Grow Your Take-Out Food Delivery Business
Do you need your take-out delivery business to serve up more impressive returns? Perhaps it’s time to take a bite out of online food delivery.
Food delivery apps are addressing the changing preferences of time-starved customers who want a better and larger variety of food on demand. Whether you have two restaurant locations or 200, food delivery apps are leveling the playing field by democratizing home delivery.
Food eaten off-premise currently accounts for $210 billion a year in revenues for the U.S. restaurant industry. Morgan Stanley projects that online delivery could make a run for that revenue. And since online food delivery only accounts for $11 billion of the total $30 billion food delivery market, Morgan Stanley believes the industry is “still in its nascency.”
JUST EAT is one of dozens of apps capitalizing on this growing market. In an interview with JUST EAT’s Howard Migdal, Country Manager for Canada, Migdal discusses how restaurant brands big and small are seeing huge returns through their partnerships with food delivery apps.
Who: Howard Migdal, Country Manager, Canada, JUST EAT
What: How to grow your food delivery business online
When: Wednesday, March 29, 2017 at 12PM EST
In this session, you will learn:
- How to drive growth for your home delivery business
- How small, local establishments are pulling in $1 million in annual delivery sales
- How to increase your delivery business by 20%-40%
- The fastest growing food delivery category
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Jean-Pierre: Good afternoon. My name is Jean-Pierre Lacroix. I’m President of Shikatani Lacroix, and I’m here with Howard Migdal, who is the Country Manager of Just Eat. And we’re gonna talk about apps and the impact apps have on the food service industry and how consumers use those apps to drive frequency of purchase. So Howard, thank you very much for joining us.
Howard: Thank you for having me.
Jean-Pierre: So Just Eat. Talk to me a little bit about what is this?
Howard: So Just Eat is the world-leading global marketplace for delivery restaurants. We operate in 13 countries. We have about 60,000 restaurants and we process over 10 million orders daily. So what does that mean, “global leader in food delivery marketplace?” It’s simple. Customers go to our app or website, they put in their postal code, and we show them the best delivery restaurants in their area.
Jean-Pierre: And so can they order the food through your app?
Howard: Exactly, of course. So via the mobile apps or website, they put in their postal code, they see a bunch of… They can search by cuisine or food type or price or rating. And we show them, you know, they choose a, you know, pizza place. They can order food online. We send that order to the restaurant. The restaurant prepares and delivers the food.
Jean-Pierre: So what’s driving this behavior? Obviously, you’re in numerous countries and, you know, 10 million orders a day. That’s phenomenal. I mean, I think if you’re a restaurant operator, you just dream of those kind of orders. What’s driving…what’s fueling that?
Howard: Tens of millions of orders monthly, not daily.
Jean-Pierre: Monthly. Oh, okay, is that a correction? Well, what’s next?
Howard: Okay. So delivery’s not a new thing, right?
Howard: In the olden days, there was, you know, you’ve got the Yellow Pages first. That was the first ultimate aggregator. Then restaurants started mailing you flyers in your door, typically you would…
Jean-Pierre: They still do.
Howard: They still do, less and less. But typically you would order from the same places over and over again. You had a few phone numbers stored in your phone or you had the Yellow Pages. And all the apps and website has done is sort of, like everything else, has made the process quicker, easier, more efficient, more transparent.
Jean-Pierre: If you looked at the marketplace, you know, who is the most frequent user of the app?
Howard: So if you would’ve asked me that question 5, 10 years ago, it was, like, university students, people in their early 20s, millennials. And now, literally, it is everyone. The first average age is in the 20s. Then it skewed to the 30s. Now it’s skewing to the mid-30s and late 30s. Like, everyone orders delivery and takeout, and everyone’s comfortable putting their credit card details into a mobile device or website. It’s a \$13 billion industry in Canada. There’s a lot of people ordering pickup and delivery, so the demographic is very broad.
Jean-Pierre: We’re currently doing a study on apps, to understand how many apps… It’s for the banking industry, how many apps a customer will have on their smartphone that are tied to financial services. I’m kind of curious the same. Do you have any stats or understanding of how many apps, food delivery apps, would a customer…? In other words, you’re no longer competing with another restaurant. You’re now competing with another app on their phone.
