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After years of menu price inflation, price-conscious consumers are finally starting to break their restaurant delivery habit.
Or maybe they aren’t. Right now, it just depends on who you ask.
DoorDash last week raised some eyebrows when it reported that restaurant delivery sales growth on its marketplace “decelerated slightly” year over year. Its overall delivery volume still grew by 21%, but it appeared that much of that came from non-restaurant businesses like grocery stores.
Results from elsewhere in the industry also showed signs of a delivery slowdown. At Chipotle Mexican Grill, delivery revenue fell by about 1% year over year in the first quarter, continuing an ongoing trend at the burrito chain.
Papa Johns also reported a decline in first-party delivery orders, citing a weaker consumer. But it said third-party delivery grew and now makes up 16% of its sales.
A slowdown in delivery would hardly be surprising. The service is expensive, and consumers, especially lower-income ones, have pumped the brakes on their restaurant spending in recent months. All but a handful of publicly traded chains reported negative traffic to start the year.
But DoorDash executives downplayed the impact of inflation on its customers, suggesting that it's not as much of a factor for delivery users.
“In general, we're not seeing the signs of strain on the consumer,” said CEO Tony Xu, according to a transcript from financial services site AlphaSense. “But I think it perhaps has something to do with the segment that we operate in, which is digital and delivery.”
There was plenty of other evidence that delivery is doing just fine.
McDonald’s, for instance, said its U.S. delivery business hit an all-time high in the first quarter. That came despite an overall traffic decline at the burger giant in Q1 in which it said it lost customers to more value-oriented chains.
It was a similar story at Portillo’s. Traffic fell 3.2% at the hot dog chain in the first quarter, but most of that came in the drive-thru. “Crazy as it is, catering and third-party is still very, very strong for us,” said CEO Michael Osanloo, according to an AlphaSense transcript.
It is crazy, Michael Osanloo! Given the high cost of food delivery, common sense says it would be the first place consumers would cut back in a harsh economy. And yet many seem to be skipping some traditional restaurant visits while more or less maintaining their delivery frequency.
How can this be? Well, delivery is a different occasion than a sit-down meal or even a trip through the drive-thru. While those both require time and energy and leaving the house, delivery is the ultimate convenience. Many consumers apparently still believe that convenience is worth the premium. And it's only a few thumb taps away.
Restaurants and delivery apps have also been working to make delivery a better value, if not exactly more affordable. McDonald’s website is currently promoting delivery as a way to get free food by earning loyalty points, for instance. And Domino’s had success in the first quarter with a free Emergency Pizza deal that helped drive up delivery orders.
DoorDash has lowered its fees by 12% over the past two years. And both DoorDash and Uber Eats are continuing to get more business from members of their respective subscription programs, who get free delivery in exchange for a flat monthly fee. Uber Eats said this week that Uber One members now account for 45% of its gross delivery bookings.
And restaurants that are struggling to get customers through the door may view delivery as a fresh source of incremental business. Applebee's said it is taking a more active approach to the channel as traffic to its restaurants falls. In the first quarter, it offered a 50-cent boneless wing promotion for both dine-in and off-premise guests for the first time.
As long as restaurants and delivery services can afford to do that, many customers will still pay the price for delivery. The convenience is just that good.