Business – the rise of the restaurant delivery service
Who'd have thought that fashionable restaurants, such as Martin Morales' Andina, Ollie Dabbous's Barnyard and Yianni Papoutsis's MEATliquor, would be packing their food off on a delivery bike as merrily as the corner takeaway? But they are - and the trend looks set to grow.
If you are in any doubt that restaurants are keen to entrust their dainty dishes to be homedelivered, check out the rise-and-rise of Deliveroo.
Unlike lower-end takeaways, which have to maintain a fleet of drivers, Deliveroo - and its growing legion of competitors, such as Just-Eat, Dine-In and Meals.co.uk - enables online ordering from a choice of local independent and chain restaurant partners on its website.
Since receiving Series A funding of £2.75m last June, Deliveroo has burgeoned from delivering to a few thousand customers in a smattering of London locations to serving a regular customer base of 50,000 across 120 neighbourhoods in London, Brighton and, more recently, Manchester.
In fact, its business is set to grow further. In January, the company raised £16.5m ($25m) in Series B funding to drive expansion in the UK and internationally. Leading the cash injection is Accel Partners, along with Index Ventures, Hoxton Ventures and Hummingbird Ventures.
Martin Mignot, principal at Index Ventures, explains the attraction: "Deliveroo is one of the fastest-growing companies in our portfolio. The main reason behind this growth is its winwin- win proposition. Customers get access to good food they couldn't get delivered before, restaurants increase their revenues and hundreds of drivers generate new income."
Before rushing to sign up, though, let's find out a bit more. Founded in 2013 by William Shu and Greg Orlowski, Deliveroo has signed up high-quality independents, such as the aforementioned Barnyard and Andina, as well as renowned chains such as Nandos, Busaba Eathai, Honest Burgers and Gourmet Burger Kitchen. The meals are delivered to customers' homes or offices by one of the 300 or so drivers or cyclists, who are paid by delivery.
In line with its competitors, restaurants are charged on a per delivery percentage basis, but don't pay equipment costs or weekly or monthly retainers.
Quality control
But what about food quality? While today's customers can easily track their food order online, surely there is a danger that restaurant-quality food will be compromised by all that driving around?
Not according to director of sales Justin Landsberger, who says food is delivered within 32 minutes. "Deliveroo operates a 2.2km to
2.5km delivery radius. We never want food, once it's been cooked, travelling for more than eight minutes. We want to ensure the quality of the food remains the same as it would in the restaurant," he says.
There are clearly benefits for all three parties. Customers might miss out on the restaurant buzz, but they get to eat great food without leaving home or racking up a bill with extras.
Restaurants, meanwhile, get to generate more revenue, drive business on slow days, boost their customer base and maximise fixed costs without paying out for marketing, drivers and technology or having to manage logistics. In fact, according to Deliveroo, restaurants can boost their sales by up to 30%.
"We provide restaurants with the ability to tap into a secondary stream of purely incremental revenue, as well as the marketing benefits,"explains Landsberger.
Darren Hassall, sales and marketing manager at Dine-In, which operates in London and Brighton, is also keen to promote the message that online delivery generates business that a restaurant otherwise wouldn't have - and with fewer overheads. Dine-In lists cool mid-end to high-end restaurants, such as 1 Lombard Street and Marco Pierre White Steak & Ale House on its website, delivering within a 1.5-mile (2.41km) radius. And it also has plans to take the service nationwide.
Hassall won't disclose what percentage a restaurant pays for the service. He does say, however, that, for instance, Dine-In can generate an extra 100 orders a night for MEATliquor.
Hassall says Dine-In educates customers about dining options. A lot of its budget goes into pay-per-click digital marketing online as well as regular PR and blogs about new restaurant openings to target the discerning foodie.
And the partnership is flexible. If a restaurant is busy, it can close outside orders for an hour or so and concentrate on in-house diners.
Peter Backman, managing director at foodservice consultancy Horizons, agrees that restaurants can benefit from outsourcing home delivery. Not least because they have a lower start-up cost.
"It also means you can broaden your reach as a business with a company that already knows the home-delivery market. You are effectively buying in expertise and experience," he adds.
Inevitably, however, there are pitfalls. Sometimes a chef can forget to pack an item or drivers get punctures. Most delivery companies have a customer service team to help restaurants settle into the new regime.
"We don't leave them to it," says Hassall. "Our account managers talk to them about staff management and how they can cope with the extra demand."