Howard: Typically, food delivery still is an episodic purchase. People aren’t doing it every day. It’s on a Sunday afternoon, maybe a Tuesday night, and maybe those people don’t have any apps on their phone. They’re comfortable going to the website or using mobile web to order their purchase when they do it once a month. Then there are other consumers who probably have multiple food apps. They’re foodies. They’re ordering all the time. They’re never cooking. To tell you specifically how much of those people don’t have the app versus have one app or multiple apps, I don’t know the answer to that.
Jean-Pierre: So do you view brands like Uber as a competitor to Just Eat? In other words, companies who, you know, you order through your app or online and it goes to the store, but the store’s responsible for delivering it. Uber kind of looks at it from a different angle. You know, how successful have they been in the food delivery business?
Howard: Let me first clarify the main difference between us and the other food delivery apps. We’re the only, what we call, “pure marketplace” in Canada. Traditionally, you’re a hungry customer. We have tons of great local restaurants that deliver food, and you order. We send that order to the restaurant. They’re responsible for preparing and delivering the food. So we have sort of broader choice because we have all those traditional delivery places, and we also, at Just Eat, can provide delivery services, just like Uber, to restaurants to get the higher-end or niche cuisine restaurants that need delivery. But they’ve been successful, of course. They have a big brand. They have lots of users, so of course they have taken market share.
Jean-Pierre: So why would the food service operator want to partner with you? I mean, they already have a website. They already have a delivery service. What’s the advantage for them to consider Just Eat?
Howard: So it’s incremental revenue. If their kitchen is not full, at 100% capacity, there are tens of thousands of people coming to Just Eat daily to look to order food. If they are not there, if that restaurant is not on Just East, they have no chance of getting that order. So unless they are at 100% capacity, they should be using Just Eat. It’s incremental revenue.
And we make it seamless on them, right? They don’t have…If you’ve been in a ma-and-pa restaurant at dinner time, it’s chaotic. It’s busy. It could take 5 to 10 to 15 minutes to order a large order over the phone. The restaurants rather not deal with that. They make food very well. They prepare and deliver food very well, but we can take the hassle of the order-taking process out of the picture for them. So incremental revenue and convenience.
Jean-Pierre: The restaurant industry is motivated by day-part growth, basket-size growth, frequency growth. Those are all kind of the metrics that, you know… Put aside margin and profitability, those are the metrics. The comp sales are kind of the holy grail of the restaurant business. Has there been a different behavior due to the introduction of apps, and specifically Just Eat, in the frequency? Have we changed the behavior of customers in a way that’s positive for the restaurant industry?
Howard: Absolutely, 100%, especially for the non-price-sensitive shopper, right? Like, it’s a busy world. You leave work at 6:30 p.m. You take the subway home. You’re on your street by 7:15 p.m. Then to go to the grocery store, to prepare food, it’s, you know, 8:30 p.m. before you can take your shoes off and relax. Whereas now you can literally, while you’re on the subway, with one click of a button, order the same thing you ordered last week and it’s home five minutes after you got home. I mean, so people are willing to pay for convenience, and it’s not that much more expensive to pay for that convenience. You see restaurants, like you said, increasing their frequency like, you know, wildfire.
Jean-Pierre: So when you look at, you know, consumers are ordering through your app, is there any… As you know, ethnicity and diversity of food is growing in North America. South Asian specifically is doing really well. Have you seen, for example, that the app has allowed accelerated growth for what I’ll call “niche operators,” or do you see it’s the big players that are benefiting from the app?
Howard: So I’m glad you asked this. Because the delivery marketplace has grown, right? So before, because these, like we just talked about, frequency. Maybe someone who ordered delivery once a month when they wanted to order Chinese or pizza for a family affair on a Sunday night, but they don’t want to order Chinese, pizza, you know, five nights a week.
But because these apps have grown the delivery space, these niche cuisines can do enough frequency to hire drivers and be an economic or a profitable part of their business. So, like, vegetarian and vegan is the fastest-growing category on Just Eat, and it’s simply because more of these cuisines are offering delivery because the market size is bigger. There’s a larger pie to go after.
Jean-Pierre: Is there… You know, if I’m an operator and I’ve got 5 restaurants or I’ve got 10 restaurants, is there a size of scale where the app has the most benefit?
Howard: No, I don’t think so. The restaurant delivery space is so hyper-local. You’re talking, restaurants deliver within two kilometers, right? You don’t care what the…you know, if we’re on the east end of the city, we don’t care what the best delivery restaurant is on the west end of the city. You care about the best delivery restaurant within, you know, two or three kilometers of your spot. So no, the people who do the best are the ones that consistently service the customers well, well-packaged food, well-prepared food, quick deliveries. I don’t know if there’s huge benefit in scale for these hyper-local businesses as to how they perform on our app.
