The third-party delivery debate rages on, and Popeyes stuns yet again

Let’s try something a little different this week. Instead of me just sounding off on a topic (although I will do that for a bit here in a second), I wanted to share some of the LinkedIn community’s responses to an article earlier in the week. It doesn’t surprise me that a piece on restaurants rejecting third-party delivery stirred heated debate. Next to labor, it’s probably (without any doubt, really) the biggest topic circulating throughout the restaurant industry.

The points of contention haven’t changed much over the past year or so. Is it profitable? Are the customers truly incremental? Who needs to shoulder the cost, the customer or restaurant? Does it threaten my restaurant’s brand value, considering these are mostly product-focused, app-loyal customers? In other words, they want a hamburger from DoorDash. They’re not pulling up the platform seeking out a specific brand. Am I willing to trade food quality for convenience? Can I handle how it muddies my restaurant’s value proposition? Why are third-party vendors keeping the guest data so close to the vest? Is there a way to negotiate that? Move more diners through direct delivery on the site? And on and on we go.

Before sharing some reader thoughts on the subject, I do want to briefly talk about a trend that’s storming through the sector right now. We ask ourselves all the time whether or not third-party delivery is viable. Not just for restaurants, but for the aggregators, too. What’s the sustainability of it all, especially considering how heavy-handed the marketing has been. The amount of money being poured into market share jostling and customer acquisition speaks to a developing reality. The likely result: Consolidation, and perhaps more power offered to restaurants with scale. You’ve seen that already with exclusive deals, from Shake Shack to Yum! Brands, which owns a $200 million stake in Grubhub.

I think Domino’s CEO Ritch Allison was right on the money when he said a “significant shakeout” was coming. “These players are currently pricing below the cost to serve,” he said, “offering free delivery or other deep discounts that are currently enabled by investor subsidy.”

And more: “We’ve got a unique opportunity right now to solidify market share gains for the long-term as our competitors retreat and as these third parties fundamentally alter the economics of many players in the restaurant industry,” he said, speaking to Domino’s resistance to the third-party space in favor of self-delivery.

There’s one other development as well that every restaurant needs to monitor, although it’s easier said than done. Stories continue to emerge about third-party vendors listing restaurants on their platforms without actually getting their consent. I spoke with Firehouse CEO Don Fox about this Thursday and he had no shortage of concerns. I’ll explore that further in a later piece. But for now, I’ll share Fox was worried and a tad fired up. Is the concept even ethical? Think of it this way: Imagine an aggregator delivers your food to a customer. The experience is poor. Maybe the driver ate some of the food. Maybe they were an hour late. Perhaps they stopped at a bar instead (this happened to me once). As is almost always the case, the customer will blame the restaurant, not the service. “I’m never ordering from there again.” And say they were a first-time guest being introduced to the restaurant. That operator might have just lost a customer for good. Vacated the chance to add them to their rewards program. Lost the opportunity to have their customer service inspire a repeat customer. Leverage everything they’ve invested in. And so forth.

When you sign up for third-party delivery, that risk-and-reward dynamic is something the restaurant agrees to, for a variety of reasons. The traffic might offset it. In response, the restaurant put in technology and packaging, employee training, etc., to excel at delivery. But what if they didn’t because they never wanted to deliver? And the delivery experience is destined to be a poor one because of that?

So, in that case, who should be held liable? In a world where guest traffic is fleeting thanks to an oversaturated industry and off-premises channels opening up throughout foodservice, losing customers this way is a very dangerous (and potentially unfair) proposition. Sure, it might work the reverse angle, if the food shows up great and all goes well. Yet, again, in my view, even that is something that should be up to the restaurant.

Anyway, here’s what some readers had to say!

Jackson Spear: “All of the arguments against delivery make sense to me, besides the denigration of food quality. While I won't deny that food tastes its best fresh out of the kitchen, I would argue the busy and often overworked delivery client values the convenience of food delivery over the focus one food quality the restaurant has. Refusing to offer convenience in a market that values that alienates the customers that value it.”

