Doordash unveils new app updates and pay changes. 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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3. Burnt Toast
Carl: Toast 99 cents fee, automation acceptance on the rise, and our dashers still gig workers? 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 the worlds of restaurants, off premise and technology, but in some way tie back to our book series, delivering the Digital Restaurant. Are you ready? Let's go.
Happy fourth Meredith. Happy fourth. I'm always a little nervous this time of year as a bridge. I have to record this from an underground bunker. Just wants to take it out on me. But we're going, we're going out there. Hopefully everyone's going to listen to us despite the holiday weekend.
Meredith: The war's over, a long time over and it turns out we won. So I don't think anyone holds anything against you.
Carl: That's good. That's good. Let's get on with this week. I think you've got the first question for me.
Meredith: That's right. A lot of DoorDash features released this week and one of them was changing the way that it pays drivers.
Can you tell us about that and any other interesting features that they came out with?
Carl: The main one was around the way in which their Dashers get paid. DoorDash announced a bunch of changes in celebration of their 10th birthday. So happy birthday DoorDash.
Now, I don't know about you. I've always found it to be a bit odd to add a tip before the experience has even started. It's a bit like sitting down at your table- no, before walking into the restaurant, popping a $20 bill into a tip envelope, and then passing it to an invisible restaurant employee.
And DoorDash has said, we've tipped perhaps a certain amount at the start of a transaction, at the checkout. And now if you want to show some further appreciation, you can tip a little bit more. So I guess you could call it post checkout tipping. And this makes all the sense in the world to me because it incentivizes, I think, the Dashers to do as good a job as they possibly can.
Now this can also be done 30 days after delivery. A little bit like how you're perhaps used to with an Uber journey that you can go back to it a couple of days later and tip your Uber driver. And so just like with Uber, the DoorDash customer is going to get prompted through the app to remember to leave a post-meal tip if they desire.
And then the article that we'll put in the link below from Nancy Luna mentions that, some users might be concerned about this thing called tip baiting, which is where they perhaps put a huge tip on and then have it reduced later. That's not going to be possible on DoorDash and even Uber Eats have spoken about it in the past where they've said, actually most people always seem to tip up after having a good experience.
Now, perhaps the most interesting thing is about where DoorDash have said they're expanding a feature to allow drivers to earn by time, like a hourly wage perhaps. It's a guaranteed hourly rate, and they can choose whether they want to accept that rate or not. And then to toggle between those two options, and I guess this addresses those dashes that perhaps deem consistent income is more important to them.
So it's an interesting one. I'm sure the employment law folks out there might be having a view or two on it because it's getting awfully close to employer employee type relationships if you ask me. But I guess treat it positively cause I think it can spread the distribution of dashes and the flexibility that they deem best for them to then perhaps have a better distribution of logistical services across those quieter times.
However, If those quieter times Meredith offer hourly rates below minimum wage levels. Ooh, I think we'll have another headline to talk about.
Anyway, here's a picture of what they're saying. So you can see, you can add more tips for Jason M in this example. I think it's good if they're finding ways to be able to get the right levels of compensation back to their Dashers.
And if it can help us make sure that more Dashers are available at different times, that's a good news for everyone.
Okay. Second question this week Deloitte often come out with some great studies about the world of food and delivery, and they've done it again this time though, around automation and customers being more accepting of it. Can you tell us more?
Meredith: Yeah, it was a great report. They fielded a survey of 750 consumers , and talked a lot with the consumers about how they see restaurants changing and how they're reacting to those restaurant changes.
And I thought what was most interesting about this report broadly was that consumers are very receptive to all the changes happening in restaurants and that for the most part, a majority or even a strong majority of restaurant consumers, appreciate the changes and understand where things are going and don't view automation as, creating a soulless experience or something like that.
And then, the rest of them, many of them were indifferent. And it was a very small minority that tended to be, anti these changes. And as you would expect the younger the respondent, the more they were open to more automation and digitization in the restaurant space.
