Growth of ‘Ghost’ Restaurant Concepts Proves Delivery-Only Trend Has Legs

April 14, 2017

960x0

Whether you call them virtual restaurants, app-based establishments or headless concepts, it’s impossible to deny the recent rise of delivery-only food businesses around the country.

Restaurateurs are desperate to stem the profit-letting in their struggling sector (especially in the fast-casual world), and this new round of digital-driven establishments solves a variety of perennial industry problems. Add to this the growth of third-party delivery companies, consumers’ increasing comfort with mobile ordering and the recent explosion of meal-delivery kits like Blue Apron, and conditions seem ripe for this idea to blossom.

But first, what are these front-of-house-free restaurants?

A few examples:

David Chang, of Momofuku fame, is the A-list name behind delivery-only Ando in New York City. It offers “second-generation American food” like bibimbap, fried chicken and cheesesteak egg rolls. Orders are accepted via the restaurant’s website or app and third-party services like Seamless. Delivery expanded recently to include more of Manhattan. The business came about as a partnership with Expa, a startup lab with connections to Uber.

In Chicago, home to several virtual restaurants with more on the way, Lettuce Entertain You Enterprises recently debuted Seaside, a delivery- and carryout-only operation that shares a kitchen with its Oyster Bah restaurant.

New York-based startup Green Summit Group expanded to Chicago, rolling out nine virtual operations out of one shared kitchen. Since its launch, Green Summit has raised $3.6 million and is anticipating $18 million in sales this year among all locations, according to the Chicago Tribune.

Even traditional family-dining brands are taking note of these ghost restaurants.

“I’m fascinated by some of the virtual kitchens that don’t have a brand, that are only supported by a kitchen,” Denny Marie Post, CEO of Red Robin Gourmet Burgers and Brews told Restaurant Business magazine earlier this year.

So, does the headless trend have legs?

In short, yes.

It appeals to the on-demand generation that’s grown up watching Netflix on the living-room couch. And it’s a good mesh with the gig economy that has given rise to third-party delivery services. States like Colorado, with legalized recreational marijuana, are expected to be primed for expansion of delivery-only concepts.

Even better for restaurant operators and innovators, these virtual establishments address nearly every foodservice-industry pain point.

They are cost-effective. Without the need to waste square footage on dine-in capabilities, these headless operations can run in a smaller footprint compared to traditional operators. There’s no need to hire a designer, account for parking space or spend money on decor and server uniforms (or servers for that matter). Rent is much cheaper for these locations since they can be built in warehouse space and in lower-rent districts. Lastly, the need to invest in costly renovations for service and seating areas is no longer required for these operators.

In Chicago, for example, Green Summit Group’s nine headless restaurants operate out of a shared 2,000-square-foot kitchen that was once home to a dine-in burger establishment.

These kitchens can also act as commissaries for food-truck or catering offshoots.

With so much attention focused on reducing operating costs and keeping labor expenses in check, this new approach will become very appealing to operators who leverage ordering and delivery services and avoid the dining-room distractions. By putting most of the focus on the food quality and preparation, the strategy is sure to deliver praise and strong reviews. Expect to see continued growth in the “ghost” restaurant space.


How to save money — and avoid talking to anyone — when ordering takeout

November 2, 2016

mw-ez228_gilmor_20161101165600_zh
By Alessandra Malito
MerketWatch
http://www.marketwatch.com/story/how-to-save-money-and-avoid-talking-to-anyone-when-ordering-takeout-2016-11-02?siteid=rss

Tech companies are entering the food delivery scene in full force; here’s how to capitalize

The way people order takeout food has evolved.

Instead of using a phone to call a restaurant, many now use their phones to access apps like Facebook FB, -0.59% or GrubHub GRUB, +0.46% to place food orders. Even though it costs more than cooking at home, it’s still possible to save a few bucks for those nights you just want to order in, especially now that there are so many services available.

Tech giants Google GOOG, -0.88% , Facebook and Amazon AMZN, -1.07% have entered the food delivery races. A Google Maps for iOS update lets users “place an order” from restaurants in major cities with a button on its app, 9to5 Mac reported last week. Amazon expanded its one-hour delivery service for its Prime members to Brooklyn. Facebook jumped in last month with an option to start an order from a restaurant’s page.