An answer to Jackson from Scott Hoots: “I don't think that the client driving delivery these days is the old "busy and overworked" person. That is who drove delivery from 1980 to 2005. The folks driving the delivery trends now are the younger generation who are fine with sacrificing quality and don't care about the social aspect of dining out.”

Another thoughtful response from Steve H.: “But it’s so much more. What demographic are most valuable to the restaurants? Do I want stay at home clients that are happy with so-so food quality and have no loyalty—or folk that want to spend the time to dine in, will happily spend more when they visit but desire quality food? The rise of Ghost kitchens threatens the very viability of door delivered food from an established restaurant as a business model. I have no data but if it were my business I would be taking a long hard look at my demographic and where to place myself with some new ways to add value. Cinemas learnt an extremely valuable lesson from the demise of MoviePass—a whole new way to revitalize their business, putting MoviePass out of business in the meantime. Maybe UberEats, DoorDash and such will provide that same opportunity to the restaurant business.”

Here’s another thread that begins with Anthony Matthews: “When you're losing a percentage of sales for partnerships with these services as well as losing the ability to upsell product—not sure those outweigh the benefit of "extending" your reach.”

Noa D Stroop responds: “Respectfully, the opportunity to upsell still exists. Ever ordered a pizza online? You have to close like 14 pop up/upsell items before checking out! As far as margins go, I agree. What restaurants are not often considering—the financial burden of "convenience" should fall on the consumer, not the restaurant. So increase the prices online. Quality control is the one inarguable hindrance. That responsibility falls on the delivery service; I'm unsure the backend processes, but drivers SHOULD be rated and restaurants offered a "discount" for poorly reputable or new deliverers.”

Marina Beale starts another line of discussion with this commentary: “I believe it falls on delivery services. It is their responsibility to maintain food quality throughout delivery, and truly they haven't been holding up their end of the deal. In retrospect, third party delivery was a great idea, but there is a fault in how it is executed. Although I am Gen Z, I do not enjoy utilizing delivery services at restaurants because I chose to dine out for the entire experience, not just the food. I feel alone in that opinion amongst my peers, but I truly believe unless third-party delivery works to uphold the restaurant food quality through their service, then they will fall as a business.”

Responds Matthew Sherman: “…. interested to know why folks think food delivered loses its integrity yet no one ever says the same about take out? Care to share your thoughts on that? Remind me of a time I met with a Burger King franchisee who told me delivery was a bad idea "because no one wants to eat fast food off premise" … I then asked him what percentage of his business is conducted in the drive-thru lane ... it was north of 40 percent.”

Back Marina comes: “Take out quality is dependent on the brand and business you're ordering from, I think take out can be done well, but it can also smear the quality and brand reputation of a restaurant. As someone who has worked both on the customer facing " front of house" side of restaurants as well as takeout or "back of house" your food quality and service quality relies on your line level employees. In take out the responsibility is on your kitchen and your take out staff to maintain the integrity of the food until it reaches the customer. If a restaurant cares about maintaining quality they will hire employees that uphold that value, if they don't then the quality of your take out or food in general will fall. Personally, I think takeout and delivery the same loses its value in the way it’s served. Sure, I ordered a $40 steak and whether its takeout or delivery, it’s still served in a plastic ( probably not recyclable) container, it loses its " wow factor" to me.”

Sherman retorts: “Marina Beale, I fully understand what you are saying and it sounds like you are not a fan of food delivered nor of take out/pick up. Do I have that correct? I can certainly appreciate your opinion and preferences, I was asking from a restaurant’s view point of view. I have talked to hundreds and hundreds of restaurant owners that have said they are concerned about food integrity traveling 4 miles down the road in an insulated bag but do not have the same concerns when "Mrs. Jones" picks up her food, drives the same 4 miles and does not use an insulated bag. It has always led me to believe the "delivery integrity" was not the true objection. Make sense?”

