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THE DIGITAL RESTAURANT: APRIL 22, 2024

Discover the future of restaurant delivery and technology in our latest episode, where Meredith and I dissect Deliveroo's earnings, the shift towards first-party pickup channels, and how senators are scrutinizing junk fees. If you're in the restaurant business or just a food delivery aficionado, this discussion is packed with insights on consumer behavior, the UK versus US financial transparency, and whether pandemic-driven changes are here to stay. 


Join us as we navigate the dynamic interplay between customer data trends and restaurant technology. We'll explore why operators are craving end-to-end tech solutions and how this demand is transforming customer interactions, from digital kiosks to personalized ordering experiences.




Articles mentioned in the video:

 

 

 

 


Transcript:


Carl: Good morning, Meredith. How are you doing today? 

Meredith: I am so good. How are you today, Carl? 

Carl: I'm good. I'm fresh back from RLC last week over in Arizona. I think a lot of people missed seeing you. 

Meredith: Yeah, I'm sorry not to be there. It's a great opportunity to catch up with everyone and network. But we got a lot going on in Indy.

 

Deliveroo earnings


Carl: It's one of those conferences where they leave plenty of space for people to have conversations. And there were lots of deals being done but first question this week we thought we'd start with A little look further afield, Deliveroo are treading water on Q1 earnings.

And so I was curious for your take on what this perhaps means for what we're going to see over here in the US later this year. 


Meredith: Yeah, they're reporting a little bit earlier than everyone else. So hopefully it gives us a little sign of what's to come. Of course, different consumer in a different market might be behaving differently.

So maybe it means nothing, but here's what I loved most about the Deliveroo earnings report. It's just so much clearer and easier to understand than the ones that we get here in the U. S. And I don't know if that's by law, Carl, in the U. K., or if you guys are much more forthright and transparent in personality.

What do you think? 


Carl: I think it's to do with our effective communication skills, our maturity as a nation. And it's okay. Keep working on it, America, and you'll get there eventually. 


Meredith: I hope so. What I thought was particularly interesting. They said Good Q1 performance with a return to growth and orders.

Deliveroo has seen negative growth in orders last year and this year in Q1, it said orders returned to growth with a 2 percent increase year over year while GTV per order was up 4 percent for total growth of 6 percent in what they call gross transaction value. That's just so much easier to understand than everything that we've been seeing over here from Uber and DoorDash.


Are their orders up flat down? We don't know. It's hard to say. And then, you know how I've been speculating that the only reason that orders are even flat to slow growth here in the U. S. is because DoorDash and Uber have been doing so much promotional activity with the consumer to try to encourage them to keep ordering.


Well, guess what Deliveroo says in their report? They say revenue take rate stable sequentially with continued investments into consumer value proposition. They just spell it right out. They just say, Hey, we're not doing as well on take rate because we're investing in the consumer value proposition, which is discounts and promotions. It's just so much easier to understand. And I would guess that all of those same things that we see Deliveroo forthrightly telling us in their earnings report are the same things that are going on here in the U. S. We just can't see it for all the complexity inside of the DoorDash and Uber earnings reports.


Carl: Why do you think that is? Do you think it's because of the market it serves, or is there just a different reason for why the U. S. marketplaces would be positioning it differently? 


Meredith: Deliveroo doesn't have quite as many markets and products, and so it's a little bit easier to see what's going on.


They just much more cleanly reported out. I mean, they do have the UK and Ireland as one reporting group, and then they have other international markets to see other reporting groups. So it's not without complexity at all. But they break those two things out separately. And so you're able to see the orders are completely flat in the UK and Ireland, whereas they're up 4 percent internationally, right?


You're able to see that very, very cleanly. They do not talk about different lines of business. So you know what I have long called for and which I would really appreciate is what I will call same store sales order growth, right? So did you bring more merchants on and that's why your orders are up or for the merchants that are on there are they ordering more? It'd be really helpful to know. Curious minds, they're asking. 

The other thing that they broke out very cleanly is their average monthly active consumers and that had been in 2023 down is now flat as well. So you can see why they would be investing in that consumer value proposition.