“More restaurants are doing mobile ordering, and because of that the younger consumer is definitely engaging,” said Darren Tristano, president of Technomic, a food-service and restaurant research and consulting firm. “Today using your mobile device with either an app or the internet becomes a very good, strong option.”

The fans of the hit 2000s show “Gilmore Girls,” which is returning for a four-episode revival on NFLX, +0.43% later this month, may find this familiar ­­— main characters Lorelai and Rory Gilmore hardly ever had a home-cooked meal on the show, opting instead for takeout and delivery for nearly every meal. Though that is somewhat of an exaggeration of real life, Americans do spend $1,100 a year on average ordering food online, according to turkey company Butterball, which surveyed 1,000 people last year. One in 20 ordered every one or two days, and 25% ordered delivery or takeout at least once a week, the study found.

Online orders may soon beat phone orders. About 904 million online orders were placed in May 2015, up from 403 million in May 2010, while 1.02 billion phone delivery orders were placed in May 2015, down from 1.39 billion in May 2010, according to research firm NPD Group.

The interest from tech companies and restaurants may be the popularity from delivery startups, such as GrubHub, Seamless some of which these tech companies are using on the back end to see their deliveries through. Ride-hailing app Uber has been on the delivery scene since 2014, though it launched its stand-alone food delivery app earlier this year. These services give those at home or at work takeout options from local businesses without having to eat in, or step into, those establishments.

Americans’ annual expenditures on food away from home jumped 7.9% from 2014 to 2015, according to Bureau of Labor Statistics, while food at home expenses jumped only 1.1% over that same period. The change doesn’t necessarily mean more people are ordering takeout, but that prices are going up, said Warren Solochek, president of food service practice at the NPD Group.

“If you’re working from home, restaurants have to do a lot more to incentivize people to go to a restaurant,” Solochek said. “I can order from GrubHub or I can go to the refrigerator, and guess what, I have most of my meal right there.”

Still, there are ways you can save, even when you do grab for your phone. Here are three:

1. Look for deals: Check food delivery sites or do a quick web search for promo codes before placing an order. Amazon is offering a $10 off code to its Prime members for its one-hour restaurant delivery and other services like Seamless and GrubHub periodically provide discounts for users, such as during the presidential election. Some sites also have first-time user deals.

2. Avoid additional fees: Double check your bill total to ensure you know exactly what you’re paying for, since some sites may tack on additional fees. Uber announced late last month that even its UberEATS service in certain cities would be subject to surge pricing, when there are more orders than drivers. The company said in its announcement the extra fee will appear as a separate line item before checkout and on the receipt.

3. Participate in referral programs: Seamless gives back to those who refer their service, in the form of $7 for every friend. In fact, both parties win — those referred get $7 off their first order and once they try the service, so will the one who recommended Seamless.


Bagger Dave’s slide: After multiple closings, missteps, burger chain goes into holding pattern

February 18, 2016
GARY ANGLEBRANDT
February 13, 2016 8:00 a.m.
Crain’s Detroit Business
http://www.crainsdetroit.com/article/20160213/NEWS/302149989/bagger-daves-aims-to-beef-up-outlook-after-closings-missteps

If the past year is any indication, the future of Bagger Dave’s Burger Tavern is anything but in the bag.

The Southfield-based restaurant chain suffered the indignity of two rounds of restaurant closings in 2015. The first came in August, when parent company Diversified Restaurant Holdings Inc. shuttered three locations, all in Indiana, gnawing $1.8 million in writedowns off the corporate books.

Then in December, eight more locations closed, at a loss of about $10.7 million for writedowns and other costs. One of them was its downtown Detroit location. The others were in Indiana.

The Detroit restaurant had been open for two years. One of the Indiana restaurants didn’t last 10 months; two more barely made it to the one-year mark. The oldest of the Indiana restaurants, the one in Indianapolis, was just 3 years old.

Anyone looking for more upbeat signs than these should avoid cracking open Diversified’s quarterly reports of the past year.

The reports start rosily enough. The first, released in March, predicted between 47 and 51 stores by the end of 2017. (There were 24 at the end of 2014.) These numbers steadily fell in subsequent reports. By the time November’s third-quarter report came around, the company had stopped making any predictions at all.

