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OPINIONOperations

Money continues to funnel into third-party delivery

DoorDash is the latest to receive a multimillion dollar investment.
Sara Wirth

Thanks to its latest round of funding, DoorDash is now a $1.4 billion company. The third-party deliverer used by a large number of chain restaurants has raised $535 million to help drive its position not just as a delivery company, but as a logistics business.

The announcement comes just weeks after Yum Brands announced plans to invest $200 million in online food ordering company Grubhub. And on the same day India-based Zomato—an international engagement platform—announced that it had raised $150 million in funding.

This also comes at a time when several operations—Red Robin, Panera Bread and Bloomin’ Brands, to name a few—are exploring self-delivery as an alternative to partnering with third parties. Still, the financial backing shows that the industry—and onlookers—are still hedging their bets on third-party partners being a primary source of delivery.

Even those exploring self-delivery aren’t necessarily planning to exit those third-party partnerships. “We were really early to the third-party adventure, and stayed there,” says Laura Rea Dickey, CEO of Dickey’s Barbecue Pit, intimating that the brand’s self-delivery experiment is a supplement to, not a replacement for, third-party. “It continues to be a growing revenue stream for us, and we continue to see an increase every quarter.”

Which begs the question: Is there a better partnership model?

One of operators’ most frequent complaints about third-party delivery is the cost; many find that the fees charged by delivery companies hurt profitability. The Yum-Grubhub deal may improve those economics—something Yum thinks will get its franchisees to buy in a little more. And the Grubhub platform will also integrate into those brands’ POS systems, addressing another sore spot for restaurant operators working with outside delivery partners.

At the same time, operators resisting third-party should consider consumer behavior. The top consideration for diners ordering delivery is the type of food—they often search these aggregators for foods that match those desires versus going to a specific restaurant’s website. Only 44% of consumers consider the actual restaurant when ordering delivery—with just 16% naming the restaurant as their first consideration.

Between consumer behavior and reduced operational burdens for restaurants, it’s no surprise that money continues to funnel into third-party delivery companies. What remains to be seen is how much they continue to grow—or consolidate.

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