You don’t need a survey or data dive to know off-premises surged in usage and growth during the pandemic. Before COVID-19, projections called for delivery sales to grow at more than three times the rate of on-premise revenue through 2023, according to LE.K. Consulting. Coronavirus amplified that by sheer necessity. It was the only game in town.
But pandemic or not, third-party delivery remains a volatile arena. Restaurants cede control of the customer experience, data, and typically swap brand value for incremental orders. Not to mention the fee structure and trying to understand who should pay for the service—the customer or the restaurant? And, if so, how that affects the overall value proposition and ultimate goal—turning new users into repeat customers (hopefully dine-in or carryout guests, both being more profitable channels).
COVID-19 has surely adjusted the conversation. Yet some of the battles feel similar.
Service Management Group, a global customer, patient, and employee experience management partner, recently introduced new research that highlights off-premises trends amid a changing landscape. The company collected feedback from more than 8,500 respondents.
“With the surge in off-premises dining, winning restaurant brands are keeping pace with consumer behavior and finding opportunities to meet evolving customer needs,” SMG Senior Vice President of Research Paul Tiedt said in a statement. “Consumers are looking for safe, convenient experiences amid the pandemic, and off-premises dining gives them an opportunity to get the food they like while allowing restaurant brands to maintain operations.”
In SMG’s study, four out of five respondents said they were aware of third-party delivery. Nearly half used it in the past three months.
Year-over-year, awareness climbed 4 percent. Forbes said in January that, by 2022, third-party sales could comprise 70 percent of all delivery. In 2016, the number was just 37 percent.
Centering on more recent trends, however, SMG identified three themes it believes will help restaurants maintain pace with evolving consumer expectations.
Guests prefer a do-it-yourself approach. Despite the aforementioned growth, the majority of consumers still prefer to pick up their order. Seventy-five percent of respondents said they’ve used a drive thru in the past 90 days and more than half (55 percent) tried carryout and curbside pickup (51 percent). Whether it’s due to health and safety or financial concerns, the majority of consumers are going to the restaurant to pick up off-premises orders.
On average, people trust restaurants more than aggregators. And there’s no denying it’s more cost effective.
Digital is driving off-premises orders. Before COVID-19, 62 percent of people said they ordered food online at least once a month. Since, online ordering increased more than 25 percent, with 78 percent of respondents ordering online as frequently or more often than before.
When it comes to placing an order, 70 percent said they prefer to do so via mobile app or website, with the restaurant’s mobile app being the most preferred channel (32 percent) followed by the chain’s website (26 percent). Trust and brand value are currency in uncertain times.
Consumers are prioritizing safety. Seventy-four percent of SMG’s polled individuals either agree or strongly agree that having a contactless experience is an important consideration when ordering off-premises.
Additionally, they’re prioritizing packaging. Eighty-four percent either agree or strongly agree that the packaging of food is an important consideration when ordering food to-go or for delivery. In evaluating the data across age groups, SMG found the importance of packaging increased with the age of the respondent, with 90 percent of consumers 55 and older agreeing or strongly agreeing packing is important.
Casual dining, fast casual, and fast-food concepts make up almost 75 percent of third-party delivery orders, SMG said. That’s a pretty telling number. Understanding where customers turn for third-party will help operators debate the merits of doing so. Naturally, this hasn’t always been an option during lockdowns. But that conversation is quickly evolving as dining rooms come back on line and restaurants need to decide whether to keep the vendor relationship live or cut it loose.
Percentage of orders by restaurant type
- Casual dining: 28 percent (year-over-year growth of 10 percent)
- Fast casual: 25 percent (year-over-year decline of 6 percent)
- Fast food: 21 percent (year-over-year growth of 15 percent)
- Polished casual: 10 percent (year-over-year growth of 2 percent)
- Family dining: 9 percent (year-over-year decline of 9 percent)
- Fine dining: 1 percent (year-over-year decline of 13 percent)
Does this suggest a more hybrid-type future for casual dining? It seems clear delivery demand is on the rise for classic sit-down chains.
When people are getting food
Previously, SMG said, trends pointed to a boost in lunch and late-night delivery orders. Coronavirus disrupted that. Now, there’s movement toward mid-day and dinner business. The mid-day change is something we explored here—a chance to flatten the daypart curve.
Third-party delivery is no longer overly favored by customers stuck at work for their lunch break or revelers in need of a late-night snack (without leaving the house). It’s become a dinnertime staple. Essentially, there is no set time where people don’t want to leave the house anymore. It’s pretty much always the case, at least for now. And dinner is the meal hardest—and most expensive—for people to replace in their day-to-day lives.