And then the average monthly order frequency has been completely flat. It's just, it's so clean. I love it. It's great data. I wish that DoorDash and Uber would take a page from Deliveroo and tell us a little bit more cleanly exactly what's going on. 

Now, the implication of all of this: every other, major industry who saw a huge bump during COVID, they fall into one of two camps, right?


Either they've got the COVID regression. So this would be something like say video games where there's a massive increase in play hours and funding of video games and creation of video games, publishing of video games during the pandemic for obvious reasons. And for equally obvious reasons, once it was over and people were allowed to go back outside and talk to each other video game usage went down and it's called the COVID regression, regression to the mean of, how consumers actually behave. And the other camp is a dramatic acceleration in adoption of something that sort of stuck with us. And in delivery, you and I have long argued, Carl, that the pandemic was an accelerant to delivery and digital adoption in the restaurant industry. And I think that's true. And therefore you haven't seen a big regression to mean in terms of the consumer going back to old behavior and stopping their usage of delivery, but that growth really has dramatically slowed down once that adoption was pushed.

And I think it would actually be negative if it were not for all the promotional activity that the platforms are engaging in. But we may never know 


Carl: I'm stood here thinking about a text you sent to me in preparation for our podcast here. And you used the term "COVID revenge."

And I was thinking, what on earth is she on about? But I'm figuring out now that you need to look at your auto correct? Because COVID regression is what you were trying to say. 


Meredith: Oh, no. COVID revenge and COVID regression are two totally different things. COVID revenge spend is when you're like, well, I haven't gone out to eat in two years.

And so now I'm going to go out and I'm going to revenge spend. So I'm going to go out and make all these expenditures that it's sort of like pent up demand coming out. They are , in fact, two separate things. 


Carl: We've got two hashtags, COVID regression, COVID revenge. Fair enough. Well, you heard it here first folks.


Nations Restaurant News Tech Report


Meredith: Okay. Question for you. Nations Restaurant News came out with their tech report for 2024. Tell us what's in it. 


Carl: Lots in it, as ever, and the best way is always to bring up some of the nformation. Christy thank you for sending this over to me last week. Really appreciate it. I'm going to start at the back, if I may, Meredith, because I think this is the best way to explain a survey.

First of all, look at the distribution of who they surveyed here. It's just under, I think, about 600 or so people. You'll see, first of all, a good mixture of different restaurant segments here obviously dominated there by full service at 39 percent, but also about 37 percent or so in the space of franchise operations in the two to ten unit zone.


So important just to take that into account because I think there's a few folks that are going to have a view as to whether this is the enterprise operation responding to this. versus the independents. You'll also see owner operators make up about 43 percent of the surveyed group and 20 percent of those on the front line in terms of the management running our restaurants.


So let's now go to the very front of this report. There's 42 pages. I'm not going to go through every one, but I wanted to highlight some of the key ones here. We're going to start off here on page four around what those respondents were saying as the key challenges and you'll see they've broken them down into four different categories.

The green here Is about those that are saying high costs remain a major challenge when it comes to building out technology stacks, not just the high costs, but also the lack of cost transparency and the high monthly fees, not a huge surprise. I suspect because of the enormity of tech solutions that exist in restaurants today.


And I think part of that is because of the question that we touch on in the second book. How many pieces of technology do you really need? Which ones are you fully utilizing? And that perhaps touches then onto the second piece here in terms of lack of knowledge and just feeling overwhelmed with 32 and 20 percent respectively.


And then we lean into some of the other things that we touch on here in the podcast in terms of systems, functionality and the ways in which people integrate their technology with other systems and the different silos of data that you're seeing there. So lack of staff to manage and integrate 29 percent data silos, 17 percent even data silos among the teams themselves within restaurants at 13%.


So you can just continue to see the theme associated to what is making technology so difficult for restaurants to succeed with today. Let's move on to slide 10 here because this one I think is interesting from the standpoint of data. Data confidence on the rise is the headline.


And so the theme on this one was does your organization optimize the customer data that it collects? And the good news is Is that data is certainly being taken more seriously and actually it's increased from a year ago with "definitely" being the answer for 20 percent of the respondents and "probably" for 25%.


So we're seeing some return here, which I think is pretty positive in terms of how people are starting to use customer data. And then when we go to slide 12, when we look at this here, what are your top objectives as you look to improve profitability in the next 12 months?


