Bowery Capital and Balance explain how B2B marketplaces can think about payments.
Food delivery has gone from being a luxury for affluent diners to being a ubiquitous part of the restaurant industry. The influx in venture capital investments in the food delivery space has shown the industry is large and growing. To succeed restaurants will need to make technological investments to adapt their workflows and services. An example adaptation is the highly discussed rise of “ghost kitchens,” which are rental kitchens that serve delivery only restaurants. Travis Kalanick, former Uber CEO, helped popularize this new trend by announcing his new project in the space CloudKitchens. Aside from physical investments there are several software innovations for restaurant delivery that are crucial to manage and grow operations.
Changing consumer behavior in the past several years has helped drive the uptick in delivery and make software investment essential. A recent LEK study projected restaurant delivery to grow 3 times faster than in store sales reaching $88 billion by 2023. This growth driven by changing consumer expectations and the rising incomes of millennial consumers. E-commerce has morphed consumers expectations of instant delivery forcing restaurants to satisfy this demand. As the incomes of 18 – 24 year olds and 35-34 year olds – who are the highest percentages of food delivery users according to eMarketer – we can expect the food delivery industry to continue to explode.
Although delivery is increasing rapidly the economics of delivery have not necessarily kept pace. The WSJ recently reported that the profit margin from delivery is well below in store dining (39% vs 69%). As more consumers choose to order delivery restaurants will continue to see their margins shrink. A potential solution to these lost profits would be to adopt software that helps manage delivery operations and reduce costs. Though not as sexy as ghost kitchen innovations these services will be integral for the future of delivery.
1. Restaurant Delivery POS Category. Point of service (POS) platforms have had a long presence in the restaurant industry helping restaurants improve their management systems and streamline and simplify daily operations. Delivery restaurants use of third party ordering systems have added a layer of difficulty in integrating with POS systems. Companies such as Chowly develop platforms that automatically transfer orders to restaurants POS system reducing the need for employees to manually transfer the information.
2. Fleet Management Category. An increased number of deliveries for a restaurant means more delivery drivers and more logistical nightmares. Restaurant owners who traditionally focused on culinary operations are now forced to manage the delivery logistics of larger fleets. Companies such as Onfleet help manage delivery operations such as driver dispatch and real time tracking of deliveries to help restaurants solve their logistical problems.
3. Restaurant CRM Category: As more and more restaurants move into delivery the competition for customers will become fierce. Restaurants will need significant digital presence to enable them to expand their marketing operations to improve customer acquisition and retention. In response to this increase in competition for customers companies such ChowNow have developed CRM platforms to help restaurants maintain customer relations through marketing and data services.
Though software innovation for restaurant delivery is essential, it’s unclear if these companies will succeed on their own. The restaurant software ecosystem has been moving towards a single platform offering bundled services. Look for leading companies like Square, Toast, and HotSchedules to either acquire companies in these spaces or continue to expand into these product offering.
If you liked “Software Innovations for Restaurant Delivery” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog.
Bowery Capital's Loren Straub and Gabe Hawkes chat with Jimmy Fong, Chief Commercial Officer at SEON, about Buy Now Pay Later (BNPL) fraud and what the future of security looks like in the space.