The COVID-19 pandemic has upended many conventional notions which otherwise represented an ordinary way of life. Whether it be the concept of working from home or maintaining social distancing, there have been paradigm shifts in thought and deed both in the professional and personal domains. The restaurant business is no exception to the norm. Dining-in has almost faded away on account of a combination of necessity and apprehension. Delivery has become the clinching factor standing between the survival and collapse of many food service providers, especially the independents. The future trend when it comes to consumption food may well be a restaurant going to a consumer’s home rather than a consumer paying a visit to the restaurant of her choice. Unless and until restaurants innovate and adapt to the changing mores of time, their chances of sustenance are very slim. However just like every crisis throws d What own a marker for opportunity, the restaurant segment finds itself positioned on the cusp of a phenomenal innovation curve. In their fantastic book, “Delivering the Digital Restaurant”, Meredith Sandland and Carl Orsbourn take their readers on a roller coaster ride as they explain some of the ingenious ways in which some bold restaurants and restaurateurs have attempted to reinvent themselves, and have succeeded beyond their wildest imagination.
Long before the pandemic struck even, the eating habits of people had undergone a perceptible shift. As the authors illustrate, longer work commutes as well as the entry of women in the workforce resulted in Americans spending just sixty minutes each day (thirty seven minutes less than the Chinese and sixty seven minutes less than the French). When one adds the awareness quotient permeating the Millennials and Gen Z, the one uncompromising demand when it comes to food is adherence to quality, speed and variety. In other words as Sandland and Orsbourn elucidate using a very alluring but lengthy acronym, the need of the hour is the phenomenon called, “I Want What I Want When I Want It” (IWWIWWIWI). Books such as Eric Schlosser’s damning polemic against the fast food industry, “Fast Food Nation” and eye-opening documentaries such as Forks Over Knives, Super Size Me, Food Inc, and Fat, Sick and Nearly Dead have influenced eating choices and preferences to degrees hitherto unimagined.
Restaurant brands such as True Foods Kitchen, Blaze Pizza and Oath Pizza have not just assimilated healthy customer preferences into their philosophy but have also literally “baked” them in, in their product portfolio. Pizzas are now “cocreated” whereby customers can create their own pizza moving away from run-of-the-mill ‘classics’. Blaze in fact went the whole distance in making their menu a veritably healthy experience by enlisting the universally acclaimed chef, Brad Kent, owner of Olio Restaurant and Pizzeria. The result – pizza crusts with no gluten and a potential foray into gluten free dough too.
One of the most influential changes that has had the effect of literally transforming the restaurant industry has been the phenomenon of delivery. Delivery Platforms such as Grubhub, DoorDash and UberEats are now ubiquitous in their reach and service. These Delivery Platforms have ensured digitalization of the restaurant in a humongous manner. For example the restaurant brand such as Chipotle expects digital sales in 2020 to net revenues worth $2.4 billion.
What is it that makes delivery platforms the harbingers of future tidings in the restaurant industry? Sandland and Orsbourn think that three facets in the form of access to technology, customer acquisition and Logistics acquisition make delivery an indispensable ally to good prospects. Digital Delivery companies like Uber and Grab (in South East Asia) have ushered in a degree of disruption in customer acquisition, that makes it comparable to fantasy. Benefitting from local network effects and economies of scale these companies have birthed a virtuous cycle that is most cost-efficient from a customer perspective. Hence an obvious shift to the ‘Delco’ (delivery carryout) model which was hitherto seen as the prerogative of only Pizzas and Chinese food. Innovations in the field of delivery, such as introduction of a Pizza tracker and an iPhone app amongst others ensured that a near bankrupt Dominos Pizza with $2 billion in debt, leap frogged over its rivals on all parameters to the extent that their share price which was languishing at $3 in 2009 touched nearly $400 in 2020.
With a view to cutting fixed costs in the nature of rent and labour, restaurants are also exploring with great interest the concept of ‘ghost kitchens’. Popularly referred to as dark kitchens, ghost kitchens are commercial kitchens dovetailed to optimize food delivery. Each kitchen is located in areas boasting a high concentration of delivery demand. The kitchens per se do not have a storefront and the staff prepares dishes off of their menus that are only available for delivery. Classic examples of ghost kitchens include Kitchen United, All Day Kitchens, C3, Zuul and Colony, and Little Fatty.
However an important lacuna to be addressed by restaurants in using third party delivery platforms border on both customer satisfaction as well as exorbitant delivery charges. Not only does a restaurant fork up to 30% of their costs on delivery charges, but also are at risk of losing repeat customers due to differing and conflicting incentives. While a delivery platform seeks to maximise its delivery potential by hooking up with as many brands as possible, a restaurant’s intention is to wean away customers from competing brands. Hence a need to transition from third party digital platforms to first party or own technology tools/platforms. This is where companies like Brightloom and Thanx come into the picture. Using predictive customer Lifetime Value (“LTV”) models and predictive recommendation models, they make available mega data and intelligence to restaurants enabling them to measure incremental benefits. Even small independent companies can avail of this Software as a Service (“SaaS”) model to their advantage.
Restaurants are also going “virtual” in more ways than one. For example, Canter’s Deli operating since 1931 have an exclusive menu called Grilled Cheese Heavens, catering exclusively to the sandwich needs of its customers. However Grilled Cheese Heavens does not appear on any storefront, does not possess any website and vests solely in the kitchens of Canter’s Deli. A subtle variant of this owned virtual model is the licensed virtual model under which restaurateurs pay a fee to use a brand created by another company. Uber Eats for example carries brands such as Lucky Cat Vegan, Ha! Poke, Hot Lips Fried Chicken only on their platform. Extending the licensed model is the franchise model. Under this variant, the franchisee pays the franchisor royalties for using the latter’s brand, supply chain and operating systems. The ultimate virtual restaurant model is of course going completely virtual! This amazing model involves churning out ‘concepts’ from a single, sprawling mega kitchen. Not convinced? Ask Salted, the virtual restaurant Group. Operating across Los Angeles, San Francisco, Chicago, Columbus, Houston, Austin, Atlanta, Philadelphia, and Tempe, Salted is a “platform for scaling better-for-you restaurant brands, without the overhead of actual restaurants”.
The future of food is unlike anything seen or experienced before. And as Meredith Sandland, Technical Advisor to Butterfly with subject matter expertise in digital disruption and off-premise foodservice distribution, along with Carl Orsbourn, Consultant, Author, Business Executive at the Convergence of Dark Retail, Food, Cannabis & Delivery Innovation, phenomenally illustrate, only the intrepid, intrigued and innovative will best the challenges that would be posed while the laggards fall by the wayside.
(Delivering The Digital Restaurant: Your Roadmap to the Future of Food by Meredith Sandland & Carl Orsbourn will be published by Mascot Books, an imprint of Amplify Publishing and will be available from the 12th of October 2021)
Thank You Net Galley for the Advance Reviewer Copy.