains are turning to a new strategy to try and appeal to customers: delivery.
In the era of GrubHub and Seamless, convenience is increasingly important in the restaurant business.
Americans order 1.7 billion meals online every year and one-fourth of people claim to have ordered a meal via delivery in the past three months, according to the NPD Group.
Meanwhile, restaurants are struggling to convince customers to eat out. In the first quarter of 2017, industry-wide same-store sales dropped 1.1%, while traffic fell 3.4%, according to Nation’s Restaurant News. In the last year, companies operating chains such as Logan’s Roadhouse and Souplantation have filed for bankruptcy. Bloomberg reported Thursday that Ignite Restaurant Group — which runs Joe’s Crab Shack and Brick House Tavern — could do the same as early as next week.
As traffic drops, restaurant chains are increasingly looking to delivery as a solution.
McDonald’s is testing delivery through UberEats in multiple cities across the US, with the most recent trial run in Pittsburgh announced last week. On Monday, Wendy’s launched delivery at 135 locations in Ohio. And, Panera Bread is rolling out delivery at 35 to 40% of its locations this year, the company announced in January.
Delivery is especially crucial for casual dining, or sit-down, restaurant chains, which have been hit hardest by the restaurant recession.
“The only part of casual dining that’s growing right now is the off premise side,” said Bonnie Riggs, foodservice industry analyst for NPD, recently told Nation’s Restaurant News.
Cheesecake Factory announced earlier this year it is expanding delivery to half of its 194 US locations through DoorDash, a third party delivery service. T.G.I. Fridays, Chilli’s, and Maggiano’s are all now on Grubhub, and Buffalo Wild Wings and Red Robin are testing the service. Outback Steakhouse is using both third-party services and building its own delivery service.
While delivery is clearly a compelling option to offer, it isn’t a simple service for restaurants to add. Customers often spend less when ordering delivery, especially at casual dining chains that rely on alcohol orders to drive sales. In-house delivery means added complexities, paying drivers, and additional insurance costs. Using a third-party means losing control over the food’s quality.
Taco Bell’s CEO Brian Niccol told Business Insider that delivery is customers’ No. 1 demand at the chain. Despite several tests, the Mexican fast-food chain hasn’t figured out a way to make the service work.
“The third party folks, the aggregators — they’re just not fast enough,” Niccol said.
However, as customers’ demand for convenience grows, chains are increasingly going to have to invest in delivery — or be beaten by restaurants that have.
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