Jean-Pierre: So what you’re really saying is that the app actually is democratizing home delivery, that it’s allowing pretty well any operator a platform, if interested, to be able to provide. As long as they can deliver the food, they have a platform through your app or other apps similar to yours to be in the home delivery business. Now the home delivery business, is it growing? Is it flat?
Howard: From our research, the independent sector, the fast casual, independent restaurants’ delivery, is growing at 5% to 6% year-on-year, which is one of the fastest-growing sectors in the industry.
Jean-Pierre: Again, fast casual has always been kind of the most successful segment. Has it helped casual dining and fast casual, which has been struggling historically?
Howard: It has, right? You know, you’re limited to your four walls with dine-in, right? We give them exposure to hundreds of thousands of customers. And if they have good food and a good brand and can deliver to the customer in a timely matter, we can give them tons of incremental revenue.
Jean-Pierre: Obviously, there are competitors out there that offer similar services. You know, if I’m an operator, I’m now looking at all my options. Why would I pick Just Eat?
Howard: So I’ll explain the benefits for both the consumer and the restaurant. So from the consumer, because we’re that traditional marketplace model, you know, you’re a hungry customer. We’re looking to connect you with a great local restaurant. You know, you order food, we send that to the restaurant. Because we charge a very low commission to the restaurants, there’s no markups.
As a matter of fact, we have a price promise to the consumer. When you order through the app, you’re guaranteed to get an equal to or less price than you would by ordering direct, and 50% of our restaurants actually offer no delivery fees. Because of some of the competitors you discussed have to support a logistics model. They’re actually delivering the food, there’s additional costs. So there’s higher delivery fees, and the restaurants are forced to mark their prices up to subsidize a large commission that they have to pay to the other providers. So the benefit to the consumer is not only do you get good choice, you’re getting the same rate or cheaper.
And when I say cheaper, you’re probably wondering, “How could you possibly get it cheaper when you order on Just Eat compared to ordering from the phone?” It’s because we have a marketplace, you know. When you have, you know, 10,000 people, 10,000 eyeballs, 20,000 eyeballs a night looking for a restaurant, as a restaurant you want to capture that business, right? So you’re willing to compete with your competitors and offer 20% off discounts during slow times to capture that incremental customer. So often you’re actually getting cheaper prices by ordering through Just Eat. So that’s the benefit to the consumer.
Jean-Pierre: But as an operator, why would I select you versus somebody else? Lower rates?
Howard: It’s incremental business for them, right? We have the biggest marketplace. We have the most customers looking for a restaurant. So, you know, day one, they’re gonna come on our aggregator…
Jean-Pierre: So you’re a destination for…
Howard: Yes, exactly. You’re hungry. You don’t know what you want to eat. You’re gonna come to Just Eat, and then you can find and discover new restaurants. So it’s incremental revenue for the restaurants. And because, if a restaurant is a good provider, the way our… You know, we may have 300 restaurants deliver to this very spot right here, and we rate the restaurants by customers’ reviews and re-order rates. So we do a good job of showing you what the best restaurant is for you at that time. So if a restaurant can provide a really good experience to the consumer, they’re gonna actually continue to get more and more and more orders.
Jean-Pierre: That’s great. So you actually provide reviews and evaluations of the performance of the restaurants.
Howard: Absolutely. So we want to be completely transparent. And one of the benefits of our app, restaurants have thousands of thousands of reviews accumulated. So you know what you’re ordering before you get it.
Jean-Pierre: Is there any other added value, you know, collateral benefits of the app – for either the operator or the consumer? Things that are not part of the delivery ordering system, but are benefits to both parties.
Howard: Not only on that individual order are you getting incremental restaurant and a new customer in the door, but… For example, I’ll compare it to the travel industry. If you book a hotel on one of the big travel providers, you don’t go back to your friends and say, “I love that travel provider.” You talk about the hotel. “I had a great experience at this hotel. It was a beautiful hotel.” If you discover a new restaurant in Just Eat, you’re not gonna go, you know, tell your wife, “Oh, I love Just Eat.” No, “I love that restaurant. It was a great experience,” right? And maybe next time you’re walking by that restaurant, you’re gonna walk in the door because you tried it at home on Just Eat. So it’s not just helping the restaurant on that one individual order. We’re giving local ma-and-pa establishments the same reach as a big national brand.
