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Re-thinking the delivery model

Shake Shack might’ve just played disruptor for everyone. And that’s not the only change remaking the fast-growth sector.
Photo Illustration: Restaurant Business

reality check

Every once in a while, human achievement bounds forward to shatter preconceptions of what’s possible. Roger Bannister runs a sub-four-minute mile. Roger Maris whacks 61 home runs. Wilt Chamberlain scores 100 points. NASA lands a man on the moon.

Meh to those. Oh, sure, they reoriented humanity’s thinking. But the aftermath is nothing compared with the seismic waves of Shake Shack’s recent feat. Schoolyard dreamers will one day pester their grandparents for a retelling of how the burger chain demanded and won access to information gathered on its off-premise customers by Grubhub, the brand’s new national delivery partner. For restaurant operators who’ve long griped about the third parties’ unwillingness to share, it’s like lassoing the sun. Shake Shack (and presumably others) will finally learn who’s ordering delivery and how those patrons should be courted. How can this not become the focus of a Ken Burns documentary? 

Yet the breakthrough is just one of the advances operators have logged in recent weeks as they adjust to the realities of off-premise. Delivery became a firehose of new business in large part because third parties provided an instant off-the-shelf way to offer it. No wonder there was a stampede to pair up with the likes of Uber Eats and Postmates. Suddenly, operators had a way of compensating for the slowdown in dining room traffic.

But now the first flush has passed. Restaurateurs who held off are telling the services soliciting their business that a deal isn’t going to happen unless the standard partnership model is adjusted. And the services, knowing they can’t get to a national scope without those laggards, are listening and responding. 

Delivery arrangements are moving faster than a kid with a hot bag and four scheduled deliveries. Chili’s Grill & Bar is (finally) plunging into the market because of the concessions DoorDash was willing to extend. Officials of parent company Brinker International would not reveal what breaks it secured in the negotiations, but the grapevine holds that casual dining’s second-largest player was able to hammer down the standard commission rate.

Similarly, Outback Steakhouse and its Bloomin’ Brands sister, Carrabba’s Italian Grill, warmed to third parties as they heard the latest terms of a possible arrangement. The chains developed their own delivery system to avoid reliance on those outside partners. But management recently revealed that it intended to find a collaborator because delivery’s evolution delivered a ripe opportunity. “Our market test suggests this will have a significant impact on comp sales over the back half of the year once this contract is completed,” said Bloomin’ CEO Dave Deno.

Not all of the changes unfolding in delivery were triggered by the need to meet potential partners’ demands. The third parties themselves are tinkering with their models as they move past the land-grab stage of their development. DoorDash, for instance, has adjusted its DoorPass subscription offer in hopes of fostering customer loyalty.  For a monthly payment of $9.99, consumers are exempted from any additional fee on orders of at least $12, an adjustment from the initial threshold of $15. DoorDash says the offer now generates one of every three deliveries it makes in top-tier markets.

One of the amazing things about delivery is the sheer speed of its evolution and market penetration. Five years ago, self-delivery seemed like an impossibility for any brand that didn’t specialize in pizza. Now Dos Toros, a 21-unit chain, is rolling out a homegrown version to ride the boom. Partnering with an outside service was virtually unheard of prior to 2013. Today, even vocal doubters such as Chili’s are forging alliances. A&W said it couldn’t see the service meshing with its nostalgic essence—how do you deliver a frosted mug of root beer? Now it’s looking for a way to send food to the homes of die-hard fans. 

The changes don’t end there. Sweetgreen and Aramark have both bought a service to handle that fast-growing piece of the business. Yum Brands already has a piece of Grubhub. 

Moving at that speed, Bannister might’ve cracked the three-minute mark.

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