With an increase in mid-day and dinner orders, SMG said, restaurants should review their menu offerings, hours of operation, and staffing availability to meet customer demands. Rethink those so-called “shoulder” hours. Observing customer behavior over the next few months might show a change in historic visitation trends.
Percentage of delivery orders by daypart
- 6 a.m. to 11 a.m.: 4 percent (year-over-year growth of 1 percent)
- 11 a.m. to 2 p.m.: 16 percent (year-over-year decline of 6 percent)
- 2 to 5 p.m.: 13 percent (year-over-year growth of 3 percent
- 5 to 9 p.m.: 56 percent (year-over-year growth of 3 percent)
- 9 p.m. to midnight: 7 percent (year-over-year decline of 6 percent)
Questions of frequency
This was bound to happen in time. Third-party delivery isn’t just gaining more users, it’s seeing more frequent repeat customers as it matures. Gen Z and millennials are the heaviest users, but Boomers saw an 8 percent increase in usage overall.
If there’s one thing COVID-19 forced, it was new customers into the delivery pool. The Cheesecake Factory said in its May Q1 review that it’s roughly doubled weekly new delivery users since February. More than a third of its delivery orders since the crisis arrived from first-time guests.
Also, proving another pandemic trend, incident rates for cheesecake spiked. People are seeking restaurants’ core menu staples. COVID-19 hasn’t really proved a time for adventurous dining.
Frequency of delivery orders in last three months by age
- 1: 21 percent
- 2: 25 percent
- 3: 19 percent
- 4-plus: 25 percent
- Year-over-year growth of 2 percent
- 1: 28 percent
- 2: 24 percent
- 3: 20 percent
- 4-plus: 28 percent
- Year-over-year growth of 2 percent
- 1: 31 percent
- 2: 24 percent
- 3: 19 percent
- 4: 26 percent
- Year-over-year growth of 1 percent
- 1: 30 percent
- 2: 25 percent
- 3: 20 percent
- 4: 25 percent
- Year-over-year growth of 2 percent
- 1: 35 percent
- 2: 26 percent
- 3: 18 percent
- 4: 21 percent
- Year-over-year growth of 8 percent
SMG also noted that not only are customers using third-party delivery more often, half of them are deploying more than one app to do so. Boomers were the only age demographic more likely to stick with one provider.
KeyBanc offered up this data in January that supports the point:
- Only app: 17 percent
- At least one other food ordering app: 83 percent
- Only app: 39 percent
- At least one other food ordering app: 61 percent
- Only app: 27 percent
- At least one other food ordering app: 73 percent
- Only app: 26 percent
- At least one other food ordering app: 74 percent
- Only app: 12 percent
- At least one other food ordering app: 88 percent
- Only app: 56 percent
- At least one other food ordering app: 44 percent
“With so many delivery providers in on the action, customers are keeping their options open,” SMG said. “Have you logged on to the top third-party apps to see how your brand is represented? Is it available at all? It’s important to understand how your brand appears through the eyes of the user.”
In terms of which app is fronting the conversation, SMG found 33 percent of respondents turn to DoorDash—a 9 percentage-point bump from last year.
- Uber Eats: 29 percent (down 5 percent)
- Grubhub: 23 percent (down 3 percent)
- Postmates: 9 percent (flat)
When SMG first conducted its third-party research study in 2017, DoorDash wasn’t even mentioned. Goes to show how quickly trends shift in this space.
The cannibalization question
SMG uncovered a vivid note: If a restaurant isn’t available on third-party delivery, three out of four respondents said they would get food somewhere else. Only 24 percent said they would choose another option to eat from that restaurant.
What does that tell us? Customers looking to use third-party delivery are hell bent on doing so. They won’t make concessions, like electing for dine-in instead. That isn’t to say they wouldn’t swap the occasion on a different day. It’s just that if they dial up delivery mentally, there are enough options at the ready to find one that meets their convenience demands. There’s no reason to compromise.
Starkly, only 6 percent of SMG’s respondents said they would dine in at the restaurant if it wasn’t available with third-party delivery. Eight percent said they just wouldn’t eat at all. Point being, delivery is a game that people commit to.
“What would you have done if third-party delivery was not an option the last time you wanted food from a restaurant?”
- 24 percent: Make a meal
- 23 percent: Carry out or drive thru at another restaurant
- 18 percent: Carryout or drive thru at same restaurant I ordered delivery from
- 8 percent: I would not have eaten anything
- 6 percent: Dine in at same restaurant I ordered delivery from
- 6 percent: Dine in at another restaurant
- 5 percent: Carryout prepared meal from grocery store
- 4 percent: Carryout prepared meal from convenience store
Convenience is simply a powerful trigger. It’s unrelenting, crisis or not.
