8.27.2019: Still Delivering…
It wasn’t my intention to focus so intently on digital ordering and delivery in Expedite’s early days, but here we are. Week three and counting.
Panera Adds Third Party Delivery Services
A little more than a year after launching nationwide delivery, Panera is calling in reinforcements to generate more business for its delivery channel. The casual dining chain announced today that it is partnering with the big three third-party delivery services in the U.S. — Grubhub, DoorDash, and Uber Eats — to fire up more demand for lunch and dinner delivery orders. (For now, Panera is keeping breakfast delivery to itself.)
Panera fulfills the deliveries via white-label logistics system Bringg, the company confirmed, so the partnership with the third-party services is largely a marketing play to reach a wider consumer audience. It doesn’t hurt that the company can side step the bulk of third-party delivery commission fees with this setup, either.
“Because they’re providing their own logistics, they likely cut their commissions in half or more,” said Scott Landers, founder of Figure 8 Logistics, a food delivery consulting firm based in New York City. “Typically a 20 percent commission can be broken down to 10 percent marketing and 10 percent delivery. This means they’re likely paying no more than 10 percent and probably as low as 7.5 percent due to their purchasing power and brand.”
In making this move, Panera is following a strategic playbook similar to other nationwide chains like Chipotle and McDonald’s. Court one service to white label (more on that in a second) the delivery logistics, but don’t let that stop you from selling delivery wherever the people want to buy it.
- Erika Adams
Expedite contributor Erika Adams is a Brooklyn-based freelance restaurant reporter.
So What Is White Labeling?
While plenty of restaurants are eschewing exclusivity contracts with third-party ordering and delivery services (see: UberEats/McDonalds), others are quietly enhancing their relationship to a delivery company with a white-labeled mobile app or website integration.
What does that mean?
In short, it means when it looks like you’re ordering directly from a restaurant — from that restaurant’s dedicated app or on its website, for example — your order is actually powered by one of the big digital delivery companies. DoorDash and Grubhub in particular are clear on the importance of this feature to their businesses. White labeling can take several forms, from powering the logistics part of the delivery — DoorDash has a whole product devoted to this called DoorDash Drive — to actually building mobile apps and restaurant websites to facilitate delivery. This is also a big part of the reason Grubhub paid $390 million for LevelUp, which is mostly known as a loyalty and payments company — it also creates white-labeled digital properties for restaurants.
White labeling in this form isn’t meant to be some secret endeavor, but it can be surprising information to those with a linear view of restaurant delivery, believing the business is more black and white: either you order from the restaurant directly or you order via a third-party marketplace. Nope, not always!
Wait, what? Why?
The big companies get some things very right, including infrastructure and fulfillment logistics. Many restaurants, from small independent locations to larger chains (“enterprise businesses” is what the industry calls them) don’t have the resources to devote to building a complex digital product that interfaces with real-life delivery logistics. And, truthfully, even if they did, why bother when a host of other options are available?
Just like restaurant delivery is not zero-sum, nor are the avenues by which a restaurant or restaurant chain can offer ordering and delivery. There are plenty of ways to do it, and plenty of ways to find success.
Some are clear about branded partnerships, like Taco Bell’s delivery with Grubhub. You can’t miss the co-branded experience , really, online or in television ads.
For others, the online ordering and delivery experience is restaurant-first, like Chipotle’s in-app partnership with DoorDash. KFC, an exclusive Grubhub partner thanks to parent company Yum Brands’ exclusive deal a couple years ago, “expects to launch a branded web experience by year end” according to Yum CEO Greg Creed. (“Branded web experience” just means a way for customers to order via the KFC website without being redirected to Grubhub.)
Grubhub CEO Matt Maloney has confirmed that Grubhub is building KFC’s mobile app on a few of the company’s recent earnings calls, though he defers to Yum Brands when alluding to its eventual release.
Why is it a good idea?
Simple: brand recognition and loyalty. Chipotle, for example, prompts app users to register for its (new-ish) loyalty program when placing a delivery order within the app. Thanks to LevelUp, Grubhub offers loyalty services too, including targeted marketing campaigns, to those placing digital orders on its platform.
While third parties can provide incremental lifts in business, they’re also, at their core, marketplaces. So: it behooves restaurants to continue to invest in creating and maintaining a loyal customer base. According to recent data from Second Measure, customers are becoming less loyal to particular ordering platforms over time — likely a symptom of growth and consumer recognition of newer companies.
So… why doesn’t every restaurant white label online ordering?
In short, it doesn’t make sense for all businesses. Ordering and delivery services can be good marketing engines for all restaurants, but especially smaller businesses working to get noticed in a competitive market. I mean, look at Panera, which publicly eschewed large third-party services for years. Even Pizza Hut uses Grubhub to take some orders. (The pizza chain still uses its own delivery fleet, a la Panera.)
The point: delivery is touted as providing incremental growth. It’s also pricey and time-consuming, and restaurant businesses are still iterating on different formulas to see what works. Increasingly, business models say partnering with a larger company is fruitful, whether for a small business or national chain.
-KH
