Why Your Franchise Needs Delivery
A recent study from Morgan Stanley on the third-party delivery market had some staggering conclusions: Currently, only about a third of the population orders delivery food that’s not pizza; demand for a wider variety of take-out food is consistent in cities, suburbs and rural areas; and, the delivery category as a whole is only scratching the surface of its massive potential as third-party services literally bring more meals, goods and services to more people.
After presenting several layers of evidence suggesting North American customers want and are willing to pay for the convenience and variety of more food and retail choices, Morgan Stanley’s comprehensive “Food Delivery: What If All Food Could Be Delivered as Easily as Pizza?” study argues the industry is “in the early days of a significant shift in the access to delivery food.”
In short, this third-party delivery stuff is going to be a really big deal—and franchised brands of all sorts need to start boarding the train.
As companies like GrubHub, Postmates, DoorDash, Seamless and many others enter new (and smaller) cities, Morgan Stanley’s research sees this growing proliferation of delivery services as a major boon to chain restaurants “over independents, as these brands should be able to integrate the online delivery ordering more seamlessly into their in-house technology platforms.”
While pizza chains have quickly added online ordering, which the study says is now one-third of the category’s sales, at the top three pizza delivery chains—Domino’s, Papa John’s and Pizza Hut—online ordering quickly grew to more than 50% of total sales.
It added this shift in ordering convenience created more than $7 billion in shareholder value in the top two publicly traded pizza companies during the same timeframe.
Do your shareholders want that kind of return? With such a big shift in less than a decade, the study concluded, “this demonstrates the power of combining easier brand access through online ordering and the stickiness of a first-mover advantage.”
Its research included a survey of more than 5,000 U.S. customers, 40% of whom had recently ordered delivery food. The research found that the key barriers to a wider adoption of delivery was price and availability.
“Greater availability through networks that service multiple brands should solve both the availability issue as well as the economics of running a delivery network through better capacity utilization,” it said.
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