Delivery Math, Avocado Peeling and Domino's join the marketplace party.
All these headlines and more represent our thoughts and views on the world of restaurants, technology and off premise food in our round up of last week’s hot news stories - subscribe today to The Digital Restaurant and register at www.deliveringthedigitalrestaurant.com for more bonus content.
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TRANSCRIPT:
Carl: Delivery math, avocado peeling, and why has Domino's decided to join the Marketplace Party? That's all ahead on this week's Digital Restaurant.
The Digital Restaurant works like this. We're going to ask each other five questions about headlines that have caught our attention, that affect the world of restaurants, off premise and technology that tie back to our book series Delivering the Digital Restaurant.
Are you ready? Let's go.
Good morning, Meredith. How you doing today?
Meredith: Very good. How are you, Carl?
Carl: Very good. It's nice to actually spend a little bit of time in Southern California. I was over in the heat of Texas recently, and the kind of weather over here in SoCal is still warm, but it's not as hot as they've been having it down south.
Meredith: We're very lucky. The Texas Restaurant Association Show for which we were in Texas, it was fantastic. But I'll take California, I'll be honest.
Carl: There you go. Well, let's get into it. We've had a busy week, a lot of different articles out there. Maybe you can answer the first one this week, Meredith. Buffalo Wild Wings are dropping their takeout fee.
What is this takeout fee? Why are they doing it, do you think?
Meredith: Yeah, super interesting article in light of the News Toast came out with last week about charging consumers and 99 cent ordering fee. Which so far I haven't heard a lot of consumer reaction to. Restaurants, certainly, were a bit up in arms over it, but have not heard consumers taking issue possibly because it's not fully rolled out yet, possibly because it's buried inside that service fee.
But Buffalo Wild Wings was charging a similar, I'll call it digital ordering fee, for takeout of 99 cents. They actually got sued over it and the lawsuit appears to be still outstanding, but in an unrelated move, they've decided to cancel it and not roll it out nationally. Now I think it's an interesting question right there is you know, probably more cost associated with takeout. If you look only at the additional costs, right? Something like packaging or maybe the technology involved. But you're also avoiding a lot of costs because you don't have a consumer coming in and so you don't have whatever in-store packaging or maybe in-store labor that you're using. So there seems to be a give and take there, and I can see why consumers were upset about the idea of a fee for coming to the store and picking up themselves.
I think Buffalo Wild Wings made the right move here, and I think it will be fascinating to see once consumers realize what Toast has done, if and how they react.
Carl: I agree. I'm very curious just to see whether consumers see the connection, because obviously the Toast aspect is affecting first party channels, and typically I think there's always this question as to whether first party channels are truly understood to be the most value orientated place to be able to get your food. And I, I'm not sure it's, that's the case today. I think a lot of people see things like [00:03:00] DashPass subscriptions and, and the like, and think, well, that actually is the best way for me to get my meal delivered in an efficient manner. And I think there's, there's some work to be done by the industry to try and help folks understand that.
I think what Buffalo Wild Wings have done here will help.
Meredith: All right. And we also had some really interesting news from Domino's. Domino's, after so many years of resisting, is finally entering the marketplace arena. So tell us about that one.
Carl: Look Domino's, we, we have been talking about Domino's front and center since we started writing about the subjects of the digital restaurant.
Right? Right. Meredith, I mean, we have a chapter in our first book about why pizza works and why as a cuisine type pizza is so advanced in comparison to many others. And you know, in that book we said about how Domino's it took near bankruptcy. Do you remember? And the fact that it drove that mindset towards innovation and how very early on they were investing huge amounts of money to drive things like order by text, which I think they launched in the UK in 2007, and then first party ordering and their first app launched in 2010. So Domino's have approached this whole ecosystem with very much a tech forward mindset and very much a first party ordering mindset.
So that's why I think it's been particularly interesting to see a bit of a turnaround in their approach to how they're approaching marketplaces. It's only in April of 2019 when the CEO- then Rich Allison -said to ,investors, when I take a look at our US business, I don't see any need for us to go into these third party platforms.
Well, recently of course, we've heard the news that they had decided that's no longer the case, and so now they've got an exclusive deal with Uber where they're able to have their food and Domino's represented on Uber Eats, but still their food is going to be delivered through the Domino's drivers, the uniformed Domino's drivers. In fact, they're also enabling the pizza tracker to be represented through the Uber app as well, which of course is one of those proprietary fun things that really helped people understand where their order was in the fulfillment process. So, I guess the big [00:05:00] question that people have been asking us this week, Meredith, around this one, is why have they done it?
And, incrementality, I guess is the word I would answer. Ultimately, when people are hungry, they're going onto marketplaces. And just by being part of the conversation, I think now gives Domino's a chance. We've been able to get more orders through the door as such, but there are some challenges I think that we have to be mindful of here as well.
