Do On-Demand Food Delivery Apps ‘Eat’ Restaurant Visits?
While there are differences when it comes to QSRs and Casual Dining, Sense360's report found 'no significant decrease in restaurant visits and in-store orders from customers who have downloaded third-party delivery apps,' says CEO Eli Portnoy.
Restaurants have felt considerable pressure the past few years the sign on with the on-demand food delivery apps from GrubHub/Seamless, Yelp’s Eat24, UberEats, DoorDash, Caviar, and general online courier services such as Postmates.
The question restaurants wrestle with is if people can have their food in the comfort of their own home — and save on beverages and other menu items typically driven by table-service — would they stop coming altogether?
When looking at individual categories like Quick Serve Restaurants and Casual Dining, the answer from a report by mobile data analytics provider Sense360, is complicated.
But for the most part, Sense360’s look into the connection between mobile-based food ordering and traffic to full-service restaurants and QSRs “found no significant decrease in restaurant visits and in-store orders from customers who have downloaded third-party delivery apps.”
To arrive at that conclusion in its report, Impact of Third Party Delivery Apps on In-Restaurant Orders, Sense360 tracked over 21 million anonymous full-service dining establishments and QSR visits to measure visit frequency both before and after downloading third-party delivery apps.
The bottom line is that there is no evidence that delivery apps drive significant, short-term drops in visitation, said Sense360 CEO and founder Eli Portnoy.
“With delivery among the most watched business opportunities in the restaurant industry today, our findings tell an interesting story of both who delivery app users are, and that downloading such apps did not impact their in-restaurant visit behaviors and frequency,” Portnoy said. “The data gives a clear and unequivocal view into this industry trend, provides clarity that restaurant operators and owners have been seeking to help them make the most informed and strategic business decisions.”
Apps’ Added Value
Sense360’s findings offer an expanded view of the benefits of app-based delivery by Los Angeles restaurants in an LATimes feature story back in March. That story noted that while LA residents tend to order in much less compared to their New York City counterparts, on-demand delivery apps carved out a new revenue stream for many independent local places like Mendocino Farms and even restaurant chains like Bareburger.
“When it comes to restaurant economics, it just makes sense that delivery is becoming an increasingly large portion of everyone’s business,” Allen Wong, president of Silverlake Chinese restaurant Fat Dragon and a partner at the Sticky Rice Group (which relies primarily on Caviar’s delivery platform) told the LATimes.
Challenges For QSRs and Casual Dining
As one example that proves out its thesis, Sense360 analyzed McDonald’s customers who downloaded the UberEats app during the brand’s delivery test pilot in participating Florida DMAs. The LA-based company, which collects anonymous always-on location and survey data from a panel of 2 million consumers, found that McDonald’s did not experience any noticeable visitation decrease among the UberEats users.
While that may augur well for McDonald’s planned expansion of mobile ordering and delivery, along with other omnichannel touchpoints to make its franchises more appealing to connected consumers, the overall balance between app-delivery and QSRs and casual dining appears a bit mixed.
But as Sense360 notes, it’s not a matter of delivery cannibalizing in-store table dining. Any disconnect between app ordering and restaurant traffic is due to factors in the individual habits of groups of consumers.
“It’s important to consider all the factors that come into play,” Portnoy said. “If delivery apps caused lower visitation rates, then the delivery apps could indicate cannibalization of in-store visits. However, if delivery apps merely indicate a different type of user according to socioeconomic level, demographic, or geography, who has a naturally lower rate of visitation, then creating opportunity for them to access the brand on a delivery app could drive incremental purchases.”
Here too, Sense360’s analysis of app downloads and restaurant visitation offer insights into those habits.
Case in point: Consumers with delivery apps installed on their phone go out to QSR and Fast Casual Restaurants 5 percent less than people without delivery apps, Sense360 said.
And that difference is why restaurant operations like Bloomin’ Brands — the corporate parent of casual dining franchises Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s Prime Steakhouse & Wine Bar — say its main competition isn’t other restaurants. It’s all the on-demand dining options consumers have available from their couch as they tap out orders on an increasing variety of smartphone delivery apps.
As brick-and-mortar categories from retail to groceries seek to find the right mix of methods to bridge online and offline business, the common thread is simply giving customers many and as customizable options as possible to meet their varied mindsets in the moment.
In a larger sense, app delivery can provide a crucial path of online discovery for restaurants, alongside the ability to find individual locations’ menu items via search queries and via maps, as Google My Business has recently begun providing. Along with tying together local business info across social media, reservations platforms, and review sites, restaurants can use mobile delivery platforms to enhance their marketing outreach.
Among the other findings from Sense360’s report:
- Delivery apps are more popular and oft-used by consumers in top metro areas including New York, San Francisco and Los Angeles.
- Those who download delivery apps tend to be of higher income, and visit fine dining restaurants two-and-half times more frequently than those without a delivery app.
- Delivery app users who frequent QSRs tend to visit newer and higher-priced concepts such as Chipotle and Starbucks more often than traditional quick-serve locations such as McDonalds or Hardees.