Jean-Pierre: Could you share a case study, a situation of an operator where the metrics and the performance and how well it’s done?
Howard: We do have some restaurants, some local establishments with small delivery zones, three or four kilometers, that are pushing \$1 million in sales just through Just Eat alone. Just through that one delivery channel, annually they’re pushing $1 million in sales. We have a few operators…that’s not the norm, but we do help… We don’t know…I can’t give you a percentage on how much we raise their business because we don’t know much their dine-in business is or how much their phone business is, but it’d be very normal for a restaurant to increase their delivery business by 20% to 40%.
Jean-Pierre: When you think of Just Eat, and you’re a restaurant operator trying to make a decision, “Should I or shouldn’t I?” And so if I say, “Yes, I should,” you know, what options should I take? What advice would you give those restaurant operators, those that are not committed yet or thinking about, or are not even aware that is available? What would your advice be?
Howard: If you advertise and you compare it to another channel, this is a commission-based model. There’s no setup fees or monthly fees. You know, when we send you an order, the restaurant pays a small commission on each order they get. So actually, it’s a true partnership, right? You actually want to pay Just Eat more money. That means you made more money, right? And there’s no commitment. So it’s not like you’re buying a print ad, and you have a \$10,000 price, and it’s gonna last three or six months. You can sign up for two weeks and try it. So I would say simply, “Try it. You know, it can’t hurt.”
Jean-Pierre: So if I could put you on the spot here…
Jean-Pierre: You know, in most technology-based companies, churn, the cycle in which a customer is a customer and then moves onto a competitor because better margin or better price… In the cable business, you know, churn is basically how they define their performance and that. Is there such a thing as churn at Just Eat or in the app industry, and what does it look like?
Howard: There’s definitely churn, from both the restaurant side and the…and that’s something we don’t wanna do. You know, we pride ourselves on a very, very, very low restaurant churn rate. Restaurants don’t cancel Just Eat. They like the service. We’re a partner to them, and they see the value in the incremental revenue we provide. In terms of customers, something that we focus on a lot in our industry is order frequency and lifetime value of the customer, right? We want them to be… You know, I can double the size of my business if every customer orders, you know, double the amount in the year. It’s a lot easier to get your existing customers. A lot cheaper, in my opinion, to get your existing customers to order more frequently compared to acquiring a bunch of new ones.
So we want to take care of our customers. We want to work with our partners to make sure they’re getting a great service. And when things go wrong, we want to make sure we provide an exceptional service to keep those customers. So we’re relentless at our office about customer re-order rate. We call it “second date store.” We want to make sure that when they come back once, they come back for a second date and we retain those customers. And we’re relentless about it at Just Eat.
Jean-Pierre: Ownership, is it a publicly traded company?
Howard: It’s a publicly traded company on the London Stock Exchange. It’s a FTSE 250 company.
Jean-Pierre: Knowing that you’ve disrupted the food service industry, in a positive way because you’re driving growth, because you’ve met a need that wasn’t being delivered by the current industry, who do you think’s gonna disrupt Just Eat? If you…like, crystal ball, who potentially could disrupt your business model?
Howard: So there are some big players coming in. There’s no doubt about it. Uber has gotten involved. Amazon has gotten involved. And because they’ve seen we’ve created this industry. It actually makes us feel good at Just Eat because everyone sees what a great industry it is and all the heavyweights have come to battle us. But 70% of the orders in Canada still go by phone. Seventy percent, right? So we’re looking at a \$13 billion industry, and 70% of that is on the phone. So the pie is still very big, and we’re still in disruption mode. We’re still in growth mode. We’re still in early days. Our biggest competitor is still a telephone, believe it or not, right? Whereas other industries like travel have got much more maturity in terms of online penetration, we’re still early days. So we’re trying to sort of, you know, gravitate those people from the phone to show them how easy, convenient it is to order via your mobile device or web.
Jean-Pierre: Well, Howard, thank you very much. That was very exciting. You know, it’s some great insights. You know, the opportunity, it gives growth, both growth for yourself and for companies, restaurant operators that wanna join Just Eat and leverage your services. I would like to open up this webinar to our audience. You’ll see at the bottom of your screen a phone number, a toll-free number. Please dial it. You can email us your questions. There’s a chat screen that you can send us your questions, or you can actually just jump on the line. We’ll be here for the next 15 minutes answering your questions. And again, I’d like to thank you for joining us. I’m Jean-Pierre Lacroix from Shikatani Lacroix. Take care.