Papa John’s, the fourth largest US pizza chain restaurant, behind Domino’s, Pizza Hut and Little Caesar’s has partnered with 3rd party delivery service DoorDash. The partnership is expected to extend the reach of existing in-store direct delivery by leveraging a deeper reach into suburban and rural locations using the “dasher” network. Consumers who were currently outside of delivery zones will now have greater opportunity to get the pizza delivered to their home, business or off-premise location.
With over 3,300 locations in the US, Papa John’s has continued to focus on quality ingredients, taste and flavor of their product. Sales at the pizza giant have been slipping and the brand is looking to rebound. Menu innovation has created some new appeal for customers and extending the delivery zones can provide greater ability for Papa John’s to steal share from other leading chain and independent pizza restaurants. Restaurant delivery in 2018 was estimated to be $45 billion, according to FoodserviceResults. Direct in-store delivery represented $32 billion while the remaining $13 billion was through 3rd party delivery providers.
While many Americans have used 3rd party delivery services, a large portion of consumers have not used a 3rd party aggregator or delivery service. According to the Off-premise Insights Report, 41% of consumers surveyed indicated they haven’t used these new digital services. Although many consumers live in remote locations, can’t afford the service or lack the sophistication or desire to use digital ordering, the trend is positive in the use of delivery services beyond traditional direct delivery from the store. Among those surveyed, Grubhub, Uber Eats and DoorDash are among the most used 3rd party marketplaces.
For many restaurants, 3rd party delivery takes control away from the restaurant operator. Once the food order is handed off to the delivery person, they have to put faith in the driver to get the order delivered quickly. Food has to arrive with the proper temperatures maintained so heating and cooling bags are often necessary. But most importantly, the driver should represent the brand which means good, friendly customer interaction, appropriate appearance and respect for the neighborhood safety while driving. When issues arise through 3rd party delivery, the restaurant operator typically gets the blame.
As I see it, the convenience of 3rd party delivery providers will continue to see high growth at the expense of traditional take-out and dine-in restaurant occasions. Consumer continue to value their time and prefer the quality of restaurant meals compared to cooking at home. American culture has changed with the continued improvement and affordability of new technology. Binge watching Netflix or Hulu using enormous high-definition televisions and the ease of mobile device ordering has become a common behavior for many consumers, especially Millennials and GenZ age groups. Delivery is expected to continue to grow at double digit rates while in-store dining occasions will remain flat over the next 5 years. Expect to see more restaurant brands leveraging 3rd party delivery partners and more Americans jumping on board to dash their way to better income.