Grubhub, Uber Eats And Doordash Made Online Food Delivery A $10 Billion Business. Restaurants Aren't

Posted: Dec 16, 2019

In this decade, more and more consumers have shifted to ordering their food online through delivery aggregators like Uber Eats and DoorDash.

Consumers looking for convenient meals ordered $10.2 billion from third-party delivery services in 2018, according to Technomic.

Restaurants adapting to the changing landscape will likely have new challenges in the next decade, including a focus on food quality and increased consolidation of third-party delivery providers.

A decade ago, ordering in for dinner often meant choosing between pizza and General Tso’s chicken that may or may not show up lukewarm at the doorstep.

The rise in online food delivery has changed that. Now, consumers can have anything from a steaming bowl of ramen to filet mignon sent to their front doors.

A 2011 Cornell survey of 372 U.S. restaurant operators found that less than 10% of takeout or delivery orders were done online. Since then, third-party delivery apps like DoorDash and Uber Eats have transformed the delivery market. Consumers looking for convenient meals ordered $10.2 billion from delivery aggregators in 2018, which would make the third-party delivery market the size of the fifth-largest U.S. restaurant chain, according to Technomic.

“The consumer migrated towards having this expectation of things being at our fingertips, from other industries — the Amazon effect, you could argue, contributed to some of this,” said Aaron Allen, CEO of restaurant consultancy Aaron Allen & Associates.

As consumers embrace delivery convenience and abundant options, restaurants are still trying to adapt to the huge change brought by the service.

McDonald’s, Starbucks and Chipotle Mexican Grill are among the many national restaurant chains that have partnered with delivery services. But for some, the extra sales from delivery also mean lower profit margins and major operational changes.

Chipotle, for example, started adding second kitchen lines to locations in 2016 to handle online orders. Employees assemble digital and delivery orders on the second line to speed up service. The chain completed the project this year.

“We see this a lot more in the sophisticated restaurant chains that are beginning to really embrace off-premise and delivery,” said Trevor Boomstra, director of AlixPartners’ restaurants, leisure and hospitality practice. “They’re adapting their physical presence and their layouts.”

Increased delivery costs weighed on Chipotle’s profits during the third quarter.

By Amelia Lucas 
December 14, 2019
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