You know, it wasn't so long ago, I think maybe on a previous podcast you were talking about the driver shortage with with Domino's. Right? And how are they going to satisfy that challenge? That challenge remains with that incrementality. You're still going to have a large amount of drivers required to be able to take the pizzas out to the customers.
And so I think that is a particular challenge. The other one that I made a reference to on LinkedIn earlier this week was around does this create a bit of first party to third party conversion. We're always talking about third party to first party conversion. But what about those loyal customers that have just been accustomed to using Domino's app or the Domino's website and the mobile ordering that they set up?
And maybe now because maybe that same customer does have a Uber One subscription that they think, well, now I might as well just order through Uber and therefore you lose some of that first party channel. I think it's fascinating. I think it's really exciting to see what's going to happen on this 'cause they're a dominant force and we'll see whether they get success or it.
Meredith: Yeah, Rob Lynch, the CEO of Papa John's is also featured in that same chapter in the first book that you're talking about, Carl. And they have long been on the third party platforms and he absolutely believes and can make the case for it is incremental. So will they lose a couple of people to third party I had not considered that they might. But I think it is more likely on the balance that they're going to drive incremental sales. What was mystifying to me is that they have been saying for, I don't know, years now, that they have a driver shortage.
And so their plan is to add sales, but still use their own driver workforce. That, that to me was the very mysterious part. You would think that they would've coupled this with having a third party logistics option, at least on the backend.
Carl: Absolutely. Well look, before we go on to our third question, I'd love to remind people that if you have yet to subscribe to the Digital Restaurant, you can do so free through YouTube or wherever you listen to your podcasts.
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Okay. With that said, Meredith we have a subject close to your heart. And I know some might think, well, it must be about digital and delivery restaurants and things, but I know a subject close to your heart is also math.
And so when I have a question around the math of delivery apps, you must be in your element. Great article this week on Restaurant Business about this. Can you tell us about why it drew your attention?
Meredith: Yeah, that's so true. I mean, this is like the perfect Venn diagram of things that I love.
Restaurant, delivery plus numbers. That's so great. And this particular article was about the backlash of requiring the third party marketplaces to pay drivers essentially a minimum wage. And their pushback on this because they've filed lawsuits against the cities in question. Their pushback on this is we can't afford it. There's no way that we can pay people minimum wage.
And it's quite shocking that that's their storyline, right? First of all. And then second of all, okay, they can't afford it and they're already losing money. Hmm. Does third party delivery actually work? And I think that was the question raised by this article, that maybe this is a sign that there's something wrong in the entire ecosystem.
And you know, I would argue from an Empower Delivery standpoint, that what's wrong is that you just aren't pushing enough merchandise through these delivery drivers, and that's why they're not getting paid enough, right? If they're doing 1.2 deliveries an hour, which is what they do on average, on a $30 check, that is just not enough money to pay both the restaurant and the delivery driver a decent wage.
And then there are of course, times during the day when they're doing even less than that because it's just a slow time. The right answer to this problem, and it is the same answer that it is in all logistics companies, is you have to increase your stops per hour or deliveries per hour, and you have to increase your drops per stop, meaning like you need to bundle things together and you need to make it more efficient routing.
And that is the only way to make the economics of delivery work. You know, yes, you could also lower costs through automation and things like that, but still like making a delivery network work is about pushing as much volume across that network as you can. And what the third parties are telling us is that, They don't have enough volume to be able to afford to pay the workforce.
Carl: So it sounds to me like you're endorsing the next big drone project. Is that right?
Meredith: Yes. Yes. That's what you can take from that. No. I think we need better software that can optimize the routing so that we are utilizing our couriers in the best way possible and therefore we're able to pay them more.
Okay. So, Carl I know you love crazy robots and there are some crazy robots in this story. So tell us what Chipotle is up to with the avocados.
Carl: Yes. I thought it might draw some attention if we said avocado peeling in this particular question. Look, Chipotle have been spoken about very often in, in recent years in relation to automation.
We talked about hyphen, of course, which was acquired through their Cultivate Next Venture Fund, and that's got a lot of headlines. And then of course there's chippy from Miso Robotics and the way in which the chips are created. But this next company is called, I think Vbu is the way you pronounce it, and they've created something called the AutoCado.
And the best way I think, to demonstrate what the Autocado is, is through a video. So let me bring this up.
Meredith: I see those avocados getting dumped into a bin.
Carl: Yeah, they're getting dumped in. It looks pretty simple. And then here's the autocado and out of the bottom pops, a nice big bowl of peeled avocados.
Meredith: I'll be honest, I saw the avocados go in with peels. I saw 'them come out without peels, but I did not see the magic in between in this video.
Carl: Well, I suspect there's some proprietary knowledge going on.
Okay, so I share that because you might be thinking. An automated avocado peeler is this, is this where we're going? And of course you saw at the end of that video a human mushing it all together. So, so why is Chipotle looking at stuff like this? I think ultimately when we reference automation in the back of house, one of the big things is it takes some of the menial tasks away from humans.