Quality control
The restaurant can also decide which orders to accept and set a time for collection. The logistics team then liaise with the drivers, so there is no hassle for the restaurants. Dine-In also works with clients to streamline the delivery menu. For instance, it won't deliver dishes with fried eggs.
"It has been trial and error," says Hassall. "Our aim is to open up the type of food that is delivered, so it is not just the usual pizzas, Chinese or Indian cuisines."
By contracting out home delivery, restaurants do have to relinquish some control of the operation, however. Backman points out there is limited advantage to a restaurant brand if the delivery van runs under another name - an issue, incidentally, that faced Waitrose when it linked-up with Ocado.
"Operators must also make sure the service can grow along with their restaurant business, so the reach and scale of the delivery company must be considered," says Backman. "Any restaurant operator going down this route has to also make sure they are happy that the food will be delivered in fantastic condition with a high level of service."
Backman also explains that the service relies on there being a good relationship between the partner and the operator. "Any service that fails to deliver on time or with good quality food will naturally damage the brand values that any restaurant has built up. But for many brands a home-delivery service should prove a useful and viable addition to its business."
Boosting business in lower trading times
Martin Morales' on-trend Peruvian restaurant, Andina, in Shoreditch, London, has seen a 300% increase in business since January, when it started to use a delivery service.
"More and more customers want higherquality food in their homes and offices," says operations manager Raquel De Oliveira. "Deliveroo has certainly helped to create valuable extra business at lower trading times, such as early weekdays and before 7pm. It's a great tool as it's very flexible and can accommodate our business needs."
She concedes, however, that the restaurant needs to be vigilant in managing timings, because an influx of deliveries on a busy night could affect service.
"Restaurant customers should not suffer delays because of deliveries," warns De Oliveira. Andina offers an edited menu for delivery. It has
been careful to research those menu items that can be transported correctly to ensure they arrive at the destination in perfect condition.
"Certain items may bring great revenue, but if they don't travel well, it will be detrimental to your reputation," says De Oliveira.
The other hurdle faced by quality restaurants is persuading chefs to get on-board. "You need to get chefs to understand why you are doing it - they don't usually like take-away and need to see how valuable it is for the business," she adds.
Competing with the caterers
Founded in January 2014 and based in London, City Pantry is an online catering marketplace that delivers food to offices from street vendors, pop-ups, chefs, cooks, restaurants, delis and bakeries. And it is a completely new competitor for caterers.
"We are using technology to allow customers to easily order catering from experts who make one or two things really well, rather than having one kitchen preparing everything," says founder Stuart Sunderland.
"We see our competitors as large catering firms that provide a wide range of food types and anyone that provides catering en mass, for example Pret, Eat and M&S," he adds.
Essentially, it generates business for small independent start-ups that would otherwise struggle to provide catering for big businesses. Equally, it keeps business ticking over for street food vendors out of season.
Sunderland, a former City worker, says the company has seen growth of 29% a month, with regular orders for team lunches, breakfasts and so on
from heavyweights such as Google, Spotify and Buzzfeed.
It takes a commission from the vendor, not the company. "We have fed more than 100,000 people in the last year since we launched and
that number is going up quickly," says Sunderland.
Delivery from the Diner
The Diner has seven restaurants around London, as far-flung as Gloucester Road and Dalston. The US-style concept, serving dishes such as burgers and ribs, started using Deliveroo in August 2013.
"We had been on the look-out for a delivery partner for some time - we had noticed collection orders increasing and more people were asking for it," says chief operations officer Chris Todd.
He says the benefits have been increased revenue, increased presence in London and a wider marketing reach. "Deliveries have increased gross revenues by about 10% in all delivery sites.
Our target is for gross annual delivery turnover to hit one million in 2015/16," says Todd.
The menu is the same as in-house, but the restaurant won't deliver certain items that don't travel well, such as eggs.
"We anticipated most of the challenges and were prepared," says Todd. "Packaging, menu, labour and presentation were all thought out strategically before the launch. Shakes used to spill as there are so many speed bumps in London, but now we heat-seal all shakes in bags."
All ordered food is prepared at the nearest outlet and Todd says there are no plans to move production to a central processing unit, citing that it wouldn't fit the concept's model.
Nevertheless, Todd reckons deliveries are here to stay: "We see deliveries as something that will become standard in the fast-casual sector as the technology improves," he says. "Customers will become more discerning and demanding as standards rise. Packaging, presentation, food
quality and speed will all improve and prices may rise slightly as businesses offset some of the commission."
And as the technology is still evolving, efficiencies can only improve.
