Delivery apps are altering food service providers’ operations

Bao Vuong
October 24th, 2017
IBIS

Tech companies are changing the way we interact with food service providers. Food delivery companies such as Uber Eats, Deliveroo, Menulog and Foodora have become increasingly popular among consumers. Restaurants and fast food companies have been forced to adapt to growing demand for food delivery services. While restaurants were quick to adopt new app technology, fast food companies have been slower to adapt. In June 2017, McDonalds and KFC became the latest major players to embrace this trend by launching partnerships with Uber Eats and Foodora, respectively.

Changing lifestyle trends have driven the popularity of food delivery services over the past five years. With increasingly busy lifestyles, food delivery services offer a way for consumers to save time. The Restaurants industry has benefited from the proliferation of food delivery services, with industry revenue expected to increase by an annualised 3.5% over the five years through 2017-18, to reach $20.0 billion. The popularity of food delivery services has changed the way restaurants are run. Some restaurants now sell their products solely through food delivery apps. Restaurants that do not provide the option to dine-in often have higher profit margins than traditional restaurants because they are cheaper to operate. Some restaurants have created delivery-only menus and adjusted their opening hours to cater specifically to demand from food delivery. Other restaurants have introduced separate service counters dedicated to food delivery couriers.

The Fast Food Services industry in Australia is yet to fully take advantage of the food delivery boom. Although this industry has grown over the past five years, increasing health consciousness is anticipated to stifle demand and constrain revenue growth over the next five years. In an attempt to maintain growth and take advantage of the strong demand for food delivery, several major fast food players are starting to enter the delivery game. In 2016, Red Rooster began delivering food through Menulog, allowing the chicken shop franchise to move beyond the suburbs it has traditionally serviced into inner city areas. In today’s crowded market, integrating with a food services app can give food service providers a major competitive advantage. Businesses that choose not to keep up with this trend risk getting left behind.

The popularity of food delivery services presents a threat to more expensive restaurants that are unwilling or unable to have their food delivered. Time-poor consumers are increasingly using food delivery services as an alternative to dining out. Fine dining restaurants have sought to counteract this trend by providing a unique restaurant experience. By improving customer service and creating a better ambience through lighting and increased customer interaction with chefs, restaurants can differentiate themselves from food delivery.