Industry News | June 20, 2017 | By Danny Klein | QSR Exclusive Brief

Report: Third-Party Delivery Won't Cannibalize Foot Traffic

Will delivery hurt McDonald's in-store business? One study says it won't. flickr: Mike Mozart
Bookmark/Search this post
Email this story Email this story
Printer-friendly versionPrinter-friendly version

Read More About

A quick stroll through the Tech Pavilion at this year’s National Restaurant Association Show hammered home a new reality. Third-party delivery is all the rage in foodservice. It’s this year’s version of the handheld tablet, the kiosk, beacon technology, loyalty apps, and on and on. One key criticism of the service, recently pushed above the fold by McDonald’s and its plan to offer delivery via UberEATS to some 3,500 restaurants by July, is the in-store dilemma. If more guests are sitting on the couch eating Big Macs, will fewer actually visit the Golden Arches?

Logic says yes, but Sense360, a data insights firm focused on offline customer journeys, released data that tells a very different story. The company tracked more than 21 million full-service and quick-service visits to measure frequency before and after downloading a third-party app, such as the aforementioned UberEATS, Grubhub, and Postmates.

Findings showed zero evidence that delivery apps drive significant, short-term drops in visitation.

Focusing on the McDonald’s equation, Sense360 analyzed customers who downloaded UberEATS during a delivery test pilot in Florida. There was no noticeable visitation decrease among users.

“With delivery among the most watched business opportunities in the restaurant industry today, our findings tell an interesting story of both who delivery app users are and that downloading such apps did not impact their in-restaurant visit behaviors and frequency," says Eli Portnoy, CEO and founder of Sense360, in a statement. “The data gives a clear and unequivocal view into this industry trend and provides clarity that restaurant operators and owners have been seeking to help them make the most informed and strategic business decisions.”

Not surprisingly, the study found a more direct and quantifiable relationship between app users and their surroundings. For example, top metro areas are home to the most downloads, including New York City, San Francisco, and Los Angeles. This makes sense on a multitude of levels when you factor in where a brand is most likely to focus the platform and the frequency of diners who don’t own vehicles and tend to eat in the neighborhoods they live in. Not to mention those who are reliant on public transportation, and, thus, more likely to order food instead of hop in the car and drive to it, or pick it up on their way to or from work.

The study also showed app users to report higher income on average. They also visit fine-dining restaurants two-and-half times more frequently and grocery stores slightly more. Consumers with delivery apps installed on their phone go out to quick-service and fast-casual restaurants 5 percent less than people without them.

Also, delivery app users are more likely to order from higher-priced concepts such as Chipotle and Starbucks.

“It’s important to consider all the factors that come into play,” says Portnoy. “If delivery apps caused lower visitation rates, then they could indicate cannibalization of in-store visits. However, if delivery apps merely indicate a different type of user, according to socioeconomic level, demographic or geography, who has a naturally lower rate of visitation, then creating opportunity for them to access the brand on a delivery app could drive incremental purchases.”

This speaks directly to the off-premise boom in today’s casual dining arena. Many concepts aren’t courting “regular guests,” but using services such as curbside and delivery to compete in a different lexicon. In that case, a burger chain like Red Robin can enter a consumer’s mind who otherwise would have stuck to quick service, looking to save time. This ideology can be true of limited-service players like McDonald’s as well, which can now appeal to diners who may have otherwise ordered from a local Chinese restaurant, pizza establishment, or full-service eatery known for its delivery. As Portnoy is alluding to, the apps indicate different types of users. The typical guest is left unscathed.

For this study, Sense360 tracked 21 million visits from June 2016 through April 2017, including 1.1 million visits from users with delivery apps installed.  The company uses mobile sensor technology to collect anonymous, always-on location and survey data from a panel of two million consumers.