MCA editor James Wallin looks at how the delivery segment and its relationship with operators has evolved and how the growth of remote kitchens and virtual brands is impacting on the wider market.
The news – still unconfirmed but certainly not denied – that Uber is in talks to acquire Deliveroo seems to be a sign of disruption within the disruptors. The sums involved, with a negotiations understood to be starting at the $2bn mark, shows what sort of price can be put be put on market share. It also shows just how far this industry has come from the launch of Deliveroo in 2013.
In an interview with MCA a year later, Shu described the early reactions from restaurant chains: “Owners were under the impression that we would need to call or fax the restaurant, which would greatly impact their in-house operations. Other restaurants associated delivery with extremely low-end food, which also made sense. Some owners indicated that their restaurant would be too busy. Others were convinced that their food would not travel well, which is also an understandable concern. With all of this in mind, we set out to convince the restaurant owners otherwise.”
It’s not just the reference to a fax that dates that scenario. However, while restaurant owners are now far more familiar with the process, the battle to convince them that delivery is a friend not a foe, is still being waged.
Over the past five years, Deliveroo’s model has evolved – building on the layers of support it offers businesses but also innovating within the segment – chiefly within ‘dark kitchens’ and the push to create virtual brands.
The term dark kitchens has always irked me - it seems an unnecessary affectation aimed at making a shipping container sound sexy. However, the impact on the sector of remote kitchens, or whatever you want to call them, has been profound.
Perhaps ‘dark’ is the right adjective because for many restaurant operators, delivery sales seem to have been a dirty secret for some time now. With traditional avenues for growth increasingly strained, delivery has been a very useful source of momentum, but few operators seem totally at ease talking about it, even now.
I suppose this is unsurprising given the dichotomy that appears to lie at the heart of this relationship. Restaurateurs have spent their professional lives trying to persuade people to leave the comfort of their own dining rooms to eat out. Now they are having to put equal effort into giving people more reason to stay in. The attitude of most restaurant operators seems to have been that involvement in delivery is essential and that there is a genuine demand for quality food delivered to the home, which is not so much a substitute for eating out as for cooking.
With remote kitchens, the relationship is even more complicated. Many eating-out brands set up remote operations only to close them within months. It will be interesting to see how Wagamama – the latest high-profile tenant of Deliveroo Editions – will fare. It seems like a good fit. Maybe better burgers and other protein-based concepts just don’t fit the model.
The rise of the ‘virtual restaurant’ has long been tipped as the next stage of the delivery revolution but all of a sudden it seems to have become an established trend. As we reveal in this month’s special feature, there are expected to be 400 virtual restaurant brands on Deliveroo alone by the end of the month.
There is, however, no shortage of established eating-out brands creating their own online avatar, including The Restaurant Group and Casual Dining Group. These mostly seem to be brands created from an existing menu item/items marketed in a new skin. With surplus space in kitchens and the ability to turn the flow on and off depending on restaurant trade, it seems a complementary fit. It also bypasses one of the concerns of some restaurant operators – the loss of control over their brand in the final mile.
It’s difficult to gauge how successful these experiments have been. However, at least one operator has already begun eyeing opportunities for a physical space for a brand that started out online.
The key seems to be to ensure that quality and customer service remain top priorities. A generation is emerging that is very likely to experience eating out brands and their offshoots for the first time through delivery. If they cannot be convinced of the quality of the offer why would they want to repeat the experience in a restaurant?
Similarly, casual dining has to learn lessons. It’s now difficult to find anyone who did not apparently foresee over-supply in the market coming to a head, yet the aggressive rollouts that caused this continued long after the warning signs were there. Is there a danger of a glut of virtual brands flooding the delivery market and spreading trade too thin for anyone to make a decent return?
Discussion around delivery understandably centres around restaurants but real opportunity seems to lie in other areas. Delivery in China has advanced to the point where Starbucks is delivering coffee to people’s desks, why couldn’t this happen here?
Meanwhile, the relationship with pubs and delivery has never been as straightforward as with their casual-dining cousins. Many pub operators seem to have dismissed it out of hand, and while the wetled sector is in boom maybe they can afford to. But after dark kitchens and virtual brands, could the next challenge for delivery be an attempt to create a pub experience at home?
Dark kitchens come into the light
The news – still unconfirmed but certainly not denied – that Uber is in talks to acquire Deliveroo, seems to be a sign of disruption within the disruptors. MCA editor James Wallin looks at how the delivery segment and its relationship with operators has evolved and how the growth of remote kitchens has affected notions of what a restaurant brand is. Meanwhile, Finn Scott-Delany examines the rapid development of a whole industry of virtual restaurant brands and how operators have adapted.