But let's take a look at a few of the survey results. Carl, if you could pull those up. For those of you who are listening and can't see this one question was, would customers order from a ghost kitchen? Now unclear how they defined Ghost Kitchen. And I think as we've found around talking with folks Carl, most people conflate ghost kitchens and virtual brands, so it's really unclear what exactly the customer thinks they're being asked here.
But regardless, 52% of customers said that they would order from a ghost kitchen. No problem. And a further 24% were totally indifferent. And it was only a quarter of customers who said, eh, I'm unlikely to order from a ghost kitchen. I thought that was very interesting news that as much as we talk about, oh, you need to have a brand presence and customers want to see you, and the all kinds of pushback that we hear about virtual brands and ghost kitchens, that's not what the customers are telling us.
Carl: I still certainly wonder whether customers truly know what a Ghost kitchen is.
Meredith: The next one we'll look at is how customer preferences are changing around restaurant automation. The first one, looking at drones and driverless car delivery, 47% say they would order from a restaurant that offered some kind of automated delivery. And now that of course leaves 53% who say maybe not, or maybe they're indifferent, they don't specify, but a lot of openness to trying this form of delivery.
And then the next one over around voice automated ordering systems. This one was, wow, a really strong response. 79% of participants are at least somewhat likely to return to a restaurant that uses automated voice systems for the drive-through, 74% per phone system, and 70% for dine-in use. Customers are telling us that employee taking their order or cashing them out, not a huge part of the restaurant experience for them.
And then finally, on kitchen automation. 60% of surveyed consumers reported being somewhat likely or more to order from a kitchen that prepares food, at least in part through robotic technology. So again, you do not see consumers en mass saying, "oh, you're taking the soul out of the restaurant.
There needs to be a human being involved here." Very interesting. 19%. Had some kind of experience with a cashier list restaurant and 62% said even though they haven't done it yet, they're likely to order from one if given the opportunity. So once again, we see not only is voice ordering okay, self-service via kiosk okay as well.
And I think that goes hand in hand with some of the rest of the report. Consumers were asking for a little relief from all the price increases and not just via promotions and LTOs. But actually like a value offering that they could make a choice to [00:08:00] purchase. And I think consumers realize that in order to get that value out of restaurants, there's going to have to be more automation as we continue to struggle with having enough labor for all kinds of jobs in our country including those in restaurants, the prices of labor go up. Which is great for the workers, but causes the restaurants to increase prices to the consumer. So I think a lot of what's happening here is just consumer realism, that the best way to attack inflation is to introduce automation.
Carl: I wonder if we would ask that question again a year from now. I were to say, if your food was delivered in half the time, or if you were able to save X amount of dollars, what would your reaction be? Because I bet those percentages would be a lot higher as well.
Okay, look, before I get you to ask me the third question this week, Meredith, I would love to ask our listeners if you haven't already, to please subscribe to our YouTube channel or of course subscribe to our newsletter, The Digital Restaurant on LinkedIn.
And if you are tuned in on your podcast then please rate a five star, please do so on YouTube as well. Helps us make sure that we're doing here and giving us the feedback we need to keep coming to you every couple of weeks. So if you get a chance, we'd really appreciate it. Okay. Third question, Meredith.
Meredith: So Carl, this one was pretty much most of the news cycle, I would say the last two weeks. Probably the most talked about thing. So give us your take on Toast, introduction of a new 99 cent online ordering fee.
Carl: We've all been there, right?, you've selected your items, you've been delighted from some wonderful photos, the prospect of a beautiful dinner coming your way in 30 minutes, and then you reach the basket.
The time taken to select your food, modify, get your partner selection, get the kids to choose what they want. It's gone through some process, I think it's fair to say. And then you reach the basket, and then you face these fees, the taxes, the dynamically priced delivery fees. And now Meredith, you have to Toast fee.
That's right. Going live, I think this week when a customer orders from a Toast- enabled restaurant's online menu and have a basket over $10, the customer will be introduced to another fee of 99 cents. So of course, if that's a $10 order, that's a 10% increase. If it's a $20 order, that's a 5% increase.