And Steven Cary then chimes in: “For me, I don't see a difference between Delivery and Take Out. Delivery or take out is for simple foods—Pizza, sandwiches—where not much can change in the transport time. Chinese even falls into this, because each item is generally packed separately. If a foods consistency, presentation and temperature matter it just seems logical to eat in house.”

Join in on the debate in the link below.

And as always, please sign up for our daily eletters if you haven’t already (it’s all free). QSR here and FSR here. Also, check the podcast out on all platforms.

Now let's jump into the headlines (which we will keep shorter than usual).

Popeyes stuns the restaurant industry

We all knew the sandwich was crazy (can read more about that here), but RBI’s chicken chain dropped a crazy Q4 result. The brand’s same-store sales jumped 37.9 percent in the period, year-over-year. I don’t know where that ranks historically, but I’ve personally never seen anything even close in my career covering the business.

CEO Jose Cil seemed to echo the sentiment. “This has been a very exciting time for the Popeyes team, and in fact, has been an exciting time for all of us who spent a long time in [the quick-service industry] and have never seen the kind of guest response for a single product launch like the one we had for our Popeyes Chicken Sandwich,” he said.

I think, at this point, it’s safe to call the product one of—if not the—most successful launch in the history of quick-service restaurants.

Famous Dave’s is no longer just a barbecue company

The company, which is now called BBQ Holdings Inc., announced Thursday it intended to acquire the assets of Granite City food and Brewery, a brand that filed for Chapter 11 bankruptcy protection two months ago. This is a really interesting deal and we’ll see how it unfolds, but it seems like a proprietary beer product served at Famous Dave’s would be a nice fit.

As for Granite City, there is work to be done for sure. It’s a concept with strong equity. Yet the brew-pub space can be an expensive one to play in given the infrastructure demands. Granite City, founded in 1999, was an early entrant into the craft beer market sector. So much has changed, though. There are hundreds of new brewpubs and craft brewers popping up around the country. And there’s always a tendency for customers to go local with what’s considered a local-first product. It’s a tough set for Granite City to compete with.

Not to mention, the typical hurdles, like casual-dining and quick-service intrusion, as well as fighting value and convenience, rising wage rates, and so forth.

This will be a fun portfolio to follow. Famous Dave’s, under CEO Jeff Crivello’s leadership, has definitely proven to be an innovative company, thinking one step ahead. Here’s more on their plans to build a multi-concept empire in the coming years.

What is going on at Outback right now?

Bloomin’ Brands reports quarterly earnings on February 18. I think we could be in for some significant news. On Thursday, the company announced a restructuring of leadership that included Liz Smith stepping down as executive chairman. Also, Jeff Carcara and Michael Kappitt, EVP of Bonefish Grill and Carrabba’s Italian Grill, respectively, departed the company.

Then, Gregg Scarlett, president of Outback since July 2016, was named EVP, chief operating officer, casual dining restaurants, where he will oversee the domestic operations of Outback, Carrabba’s Italian Grill, and Bonefish Grill.

Lastly, Bloomin’ announced Brett Patterson was stepping into the Outback president role left behind by Scarlett’s move.

Patterson has been with the company since 2017, serving as Outback’s group vice president of operations. Previously, he helmed the president role at Ruby Tuesday and worked as SVP of operations at Olive Garden.

So what is happening? Remember the company is currently exploring strategic alternatives, including the possible sale of the company. Much more on that here. While I’m not sure that’s what’s going down exactly (although who knows for sure) it does feel like Bloomin’ is setting itself up to be run differently. Perhaps with Outback as one focus, and Carrabba’s, Bonefish, and Fleming’s as the other. That’s something activists have pushed for in recent months. Either way, I think we’re going to find out sooner than later.

As always, thanks for reading! We’ll be back next week. Below are some easy ways to join our email lists.

For QSR:

For FSR: