Delivery Partnerships: Key to Restaurant Recovery Strategies
September 23, 2024
Note: We reveal investment insights through the quotes of top business leaders.
Key Takeaways
- Delivery partnerships are crucial for restaurant recovery, driving increased order counts and customer retention across various demographics.
- Technology enhances delivery efficiency and customer experience, with companies investing in rapid developments to meet consumer demands for speed and quality.
- Strong financial performance is linked to effective delivery partnerships, as seen in McDonald's and Starbucks, which focus on operational efficiencies and relationship building.
- The competitive landscape requires restaurants to be strategic in partnerships, balancing growth with the risk of competition from aggregators.
- Future success hinges on improved operational strategies, staffing, and training to meet the growing demand for delivery services.
Current trends and customer preferences in delivery
Current trends indicate a strong preference for delivery services, with companies like Domino's and Uber reporting growth in order counts and delivery revenue. Key factors include enhanced customer retention, increased basket sizes, and the importance of product quality and delivery experience, all contributing to a favorable landscape for delivery partnerships.
"We grew order counts in every single part of our business, in our delivery business, in our carryout business against every single socioeconomic demographic as well." --- (DPZ, conference, 2024/05/30)
"It all results in either retention being up globally in every single mega region just in June on a year-on-year basis, so right now we believe there’s a very, very long runway for growth.The more consumers use our products in a multi-product way, whether it’s a mobility user using delivery or a delivery user buying from grocery and retail, the more they transact on the platform, multi-product consumers spend three times more than single product consumers, and for us, the more products we add to the marketplace, the more this benefit adds onto it, and then on top of that, you add our membership product as well, which is now over 50% of bookings." --- (UBER, earning call, 2024/Q2)
"that we had an advantage given just our Dasher density and the network that we built up, where the thesis would go, if you can build the largest network in the highest frequency category, in the category that has the most nodes for last-mile delivery, i.e., there are more restaurants than there are any other category of local retail, then you would have a cost advantage." --- (DASH, earning call, 2024/Q1)
"It's the quality of the product in the box when it gets to the customer, all of it put together, which includes the preparation in the store as well as the delivery experience to get it in the customer's hands." --- (DPZ, conference, 2024/06/10)
"Delivery revenue increased primarily attributable to an increase in Delivery Gross Bookings of 18%, driven by an increase in delivery orders and higher basket sizes." --- (UBER, sec filing, 2024/Q1)
Technology's role in enhancing delivery partnerships
Technology plays a crucial role in enhancing delivery partnerships by improving customer experiences and operational efficiency. Companies like Amazon and Google emphasize the importance of delivery speed, safety, and outstanding service, driving efficiencies while focusing on customer satisfaction and partner collaboration.
"We seek to invest efficiently in numerous areas of technology and infrastructure so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale." --- (AMZN, sec filing, 2024/Q1)
"If you take a use case like improving the customer service experience, it is part of it which is driving efficiencies, and you can look at it from a cost standpoint, but you could also be overall improving the experience, improving conversion, driving the funnel better." --- (GOOG, earning call, 2024/Q2)
"Delivery speed really matters to customers, and we've continued to get faster while improving our safety performance." --- (AMZN, earning call, 2024/Q1)
"And when you talk to almost any customer of any type, whether it's a start up, whether it's a large enterprise, whether it's a government customer, across the board, the most important things that they are looking for is outstanding operational excellence and world class security and then a partner who's going to be very focused on them and be very partner focused to help them get through problems." --- (AMZN, conference, 2024/09/09)
"We remain focused on driving better experiences for our customers while also delivering efficiency improvements." --- (AMZN, earning call, 2024/Q1)
Financial performance linked to delivery partnerships
Financial performance is increasingly linked to delivery partnerships, as companies like McDonald's and Starbucks emphasize operational efficiencies and customer experience improvements. McDonald's highlights long-term partnerships that optimize operations, while Starbucks focuses on building relationships that yield financial benefits, underscoring the strategic importance of these collaborations.
"This won't happen overnight, but it will happen. The unique competitive advantages of McDonald's afford us many levers to pull, and we have the financial wherewithal to sustain our investments as needed. One area of strength is our restaurant teams who continue to execute with excellence to serve our customers and local communities, creating a better customer experience has delivered operational improvements, improved service times and increase customer satisfaction across most of our major markets." --- (MCD, earning call, 2024/Q2)
"And it's going to take some time to strengthen those relationships, but I'm pretty confident, very confident actually that as we continue to focus on relationships, particularly with our partners and our customers, it will continue to differentiate us as we grow." --- (SBUX, conference, 2024/06/05)
"As David put it, we want to deliver more, better, faster, cheaper and safer technology to our franchise partners." --- (YUM, earning call, 2024/Q1)
"The Company also has long-term strategic partnerships with delivery providers that continue to benefit the Company, customers and franchisees by optimizing operational efficiencies and creating a seamless customer experience." --- (MCD, sec filing, 2024/Q1)
"but in a way that's accretive to the business. So it's really a big unlock for us, not only in creating a more personalized experience for the customer, but also creating more tangible financial benefits for us as a business." --- (SBUX, conference, 2024/06/05)
Competitive landscape of delivery partnerships
The competitive landscape of delivery partnerships is marked by fierce competition, particularly in markets like Taiwan, where platforms still hold a small share. Companies like Domino's are cautious about partnering with aggregators due to potential competition, while Uber reports strong growth and margin expansion, indicating a dynamic and evolving market.