So that's a big whack of an increase if you ask me. And it's not like it's a variable fee. It's happening every single time. And there are, a lot of restaurants on Toast, 85,000 different units on Toast, and many of them are indepdendents. And many of them are struggling like crazy to get their customers to come direct and go through the Toast platform and not go through the third parties.
And so this additional fee I think is going to cause some real consternation. And then judging on social media this week, I think it certainly has. Now, perhaps the most pertinent is that this fee is going straight to toast, right? There's no revenue share here.
So they've built this amazing restaurant first dynamic with their clients. They've got a great reputation, they've built a great stack of solutions out there to create this all in one solution for many restaurants. And the only dark mark was always that the payment for these solutions and hardwares going to come through the vessel of payment. And unlike many other SaaS providers who charge a flat monthly fee, you're actually now getting this situation where you've got a B2B hardware, software and payment processing company coming together.
And I think that's when you're asking for trouble especially if you're a restaurant who is really embracing all these different services together, your entire tech stack being tied across the whole operating system. It means getting out isn't particularly fast, and it's certainly not easy.
So look I love Toast. I think they provide an exquisite service for their clients. I think they went public in 2021. They've built this great set of products. They've acquired some great companies in in the last few years as well. And in the first quarter alone this year, they've generated over 27 billion dollars in gross order volume.
But in the 10 years that they've been in business, they've yet to turn a profit. And this fee, I think is probably their attempt to change that, and I think it smacks to the same issue I have when helping restaurants with is that it is this flat blanket fee. Now, according to restaurant though, they did a test in March on 450 units and they saw a 13% increase in the percentage of guests placing online orders using its updated platform, which incorporated this fee as well.
And therefore, they're saying it hasn't hurt consumer demand. But I, they didn't say anything about frequency rate or they didn't say anything about guest sentiment data. And I think this is where, when you start to adjust prices and the effect on the overall basket, especially when we know it's happening across the board in other areas as well We really are having to watch very carefully and I think with Olo of course, putting a lot of attention into Olo Pay and know knowing how many bigger enterprise chains are working with them.
I suspect they're watching this development very closely and I suspect Toast competitors are probably rubbing their hands together with glee, thinking this might be the conversion opportunity they've been waiting for.
Meredith: Maybe some. Others actually introduced fees of their own. Clover has a transaction fee.
And actually I believe that Olo has a utility fee, is what it's called in the SaaS world where you charge per user or per use in some way or another. And it's a fairly normal fee in the SaaS world in the sense that the more a piece of software is used, the more the cost for that software go up.
They have more hosting fees, they have more transaction fees of their own. And so it is very common. Having said that, could have been maybe communicated better. And the thing that just really gets me is Toast is charging a fee not to their customer, but to their customer's customer.
Absolutely. And, I'm surprised they have that right in their contract. But even if they do if I were a restaurant, I would be like that. That's my customer. The whole reason I use you as a first party is to make them my customer.
Carl: Yes. I think we're going to watch this one closely and see what happens.
And hopefully it doesn't create a negative consumer sentiment. Hopefully it doesn't impact the folks that are using the online ordering system for Toast, because ultimately that's going to hurt restaurants and in particular independent restaurants.
Okay. Let's move on. Meredith, I thought we dealt with this one. I thought we dealt with this one a few weeks ago when we dealt, we had a big headline about are ghost kitchens and virtual brands dead? And then Joe Guzscowski comes out with another article this week talking about are virtual brands dead and is asked a bunch of very important influential players in this space.
That was very same question. Can we answer it once and for all?
Meredith: One of the things I liked most about this article was how different the people were that he asked. So he asked two folks who've led virtual brands. He asked someone who sees virtual brand activity from a third party order aggregator, and he asked an operator who operates virtual brands and got perspectives from all of them.
And I think what we can take from all of their comments is that virtual brands play a really important role for some brands in some cases. In particular, to utilize kitchen capacity at off peak times. And here the example that John Peyton gave for Dine Brands between IHOP and Applebee's was really instructive, right?
