The Evolving Food Delivery Landscape

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The Evolving Food Delivery Landscape

The Landscape:

I’m in my 40s, single, live in LA, and don’t cook. I often come home from work late, tired, and hungry. A few years ago, I would have probably been eating a lot of pizza. In fact, a few years ago, I was.

But that’s all changed. I’m now a loyal customer of DoorDash. And Postmates. And UberEats. And Caviar. Oh, and GrubHub. And through them, my cuisine options seem endless, and almost all of them will arrive in an hour or less, regardless of time of day or night. For me, and for — literally — millions of others, the booming business of food delivery is fulfilling a core need: feeding ourselves in the comfort of our own home or office without the hassle of having to prepare food. It’s all the rage amongst millennials, office workers at lunchtime, working parents with young kids, and those with limited time on their hands. So much so that Morgan Stanley predicts it will grow to be a $210 billion dollar industry.

No surprise then that it’s so competitive.

I regularly get promotional offers from the delivery service providers for free delivery, walk into a local restaurant to see a $10 off coupon if I order online for the first time, and often see delivery drivers from different providers waiting in my apartment lobby to deliver food to their customers. The delivery service providers have been spending tremendous amounts on app downloads, some restaurants are experimenting with limited menu concepts and their own delivery drivers in order to avoid paying steep commissions to the third party aggregators, and hundreds of millions of dollars of investment are pouring into the industry.

It seems like everyone’s doing it.

But as I’ve gotten to know the industry over the last few years, it has also seemed to me that there’s got to be a better way.

A Better Way

Restaurants are having a hard time keeping up with the surge of delivery orders coming in at peak times and being able to serve a customer base that may not live in a 3–5 mile radius from their location. Delivery Service Providers are reportedly in talks to combine forces to tackle the economic realities of delivering food. Delivery drivers — a core link in the chain — are trying to deliver as many orders per hour so they can make the most money in tips and fees. And consumers want all the choice in the world as cost-effectively as they can get it.

So, how do you meet everyone’s needs?

Well, perhaps through the advent of virtual restaurants (aka “ghost kitchens”): dedicated kitchen spaces that can service delivery and take-out customers of multiple restaurants and allow operators to reduce the capital risk and time of building out their own footprint as they want to expand. If there’s a local favorite that wants to become semi-regional, regional restaurants that want to rapidly scale their reach, or even national brands that want to micro-target local markets, going through the effort and cost of building out dedicated space for customers becomes prohibitive and risky. With the continuing explosion in food delivery, why not have some of your outposts be virtual?

Drivers are an essential part of the landscape. Duh.

I wanted to get a better sense of what was happening in the space, so I signed up to be a delivery driver. And, though it was a good way to get to know the relative popularity of new restaurants in my area, it wasn’t always easy. Parking was a nightmare, the threat of getting ticketed was real, I often had nowhere to wait inside a restaurant as I waited for food to be prepared, and I sometimes sat idle for chunks of time while I tried to figure out where to go to pick up my next order. This last point ends up, in the mind of the driver, being perhaps the most important, and, as we launch Kitchen United is one of the main things we think a virtual food hall can address. Multiple restaurants working out of one location should drive flow in much the way an airport does for a Lyft driver; I can be largely assured if I drive there, there will be an order waiting to be picked up. As someone who’s interested in keeping himself fully utilized this is meaningful. And in a gig economy driven by people trying to maximize the hourly dollars that they can earn, perhaps pivotal.

The delivery service providers — the DoorDash’s, etc. that I’m personally now addicted to — benefit, too. They can advise restaurants who are successful on their platform where to go next, optimize their routing for most efficient delivery of food, even enable the batching of multiple orders with one driver, and ultimately pass on the reductions in cost to their customers.

Most importantly, the consumer is better served by giving them the choice that they want. Virtual food halls like Kitchen United have the benefit of filling up our spaces with a curated set of restaurant partners optimized for the demographics in the surrounding 3–5 mile radius. As more consumers order more food for delivery, they’ll want more options — it might be a new concept from a favorite chef, a trusted burger from a large chain, or a few noodle dishes from a purpose-built delivery only menu, but they’ll get what they want.

And, as we’re increasingly seeing, more of us want it.

At Kitchen United, we’re excited to be a driver of the new world of food, and as a hungry consumer, I’m looking forward to seeing how it evolves.

-Atul Sood | Chief Business Officer | @atulsood

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