Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
A participant in the discussion forum brought up a good point whether a “delivery only” local restaurant business was an especially good business model. Steak-Out was the franchise mentioned, which delivers char-broiled steak and chicken dinners, salads, sandwiches….you get the idea. Why do you get the idea? Because the food is similar to the restaurants we all know – Applebee’s, TGI Friday’s, and Chili’s. The difference is Steak-Out is delivery or pickup only, and the others are sit-down AND are starting to contract out delivery to local entrepreneurs.
Having a dinning room exposes your menu to more people. In turn, more people will be familiar with your menu and more likely to think about using you for delivering business lunches or family dinners. The more you are exposed to a product, the more likely your to think of it when the time for the service comes. It’s partly a numbers game, and I’d rather have my customers experience my product in person in my controlled atmosphere then exposing them to my product on a piece of paper, coupon or flyer.
I’m not saying delivery only business are a bad idea, I just wouldn’t want to take the risk when my competitors out-of-the-box are going to be exposed to exponentially more customers. That raises my marketing costs. Pizza is the only food that has carved out room for delivery-only stores. Papa John’s is going from delivery only to delivery + sit down.
A 75-unit Subway franchisee group in South Florida bought the telephone number 888-SUB-TO-GO. Orders are processed via the store’s POS system and then delivered by Subway employees. Can a delivery-only subshop startup and compete with that? I doubt it, and I wouldn’t want to risk my capital trying.
If you are buying a restaurant, you should consider what provisions in the franchise agreement address delivery. If you think delivery may be an important distribution channel for revenue and competition reasons, then only consider businesses that are willing to address the issue before you hand over your franchise fee.
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In Boston we have delivery services for most of the major restaurants, and I’m sure this will soon move to the big city. I agree with the prediction that delivery services will eventually be outsourced to leverage drivers routes and lower costs. I’m surprised FedEx and UPS don’t use their expertise to syndicate a city with an efficient restaurant “delivery” service.
I have no personal experience with delivery of restaurant food except the usual pizza, but did have a relevant conversation with one of the top execs of a large national restaurant group that was interesting. His viewpoint on home delivery of their restaurant meals was this:
When a restaurant meal was delivered to a home, the customer expected to receive the meal just as he would have in the restaurant and tended to be disappointed by the temperature, appearance, etc. Because the restaurant was delivering, he/she expected restaurant quality in all aspects.
When a customer picked up their meals, they had lesser expectations. They understood that the meal would be cold when they got home, that it wouldn’t taste exactly the same as in the restaurant, etc. They were more forgiving in their assessment of the food and restaurant.
Isn’t the point of these sorts of chains that the startup and management costs are minimal, therefore being less risky?