And of course, what you're seeing here are things like increasing traffic (41%) and increasing check (25%) and then reducing operating costs (38%) . But the piece here in the middle, improve data analysis, 16%, optimize compliance and improve back office efficiency at 7 and 11%. That really stood out to me because in many ways, if you can improve your data analysis that will actually help you not only improve your sales, because you'll be able to be more informed to grow your check and to increase your off premise sales. It's also going to help you in terms of those operating costs and being able to look in the right areas. So, as we've often said, Meredith, you know, data and getting a better grasp on data is very much a capability set that's going to be important for restaurants of all sizes and shapes.


Slide 12 here then talks about which setup. For your technology stack is best for your organization of 53%. So just over half are saying buying end to end solutions. Now, that's another way of people talking about this idea of all in one. But basically, the procurement challenge of technology continues to proliferate.


And I think the idea of buying best of breed solutions and making them work together. comes back to that integration challenge because only 35 percent of the respondents chose that one. Let's go on to what are operators saying they need more from from their tech stack?


Customer data platform, CRM, those things here are seeing, you'll see 13 percent for CDPs, 15 percent for CRM saying they're not at all satisfied with what's out there right now. And then finally which revenue channels do you plan to invest in over the next 12 months?

Look at this here. A lot of emphasis into catering. 50 percent of the respondents said catering is definitely an area, carry out 38%, but only 29 percent are looking at third party delivery and only 15 percent in self operated delivery. So there's certainly a level of attention here going into off premise, but it looks like it's going to be

very much more in the catering space, at least for the 517 that responded to that question.


Meredith: Satisfaction with the integrations. I really think it is the great lie that has been told to restaurants that as long as there's an open API, everything will be fine. You can tell by the challenges that folks are having with data silos, with integrations with their desire to get an all in one type system, that they're starting to come to the realization that just because an open A P I exists doesn't mean the integration is easy. 


Carl: Absolutely. And again, to what we talk about all the time, it's that just connects one system to another. And when you've got a multiple amount of systems talking to each other, in many ways, it just creates more complexity.


Meredith: So much complexity. 

Mhm.


Senators questioning marketplaces over junk fees


Carl: All right. Let's talk question three. We're going to the white house or somewhere up there in the, near the Senate, where senators were questioning DoorDash and Uber Eats over hidden fees. What's this one all about? 


Meredith: So we had three senators writing letters to the marketplaces to ask them about some of their hidden fees. Of course, Joe Biden's been on about junk fees and Americans being fed up with it. It is certainly true that it is so much easier to charge I'm going to go ahead and call them almost imaginary fees, just completely made up fees on top of digital expenditures.


What people really hate about it is as they're making a choice. You know, I'm going to buy this item or that item. I'm going to use this platform to shop versus that platform to shop. They're making that choice based on the price of the item, but they aren't finding out about the fees until they've gone to all the effort of saying, Oh, I want this, I want it this way.


I want it modified. I'm putting it in my cart. They're going all the way through maybe multiple items. And that's the point at which they're finding out about the fees. Most consumers, once they see those fees, should expect that that will happen every single time and should know that for next time, the best way to place an order with a restaurant is to place it direct or to go there in person and that they won't be getting those fees.


But this is a problem, across the Internet, really, and we'll put in the in the notes, there is a excellent piece on YouTube last week that came out about the Internet just breaking because of all of these fees and all of this obfuscation on part of Internet based companies. But it's very difficult to find out exactly how much you're going to pay exactly when you're going to pay it and exactly what it's for.


So, in these letters that senators sent, they were trying to get to the bottom of all of that. Right? What are all these fees? Why are they being charged? And where do they go to? Now, are they going to get a response? I don't know. What is it going to say? If we can learn anything from our experience of trying to read the SEC filings of these companies, probably their letters to senators are not going to be that much better.


I myself had a, like just amazing experience last week on one of the marketplaces where I was reading, all the fee detail and trying to figure out what they were. And they literally had the exact same description, two different fees. Exact same description. If they're the same, why are you charging me two different fees?