“We will not commit to any further development of Bagger Dave’s,” the company said in the report, released seven weeks before the December closings.

That doesn’t mean the company had given up on Bagger Dave’s. It opened five last year, including one in Centerville, Ohio, as recently as November, its first in that state. Another is set to open near Cincinnati in late March. But that and the 18 Bagger Dave’s (16 in Michigan, one in Ohio and one in Indiana) that survived the closings — and employ 670 people — will be the last for the foreseeable future.

This is a marked about-face for a company normally hell-bent on growth. It opened six Bagger Dave’s in 2014 and seven in 2013. And that pales to its Buffalo Wild Wings franchise operations, the largest in the country. Last year alone, Diversified added 20 more restaurants, 18 of which came from the $54 million purchase of Buffalo Wild Wings restaurants in the St. Louis area. That brought the number of Buffalo Wild Wings locations under its umbrella to 62.

From the end of 2011 to the end of last year, Diversified increased the total number of its restaurants across the two brands from 28 to 80. This year, though, it plans to add just three — the Bagger Dave’s near Cincinnati and two more Buffalo Wild Wings locations.

Familiar taste

Bagger Dave’s has struggled before. Sales took a hit after Diversified embarked on an aggressive growth plan in 2012, opening or buying 16 stores across its two brands. It listed on Nasdaq the following year.

The pace distracted management from everyday operations, and it was the Bagger Dave’s side of the business that took the hit in sales.

To mend things, Diversified beefed up Bagger Dave’s marketing, launched a corporate training program, brought in an employee-assessment firm and began hiring professionals from national chains such as Red Robin. It brought in consultants from the Disney Institute to go over employee retention and recruitment and rolled out new menus — the first one in early 2014 and another last year. The final rollout wrapped up last September.

It included adding more burgers and removing sandwiches that weren’t selling well, switching from a two-patty burger to an 8-ounce one and adding a grilled chicken breast sandwich. Fries are included in the price of a burger instead of added on. The menu’s marketing pitch changed to tell customers about certain points of company pride, such as how it uses prime rib and sirloin in its burgers and carefully sources its food.

“I’m much, much more connected to Bagger Dave’s now,” CEO Michael Ansley said last April in a Crain’s interview.

Things appeared to pay off. In a conference call for last year’s second-quarter results, Ansley said sales at Bagger Dave’s stores open at least two years had increased 2.5 percent compared with the same quarter a year earlier and 4 percent year to date.

Ansley talked about encouraging positive signs showing in things like Facebook “likes” and “net promoter scores,” which measure customer satisfaction. Investments in technology — tabletop ordering tablets, a mobile app, a gift card program, a “RockBot” jukebox app — promised to further brighten the picture.

Nevertheless, Ansley had to acknowledge struggles. “Despite the positives, we fully appreciate the missteps we have made in the past with respect to the brand,” he said.

One initiative has proved costly. Management was determined to maintain a base staffing level at Bagger Dave’s restaurants, even if sales were low. This policy was done to bolster service and coax repeat visits out of customers.

But this, along with minimum wage increases, pushed up the company’s year-on-year compensation costs by more than 25 percent in the second quarter of last year. This came on the heels of a $2 million spike in compensation costs that brought its tally for 2014 to $9.2 million.

Minimum staffing practices like this are rarely used in the restaurant industry, said Darren Tristano, president of Technomic Inc., a Chicago-based restaurant industry research company.

“There’s nothing financially efficient about it,” he said. “You end up with staff standing around.”

In a conference call on Nov. 5, Ansley and CFO David Burke expressed frustration with the slow pace of results. Burke described Bagger Dave’s as a “Dr. Jekyll/Mr. Hyde concept” because of the changes it had undergone.

There were signs of improvement coming out of investments in the menu and training, but “you don’t see an immediate impact in sales from that,” he said.

The financial picture

Diversified’s breakneck growth comes with a heavy capital burden.

Estimated capital expenditures last year were about $30 million. It spent $36 million the year before.

The buildout of a Bagger Dave’s costs $1.1 million to $1.4 million, according to company financial statements. A new Buffalo Wild Wings costs $1.7 million to $2.1 million. Updates to older restaurants cost between $50,000 and $1.3 million.