"Taiwan is a fiercely competitive market, where online food delivery platforms today still represent just a small part of the food delivery landscape." --- (UBER, press release, 2024/05/13)
"I had a question on the operations and the acceleration, delivery volumes, seemingly just starting and so far you're able to drive the speed improvements, but as the volumes ramp further, I guess it's more of these individual orders on 3P and perhaps more surges of demand at certain times." --- (DPZ, earning call, 2024/Q1)
"focused on protecting profitability to remain competitive. Those efforts led to a comprehensive store level labor optimization effort, which contributed to an impressive 520 basis point expansion of restaurant level margins from the first quarter, despite a double-digit increase in restaurant level labor rates in California stores.Same-store sales growth remained suppressed, but we're encouraged by the improvement from first quarter trends despite a more challenged regional backdrop." --- (YUM, earning call, 2024/Q2)
"Once again, 40%, so very strong top line there. And despite that very strong growth, we were still able to expand our Delivery EBITDA margins by about 20% sequentially, and that was partly contributed to by improvement in the profitability of the grocery business." --- (UBER, earning call, 2024/Q1)
"When you look back prior to COVID, we intentionally didn't want to help grow these aggregators because they were going to be competitive to us." --- (DPZ, conference, 2024/05/30)
Future outlook for delivery partnerships in restaurants
The future of delivery partnerships in restaurants looks promising, with companies like Uber and Grubhub enhancing accessibility and technology. Improved operational strategies, such as staffing and training, are crucial for success, as seen in Domino's growth and Chipotle's focus on execution.
""Through this partnership, Instacart customers now have access to both the best online grocery selection in the U.S. and restaurant delivery, making it even easier for them to conveniently tackle all their food needs from a single app," said Fidji Simo, CEO and Chair of Instacart." --- (UBER, press release, 2024/05/07)
"Dedicated to connecting diners with the food they love from their favorite local restaurants, Grubhub elevates food ordering through innovative restaurant technology, easy-to-use platforms, and an improved delivery experience." --- (AMZN, press release, 2024/05/30)
"And in Q1, we actually delivered more pizzas than we did in Q1 of last year at improved delivery times." --- (DPZ, earning call, 2024/Q1)
"In order to deliver exceptional throughput, restaurants need to be fully staffed and properly deployed. Our crew needs to complete all food prep on time and they need to be well trained execute the four pillars." --- (CMG, earning call, 2024/Q2)
"For Uber, powering restaurant delivery in the Instacart app is another way to help drive more orders to Uber Eats restaurant partners." --- (UBER, press release, 2024/05/07)
Impact of delivery partnerships on restaurant operations
Delivery partnerships significantly enhance restaurant operations by leveraging technology and expertise. Yum! Brands emphasizes using partnerships to drive operational efficiency and consumer satisfaction, while Domino's highlights its delivery service leadership. McDonald's focuses on software innovations to streamline operations, ultimately improving customer experiences.
"From other sales driver standpoint, on that score, I feel really good about where we're at in the U.S. As I look at most importantly, how we're running our restaurants, our franchisees in partnership with our U.S. team are doing a really nice job of running strong restaurant operations." --- (MCD, earning call, 2024/Q1)
"Yum! Brands has been both acquiring and creating technologies, and in select cases working with leading partners, powered by its global scale that enable and accelerate easy experiences, operations and insights for consumers and team members while driving profitable growth for franchisees." --- (YUM, press release, 2024/07/31)
"We offer a localized pizza-focused menu that resonates with our customers. We bring unique expertise and a strong leadership position in delivery services." --- (DPZ, press release, 2024/04/08)
"The Company will deploy new, universal software that all McDonald’s restaurants will run on, enabling restaurants to roll out innovation even faster, with less complexity and more stability; and customers will enjoy a more familiar, consistent experience." --- (MCD, sec filing, 2024/Q2)
"As an example of Dragontail's impact, in the first 1,000 Pizza Hut US stores to implement the technology, we have measured a 7% increase in overall consumer satisfaction due to hotter and fresher pizzas leading to improved consumer frequency. Finally, we are in the process of scaling SuperApp, our restaurant General Manager support app at Pizza Hut US, and we plan to achieve the 10,000 store milestone across KFC globally by year-end. Lastly, I'll discuss our easy insights pillar." --- (YUM, earning call, 2024/Q2)