Business and Operations
If pizzerias are still delivering direct to consumer, are they still adding value?
When it comes to delivering restaurant food directly to customers, few industries can boast the pedigree of the pizza industry.
For over half a century, delivery has been a key means by which consumers obtain pizza. For years, we’ve had the “on demand” piece of the market cornered, but there’s been a seismic shift in the dynamics around food delivery. Technology has turned the act of delivery into the art of logistics, raising a question: if pizzeria operators are still delivering direct to consumer, are we still adding value?
From the industry perspective, getting into the delivery business has always had its pros and cons. It’s a means of getting the product to the customer but it’s not our core competency: our core competency is making great food. If you are a small to large chain, you may have your own vehicles and hire delivery team members. There are insurance and employee safety considerations to factor in. Fleet maintenance is an additional cost, and if you accept payment on delivery, there may be some loss due to bogus orders. Staffing appropriately is another challenging task, as you’ll need a good handle on your business flow to have enough boots on the ground to get those pizzas to people quickly. The industry has shifted to adding a small delivery cost to defray the operational expenses, but it’s still a diversion of operator focus. Customers desire a variety of foods, served hot and fresh, on demand and to suit their needs at any given meal. Consumers were gift-wrapped the answer to this wish with the advent of smartphones.
There has been an increase in online pizza ordering in recent years, and robust technology has allowed operators with deep pockets to enhance their delivery experience. Apps (short for software applications) are software programs that you use online or on mobile devices. You access this software while using your browser instead of installing it permanently on your computer. Apps can have a very narrow purpose or a broad range of functionality, but they typically have a narrow focus that allows them to excel at what they do. Many such apps have taken the delivery experience to a new level. Pizza Hut has developed connected car apps that allow the consumer to track the pizza’s progress from creation to delivery via a global positioning system (GPS). Domino’s has introduced apps for smartwatches, a Siri-like ordering assistant on a platform that works on voice commands and a feature that allows customers to place an order by texting an emoji (a small digital image or icon used to express an idea or emotion in electronic communication).
Online ordering and delivery of perishable food items on a national level has always been a tricky proposition. We are the second largest country by land mass with a relatively small population. Grocery stores are serious about perfecting the logistics of online ordering and delivery, and Amazon in the U.S. is getting into the grocery delivery game too. It’s a very crowded landscape.
So where exactly does the small- to medium-sized pizzeria operator fit in?
There is strength in numbers. When a variety of food service operators are bundled together digitally, it creates a cyber food court of sorts that draws some serious traffic. Companies such as Just Eat and UberEATS are two of the larger players offering the technology to promote the menu, the ability to secure and take payment for the order and the infrastructure to deliver it. Typically, the operator pays a transaction fee for each order. On the surface, farming out order taking, payment and delivery may seem like giving away your profit, but that depends on how you use the service to grow your business.
Giorgio Taverniti, owner of Frank’s Pizza House in Toronto regularly leverages such services as Just Eat, UberEATS and Door Dash to grow his business. “At first my accountant wasn’t crazy about the idea [of using these types of services] but when he crunched the numbers, he said, “Actually, you’re saving money,’ ” Taverniti says. He looks at the cost of carrying another employee, shelling out vacation pay, scheduling and providing staff meals and calculates the return on investment of these costs to grow delivery service.
A cost-benefit analysis works when the costs are low and the benefits high. Taverniti sees third-party delivery services as a way to extend his geographic reach outside of the range he currently delivers to with his own team. The service actually complements his existing infrastructure; it doesn’t replace it.
“I’ve extended my reach by another five kilometres. I was getting about 10 to 12 calls per day outside of my delivery radius,” he says. He also uses app-based delivery services to speed up delivery times within his own delivery area when he gets a rush of business activity. “If a customer wants a pizza right away and it’s really busy and the wait time is longer than they want because my delivery is the bottleneck, I tell them go order through one of these services and they can get it sooner,” he says.
Proponents of these services also cite higher average cheques as an upside of outsourcing online ordering, payment and delivery. Many sectors see a larger average sale with online ordering, and food service appears to be no exception. “The average Just Eat customer is between the ages of 25 and 35, and when they place an order they usually spend upwards of $40. Not only is this a 30 per cent higher spend than the average phone-in order, but the customer also orders more often. On average, one order represents approximately 2.2 customers won,” says Daniel Tallon, international marketing director of Just Eat. Taverniti says his pizzeria receives more orders via apps than over the phone. “In 50 to 60 per cent of the cases, the average cheque is higher (than through traditional order channels),” he says.
Some operators are concerned that by outsourcing the delivery piece they may be losing some brand control in terms of service quality and contact with the customer. “Just Eat champions the customer experience. We work alongside our restaurant partners and provide a dedicated customer care team seven days a week to ensure that every customer loves their takeout. Moreover, when an order is placed at a restaurant, the owner is provided with the customer’s name and contact details, as well as a summary of the customer’s order frequency. In addition to this data, we provide our restaurant partners access to a system called Partner Centre where they are able to track their customer database and order history in more detail,” Tallon says.
“We always have the ability to contact the customer directly,” Taverniti says.
As companies like Just Eat, UberEATS and Door Dash expand their local marketing efforts, the value to operators should continue to grow. The technology delivers the order to the operator and the logistics deliver the food to the customer.
You get to focus on making great food, which in the end is what you do best.
Michelle Brisebois is a marketing professional with experience in the food, pharmaceutical and financial services industries. She specializes in brand strategies.