For IHOP it makes a ton of sense because they have a very peaky business particularly around weekend breakfast time. And so the rest of the time that they're open, they have a lot of capacity that they can use. Virtual brands make a ton of sense for that, but for Applebee's, not quite as peaky. Doesn't make quite as much sense. As ever these things are particular to the environment that they're in.
We also see that virtual brands have the potential to change cuisine very quickly and to have a direct consumer engagement and to be able to roll out a brand, in a matter of weeks, months, years.
In the case of wow Bao, right? Look how they've gone national so quickly compared to building a brick and mortar brand takes forever to get national right. And I think those are really good things.
However, in their comments, I think they reveal some of the things it takes to make virtual brands work well. So it's not that they're dead, it's that you need to do things in a certain way to make them work.
And the first is you really have to have some IP for the brand. It can't just be, a made up random brand and hope for the best. And that IP can come via celebrity as Virtual Dining Concepts does. It could come via a really well-known restaurant as someone like Franklin Junction does.
Or could come from building your own brand internally, or partnering with someone like WowBao who's building a direct to consumer brand.
It also reveals that ops tech of some kind is needed. And now whether that's software helping to enforce quality or train, or whether that is literally a smart oven that's producing the same product quality every single time. Some kind of technology is required to enhance consistency on the execution of the brand from location to location.
And then finally, some kind of marketing tech is required as well. In order to build a brand directly with the consumer. You have to do some degree of digital advertising in the case of WowBao, putting together a loyalty program for the brand itself rather than the restaurant that's fulfilling it.
Now I think these are all things that as we go forward, we'll continue to see virtual brands be created, and we'll see them get more and more sophisticated on these three dimensions.
Okay, next up. Good news. We love good news. We're very excited. Tell us about who got funded this week.
Carl: Our friend Zach Oats over at Ovation, who's the CEO and founder of Ovation. He and his team are celebrating the recent close of 4 million dollars worth of funding. And in 2023, if you can get seven figures worth of funding, that is pretty impressive.
Led by York and TIA Ventures, this is some very pleasing news and I've seen firsthand this year with Juicer, and I spent plenty of time talking through the trials and tribulations that Zach has gone through throughout the year to get this announcement. And it really is the outcome of a lot of hard work. For those of you that haven't gone through that process.
It's lots and lots of conversations, lots of people saying yes, but not following through. Some people saying yes, then ghosting you and. Many saying yes, but we don't want to be first. And Meredith you and I saw a lot of that in the early days of Kitchen United as well, didn't we?
So for those of you who don't know, Ovation is an advanced guest feedback platform. It helps restaurants manage customer sentiment activity. It navigates positive experiences towards public platforms like Google. So that customers need a positive review for others to read. And if a guest has had a less positive experience to direct them towards the restaurant so that it gets solved quickly and effectively. And they do it just through two questions, an SMS based survey which Zack calls a digital table touch.
Remember those moments when a server comes up to your table and asks if everything's okay. Zack's trying to do the same thing for online engagements, and that therefore reduces the friction. It reduces the fact that you don't have to worry about. I'm thinking I'm going to provide my answers to a survey when I'm actually eating.
Cause that's not what people do. And so removing that friction I think is really important. And then they can get follow up data later after the dining experience. He and his team are doing something right, of course, because they've got 150% net negative churn with multi-location restaurants.
They've already got 3000 restaurants on the platform today, and as much as I suspect this will keep the lights on, it will also allow him to continue to evolve and grow his product to an even better height. I think as much as we're excited to see what the product does, I think we're also expecting some equally gregarious shirts for Zack and his team, because you haven't met Zack, you'll know that he is one of the more colorful people on the restaurant circuit.
Meredith: So do you think there will be celebration shirts?
Carl: Oh, maybe. I know I think he's actually getting his own proprietary shirts, so that's what happens when you got 4 million in funding,
Meredith: Shirts. Wow.
Carl: All right. Look that's it for this week. I would love to get your thoughts about what we've shared, whether you agree, disagree with us, what thoughts you've got for our next edition of the digital restaurant.
And if you'd like to get in touch with us, please do so below, or reaching out to us on LinkedIn or at our website, thedigital.restaurant.
But until next time, thanks for listening. 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.