So is third-party delivery helping or hurting in-restaurant visits?
There’s a lot of ways to look at that and it differs by brand and situation. But mostly if someone’s a frequent delivery user, they’re also a restaurant goer.
SMG found a 5 percent increase in restaurant visits from people who weren’t using third-party delivery but now are. It suggests there’s hope in converting some of these pandemic first-time delivery users into dine-in or carryout guests down the road.
“Business cannibalization is a myth—the existence of third-party delivery actually increases your chance that customers will come to your restaurant,” SMG said.
There is a correlation between third-party delivery guests and convenience in general. Frequent users were twice as likely to use the drive thru than dine-in, SMG’s study showed.
SMG discovered that 58 percent of people experienced a problem with third-party delivery. And the issue is easy to spot.
- 40 percent: Accuracy of order
- 17 percent: Freshness
- 14 percent: Delivery time
- 8 percent: Friendliness of driver
- 8 percent: Order experience
- 7 percent: Appearance of food
- 6 percent: Appearance of driver
Restaurants spend a lot of time worrying about all of these measures. But it appears the nuances aren’t as critical as the most obvious point—arm staff to ensure they’re prepping accurate orders. The line of communication from order arrival/payment to input to production to packaging to delivery needs to flow seamlessly.
A reality that isn’t changing: When issues happen, users are still most likely to blame the restaurant. Sixty-two percent of SMG’s respondents put at least part of the blame on the restaurant.
- Restaurant plus delivery: 27 percent
- Restaurant: 35 percent
- Delivery: 26 percent
- Not sure: 12 percent
“Even if your brand isn’t at fault, customers are likely to blame you. And if you don’t have a way for customers to contact you directly about issues, your brand will suffer,” SMG said.
Don’t rely on the aggregator to always address the problems. A lot of customers won’t turn their to complain.
And guests are placing the largest issue right on operators’ shoulders. With “accuracy of order,” 57 percent blamed the restaurant. So, if operators are going to build a system to address concerns in-house, accuracy is a good place to start.
“The bad news is accuracy is a big problem. The good news is this is one area where restaurants can regain control. Implement multiple accuracy checks in the prep process, include a copy of the receipt, + staple the bag after it’s checked to make sure no mix-ups happen in the delivery process,” SMG said.
Here’s an example of this in action. McDonald’s rolled delivery through Uber Eats in the U.K. three years ago. Over the course of the first two calendars, data showed lower customer satisfaction with delivery compared to other visit types. What McDonald’s found was that while order accuracy held less weight with traditional visit types, it was much different for delivery. It boils down to the customer acceptable with delivery that what you get is what you get. In-store, customers can bring the food back to the counter. Many third-party delivery users aren’t sure where to turn when a problem arises.
McDonald’s decided to hold franchisees accountable by ensuring restaurants contributed toward refunding inaccurate orders. Accuracy of order went up 6 points. Overall satisfaction boosted 7 points. Likelihood to return upped 3 percent.
Food safety. Restaurants can’t control what a driver will do, but you can implement processes to help protect the order and signal to customers the food hasn’t been tampered with. Food should arrive in a clean (no grease stains or spilled condiments), well-packaged, + closed container with a branded seal,” SMG said.
Online reputation. SMG: “With online ratings + reviews, customers are more likely to air their grievances with your brand, not the third-party delivery service. To protect your brand, you need a solution that integrates your other CX data and allows for easy access to reviews, seamless engagement with customers, and swift problem resolution.”
A checklist to mark
SMG provided the following points for operators to address when looking into a third-party delivery strategy, whether that’s developing a new one or refining something already in place.
There is no one-size-fits-all approach. But it’s becoming increasingly difficult to sit this booming trend out.
Here is SMG’s top 10 checklist of items to address for a restaurant’s corporate strategy, field execution, and long-term success
- Compare providers to determine which app(s) best meet the needs of your customers.
- Optimize internal operations to accommodate third-party delivery (3PD).
- Improve CX for customers buying through native convenience options.
- Evaluate 3PD data management + ownership strategy, including which provider(s) will give you access to customer feedback.
- Segment 3PD data as a separate dine type to better understand the specific experiences of your 3PD customers—especially when using ghost kitchens.
- Address 3PD problem occurrence + refine your close-the-loop process for 3PD customers.
- Determine the level of control you have, if any, over updates to your location’s information on 3PD app(s).
- Implement food safety protocols to address customer concerns + drive trust.
- Decide which menu items should be offered via 3PD app based on times of highest demand.
- If you opt out of 3PD, define a delivery strategy that will capitalize on convenience expectations without sacrificing CX.