Disruptive technology is a powerful thing. It creates the world we live in and changes how we behave, how we think, and often how we engage with people. Some of the most powerful disruptive technologies that we have come to face within the last few years include voice-based technologies, like Alexa, transportation technologies such as Uber, and food service technologies such as Ubereats, GrubHub, Doordash, and Slice. And as convenient as these technologies can be, they all come with some disadvantages. And just as Uber has devalued the taxi industry, it seems that GrubHub and Doordash are causing some restaurants to close down. At Local Backroads, we are major advocates of small businesses and we can assume that many of the small restaurants in our community have been impacted by GrubHub, Doordash, Slice and other like companies. We wanted to take a moment and explain how we can support our local businesses while also enjoying the convenience of some of these apps.
There is no doubt that food delivery apps are incredibly convenient. Between long work hours, commute times, extra-curricular activities, having to go home and cook is often overwhelming. In fact, after a long day on the go, even the idea of going to pick up take-out is too much. And this is the convenience of food delivery apps such as UberEats, GrubHub and Doordash. These companies allow you to order food from the convenience of your phone and for a small charge, deliver the food piping hot to your home. This allows you to serve the meals you can be excited about without having to put the work into cooking or deal with the inconvenience of picking up. There is no question as to why these services disrupted the food industry as we know it. Now, instead of eating pizza every night you crave delivery, you can enjoy anything your heart desires.
In fact, a study conducted by Zion and Zion, a market research group, found that some of the highest percentage of consumers using restaurant delivery apps are people in some of the lowest income brackets. This suggest that people without easy access of transportation may appreciate the convenience of a food delivery service for pure access to places that they could not access without their own form of transportation. The same study also found that consumers who fall between 18-29 are the highest users of the food delivery apps, while people aged 30-44 are the second highest. What is clear to see is that many people are increasingly dependent on the apps for access to foods they are interested in eating.
And like all good, comes the bad. There are many costs associated with these ultra-convenient food delivery applications. First, the cost of using these apps for restaurants is extraordinarily expensive. The restaurant industry typically has very slim profit margins, due to the standard budget appropriations. For example, a typical restaurant budgets 30% of revenue for ingredients, 30% for labor and the remaining 40% for everything else, including rent, utilities, insurance, credit card and bank fees and profit. Now add in the fact that most restaurant delivery apps charge somewhere in the margins of a 30% delivery service charge. Add those numbers together and you can see there are big looming problems.
Although food delivery apps might increase the number of total sales a restaurant is making, they are digging deep into the pockets of restaurants. Major chains, where profit margins are a bit thicker, might have a bit more success remaining profitable with the increase in restaurant delivery services. However, for most restaurants, the increase in usage just is a race to the bottom. For consumers, it means that if we really love the restaurant and what they provide, taking the time to order in and pick up the meal yourself may be the only way the location can stay open.
Another piece of the restaurant delivery app conundrum is safety. It is convenient and fun to order from an app and have your favorite meal delivered directly to your home. But, 3rd party delivery services mean the restaurant loses control of the customer experience, food quality, and business branding. This virtually means that as soon as the 3rd party service picks up the food, there is no control over what happens to the food between pick up and drop off location. This begs the immediate question of food safety. In fact, the Association of Food and Drug Officials has brought up the issue of consumer-level food safety outbreaks because of the lack of governmental food safety controls. How food is handled within the establishment has clearly been defined and is managed quite well. However, regulations covering the actual transportation of foods beyond the store level is yet to be established.
A CALL TO ACTION
Investment Bank UBS projects that online food ordering will rise more than 20% annually, to $365 billion by 2030. This just confirms that even with the associated costs, these apps are not going away. It also means that as consumers we need to be mindful of the app we choose to be our restaurant delivery app of choice to ensure that the restaurants we support are able to remain in business. It also means that we need to be mindful of where our food has been between pick-up location and the delivery into our home.
The convenience of restaurant delivery apps cannot be denied. The fact that this technology is changing the way we eat and how restaurants work also cannot be overlooked. However, from the perspective of the consumer, focusing on food safety, food quality and maintaining the longevity of our favorite eating establishments should be on the top of what we choose.
We believe to truly explore your local backroads, you have to actually explore your local backroads and experience the establishments in the community. Take out and food delivery apps might be an ideal solution to a hard day at the office, but truly experiencing the restaurants and the dishes they have to offer is something to be relished in person.
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