And for sure there is definitely some savings in involved in that. But I think there's also more. There's savings in things like waste or improvements in consistency and so, so what do I mean by that? Well, on waste it, it's things like resource utilization, every avocado. We'll have a certain amount of yield that it generates, and a human might not scrape out every bit of that available avocado to utilize.
And for every cubic inch of uns scooped avocado, we're missing out on potential margin efficiencies in the cost of product. Are you any good at peeling an avocado? Meredith, how good are you?
Meredith: I am so good at peeling avocados. I have a vegetarian son.
Carl: So you have a particular style, right? How would you unpeel avocado, what's the approach?
Meredith: Cut around. Pull out the pit with my knife and then slice. And then scoop.
Carl: Right. And most people say you put the knife into the seed. Right. And you twist it and add it comes nice and easy. You know, there's an angle here as a operator. I always am concerned about whenever peeling avocado, because knives can slip easily.
Right. And so there's definitely a [00:13:00] safety angle to this as well. Sometimes we don't get to talk about. And the other side that I have some questions on this is around. Does it rely on the human to determine which avocados are ready to put in the machine?
Meredith: I know, I was wondering that too, like does the machine have, some kind of computer vision that's like opening up the avocado and going, oh, this one doesn't look good and throwing it out, or how does that work?
Carl: Right, yeah. And so does the supply chain have it so well ready that that piece of human decision making at the kitchen level was taken care of as well? That's another form of automation, right? And similarly, automation can exist from a data standpoint. Determine the right amount of avocados to put into that machine on a given day.
How much leftover guacamole, cuz we know, we all know what happens to the leftover guacamole. Get waste involved on that side. And perhaps by using automation, this allows something like an additional creation process of the guacamole. So maybe from two times a day to three times a day now. Cause it's a faster process.
And why is that good news? Well, it's good news because then the customer's ultimately getting a fresher end product as well. So there are numerous different ways I think that. Automation like this can help. And oftentimes we always get thought about in the cost bucket here, but I think ultimately if it can improve the guest experience, then it's a win for everyone.
Okay. Last question. And some people might say, well, hold on a second. Haven't you already covered this article? Uber have been culling more virtual brands. What's going on here, Meredith, and what's your take?
Meredith: Yes. I feel like we've covered this article before as well, but the article was highlighting that even more brands have been pulled from Uber.
And I think Nancy Luna here questioning, gosh, is this the end for virtual brands? And, my reaction to this article, and what Uber is doing is, isn't that what the algorithm is for? I'm very puzzled. So shelf space, whether digital or physical, is what a channel or retailer, that's what they allocate.
The whole beauty of what they do is figuring out what's going to go [00:15:00] on those shelves. What's going to drive the highest -in a physical world- sales per square foot on margin. And in a digital world, what people are most likely to come back for. That's their job. In the e-commerce world, on a platform that's done with an algorithm and in a physical world, that's done with a human merchandiser who's figuring out what goes there.
And I understand that in a physical world, you've got a limited amount of shelf space. You can't put everything on the shelf. And so that merchandiser's job is super important to figure out what goes there, what doesn't go there. And the companies that are selling the merchandise, of course, Have an interest in getting as much on the shelves as they can and taking up as much of the shelf space as they can and actively boxing out their competitors, if you will.
But digitally, shelf space is infinite. There's no limitation on how many things I put up on amazon or DoorDash or Uber Eats. You could put anything up there
Carl: on the supply side. Yeah, I guess the demand side and how long a customer is willing to scroll is another thing.
Meredith: Right, but that's what where the algorithm comes in. So the algorithm should be smart enough to say, I don't need to show all of these things to the consumer. Or every time I show this one to a consumer, they don't choose it. Or this one is getting terrible ratings. Nobody needs to see it. There don't need to be all these complex rules saying your virtual brand doesn't count, but your virtual brand does count.
And trying to figure out which one should be put on and which one shouldn't. That to me seems like a lot of effort to go through and potentially very unfair where some brands get counted and some virtual brands don't. Why not just put 'em out there and let the consumer through the algorithm vote?
Carl: Wow. Always a good perspective on this one. For me, I think optimizing the digital real estate is super, super important and the question for me is more around how can we help restaurants, whether they're virtual or otherwise, Actually improve their offering? Because I think ultimately whether it be something around a rating or just the fulfillment time, we've gotta improve delivery.
And I think it would be good time utilized by Uber to really help restaurants figure that out. Cause there's a lot of opportunity there.
Okay, well look that is it for this week's digital restaurant as ever. We'd love to hear from you. What thoughts do you have? What would you like us to cover on a future edition?
What do you agree with, what do you disagree with? We'll always like to get your opinions and as ever, we'll look forward to seeing you again next time.
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