That doesn't make any sense. It is frustrating. I think Joe Biden is probably right when he says Americans are fed up with it, particularly in light of all the underlying inflation that's going on. And I look forward to seeing the response to said letters. 


Carl: I wonder how long it will take before we see any shift in policy on that kind of front, especially during an election year.


Customers favoring 1PD for pickup

Meredith: Another study, Carl, you're like the study guy this week. Tillster has come out with a study. I think the particular theme you wanted to talk about here is why customers are favoring first party ordering. 


Carl: Well, I think you've already given them a bit of the the news away really, haven't you?

But I'll bring the data to back up your opinion. How about that, Meredith? We, we talked about Tillster some time ago actually, because I think we used their report to talk about kiosks, and that's where we're gonna start today because this is their latest breakdown. 

40% of the thousand or so customers that they've spoken to over the course of February of this year have used a kiosk and they've used 26 percent have used one in the past three months and 21 percent plans to use more in the next year.


We know kiosks are very much central to a lot of restaurant groups in 2024. They seem to be something which are making a lot of sense for especially those that are in the QSR and fast casual space. And they're saying 57 percent of kiosk users wish restaurants had more of them available, and that is higher than the 36 percent of the respondents that said the same last year.


Kiosks are definitely something that it seems customers are after. And I think restaurants are responding based on what I was hearing at RLC last week. When you look at what the changes are in people's opinions based on the 2023 data, there's clearly a number of benefits associated to kiosk, but there's been a bit of a change in the year over year percentage on some of these.


"Nobody rushing me" is actually down by 16%. Only 37 percent of customers actually highlighted that as a particular benefit. Also "it shows me all the options I have" is down by 23 percent with only 31 percent of customers saying that's a benefit, but obviously things like customization still very high, convenience still very high.


And also the fact you can explore more of the menu being the most notable one there with 40 percent of customers saying that is what they like most about it. And that's actually up 10 percent on last year. And you'll see that customizing orders and earning loyalty points and using multiple language options are also benefits that they call out.

Now about in store curbside and delivery, let's get a little bit deeper into that here.


And so you'll see that for guests that were ordering through restaurant specific websites, 72 percent of them, did so for in store pickup, whereas 57 percent of guests use them for third party websites. So at least for the customers they surveyed here, there's definitely an area of interest in being able to go direct to the restaurant.


And so specifically I thought was interesting for pickup. That's probably associated to just the inflationary costs that we've been seeing for delivery as well. In fact, 17 percent of those surveyed expect to use third party marketplace apps less in the next year, and 10 percent expect to use restaurant specific websites for pick up less in the next year.

So it's interesting that there's a level of decline in people's expectations on whether they're going to use, but the impact is certainly being felt more on marketplaces.


Meredith: Oh, man, did you see the cart abandonment? 61 percent of consumers having abandoned a delivery order because the cost of delivery was too expensive. Now Cart abandonment generally in restaurant is quite a bit lower than other e commerce businesses, because the purchase intent is so high, right?


Very few of us just go, perusing menus just to see them. We generally are doing it because we're hungry and we want to eat. But that is an astounding stat right there of why specifically they are abandoning carts when they do it. 


Carl: It's just more front of mind now, right? I think as you're starting to see and look at those costs a little bit more than perhaps you might have done a few years ago, it's becoming more obvious that it's as a convenience that some customers just aren't willing to pay for.


Last couple of things here on third party versus a restaurant's own proprietary platform, you'll see for pickup preference, 65 percent of customers prefer the restaurant specific website. Whereas for delivery, they prefer 52 percent of the time to go direct to the restaurant. And that's interesting when you compare it to third parties, because these customers at least said that for pickup 65 percent preferred the restaurant's own website to 24 percent on the third party websites.


Whereas for delivery 52 over 36, a real momentum shift here especially when you understand these specific reasons on this next slide here. Because 44 percent of them say it's less expensive. 44 percent of them say they can earn loyalty rewards and benefits when going direct.


So those are certainly reasons which I think resonate for all of us that do indeed order direct. But of course the marketplaces still retain their benefit of being convenient. Those people that chose third party marketplaces said they do so because it's convenient and 37 percent say they've been habitualized.

They're just used to going through that side 


Meredith: So I do want to clarify here that we are not sponsored by Tillster. A lot of positive news about kiosks. And they do, of course, sell kiosks, but there, there are a lot of great folks out there who offer kiosks. Tillster is but one of them. I think we called last year the year of the kiosk, but it seems to continue.

There's a lot of kiosk adoption still happening. 


Carl: When you you see the success of those folks that are very much building kiosks into their future, it's understandable because customers are saying they want it. They spend more on them. And it's, it's helping just that digital experience extend onto on- premise too.


Why To-Go is so tough for Full Service Restaurants

Carl: Okay. Let's go to the next and final question. Full service restaurants. It's tough, Meredith. Tell us about the complexities of "To-Go" for full service. 


Meredith: It is tough out there. This was a whole article in FSR magazine talking specifically to full service restaurants about delivery and whether or not They were using it, how it was going.


And the takeaway of it was, it was just really complex. This whole to go delivery world going beyond the four walls was very, very difficult in particular for full service restaurants. In the article, they interviewed maybe five or six different restaurants, all of them talking about the various challenges with it.


And I think we see this most especially because this is an on prem channel, right? Full service is known for specifically a dine in experience, an on prem channel, and when they start to try to do off prem things in the form of takeout curbside delivery it's just a very different consumer behavioral pattern and operational flow that makes it hard to weave those 2 things together.


Now of course, I think that what Cunningham Restaurant Group has done, since they're operating on our software, by completely pulling that apart and not offering delivery in their actual dine in restaurants, but putting all of the restaurants together in 1 delivery kitchen and serving it that way is a really interesting response to how hard it is to combine these very different operational patterns. So I'm curious if we're going to see more of that, of course, and I think all of these folks that were interviewed in this article are absolutely right. And what they're wrestling with is off prem, whether it's pickup, whether it's delivery. Really is a big opportunity.


And some consumers do want to eat that way. Even as we had all that revenge spending as they call it, coming back into full service dining and having those experiences, there's still usage occasions for which you don't want to go into the restaurant. You want that food, but you want to eat it somewhere else.


Whether that is catering. or whether that is a home party or whether that is, taking it out to a special picnic to watch the sunset. There are reasons why you don't always want to eat inside the restaurant, even if you love that food. Of course, I couldn't help but notice that North Italia was one of the restaurant brands that they interviewed and curl, you have done a review on what it's like to get a takeout and delivery from North Italia.

And so I thought it was very funny that they opened with that concept talking about how they didn't really even have these things prior to COVID. In COVID, they learned, in fact, it was an opportunity and consumers wanted it, but they're still trying to figure out exactly how to do it well, which echoes pretty well with what you found, huh?


Carl: Yeah, that video is about three years old now. And I love North Italia. It's somewhere I love to eat all the time. And, but I have been put off a little bit from the to-go experience for that reason. So maybe, maybe it's time I give them another try Meredith to see whether those improvements have at least come through to the local one near me.


Meredith: That's exactly right. Yep. And I think, for these folks that are wrestling with, I, I want to give my consumers what they want, but I also want to give them a great experience. And it's just not a great experience when I'm using third party delivery, the price gets jacked up. We're back to all those fees again. And it maybe comes cold and old. Is that really how I want people to experience my brand expensive and bad? Probably not. And yet consumers really seem to want the convenience of delivery, even from dine in restaurants. 


Carl: Yeah, it's certainly not an easy channel to manage even in its own right, but to actually layer on top of an organization that's been built for on premise primarily, it makes it even more challenging.


But I'm sure when we we find the folks that are doing it best, we'll bring it to those listening to us here on the Digital Restaurant. Meredith, it's time for us to go. We've gone through our five questions. Thank you for your time this week and thank you for you joining us. If you have any questions, any thoughts about any of the things that we've covered today, what parts of the reports that I shared, do you think resonate with you?

And where do you think it's going to head in DC? Are we going to see some attempts to be able to address the junk fees and whether that's going to help the industry at large? But thank you for listening and we'll see you next time. 


The Digital Restaurant Podcast is available for you to follow and subscribe wherever you listen to your podcasts. Watch us, rate us, and subscribe to The Digital Restaurant on YouTube, and follow along on all our social media digital restaurant channels. Thanks for listening.


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