A listing on Nasdaq in 2013 raised $31.9 million. But much of the company’s expansion has been financed by debt. Total debt rose from $61.8 million at the close of 2014 to $123.9 million at the end of September, pushed up because of the acquisition of the St. Louis stores.

The company’s share price opened at $2.57 the day the closure of the eight stores was announced. The stock was trading just above $1.50 last week.

A pair of lawsuits last year further strained finances. The two cases, brought by the same attorney, alleged employees who work for tips were made to do the work of non-tipped employees who earn a higher hourly rate. The settlement and related expenses cost the company $1.9 million.

For the first three quarters of last year, Diversified booked a net loss of $6.6 million, compared with an $85,000 profit for the same period in 2014. The company lost $1.3 million overall in 2014. The company does not believe it made a full-year profit in 2015. (Annual results are expected to be released in March.)

Preliminary financial estimates for 2015 show revenue growing 34 percent to $172.5 million from $128.4 million in 2014, in line with the company’s guidance.

Same-store sales increased 2.8 percent at Buffalo Wild Wings and 1.3 percent at Bagger Dave’s from 2014 to 2015, but they decreased 7.8 percent year-over-year in the fourth quarter at Bagger Dave’s and increased just 0.8 percent at Buffalo Wild Wings.

The Buffalo squeeze

Bagger Dave’s menu refresh included adding more burgers and removing sandwiches that weren’t selling well.

The 18 Bagger Dave’s stores that remain don’t appear to be on much better ground.

The eight stores shuttered in December generated $5.5 million in revenue, or $687,500 per restaurant, through the first three quarters of last year and had a pre-tax (EBITDA) loss of $600,000. But the other 18 locations brought in $14.1 million, or $783,333 per restaurant, and had a pretax profit of $700,000. That comes to less than $52,000 per restaurant on an annualized basis, a growth rate of 5 percent.

The revenue per restaurant on an annualized basis comes to $1 million, well below the target revenue per store of $1.7 million, the goal stated in a presentation to investors in January.

A profit margin of 5 percent is low, especially for company-owned stores, Tristano said. Franchisee-owned stores typically hit at least 10 percent because of the fees to the franchisor they must pay.

“They’ve got to be doing better than 5 percent to pay down their debt,” Tristano said.

The obvious question that arises is, were the closures enough?

All Bagger Dave’s restaurants are company-owned. (Plans to franchise the brand several years ago were scrapped.) With a massive Buffalo Wild Wings operation cranking away, the Bagger Dave’s “baby brand,” as Ansley has called it, has had a hard time getting the attention it needs.

Diversified has a contractual obligation with Buffalo Wild Wings Inc. to open 42 restaurants by 2021 and has 15 more to go. The company says it’s ahead of schedule.

Ansley also points out that failing to make that obligation bears only a weak cost: Diversified only has to pay Buffalo Wild Wings $50,000 for each store it does not open — far less than the millions it costs to open one. “With our relationship with Buffalo Wild Wings, I doubt they’d charge us the $50,000,” Ansley said.

In any case, the moves Bagger Dave’s has made demonstrate the pressure on Diversified to stay focused on the much stronger Buffalo Wild Wings side of the business.

“In the year ahead, we plan to focus our resources primarily on growing our BWW portfolio, which represents the overwhelming majority of both our revenue and adjusted EBITDA,” the company said in its third-quarter report.

The move toward Buffalo Wild Wings is smart because it’s a more proven brand than Bagger Dave’s, which is “a good brand but not that broadly differentiated,” Tristano said.

“The reality in our industry is that there’s no shortage of optimism. We hear about these ambitious goals, but very rarely do we see brands meet those goals.”

The response

Last year’s closings, which included one Buffalo Wild Wings restaurant in Florida besides the Bagger Dave’s spots, were the first for the company. But they were a long time coming.

“Bagger Dave’s has given us some fits,” Ansley said in an interview. “We knew we had issues with it two years ago. We made a lot of changes — I can’t even count the changes.”

These changes came too quickly and were confusing for guests and employees. “We were too aggressive. That was the problem, and we learned it the hard way,” Ansley said.

Casual dining chains face intense competition throughout the country, not just from each other but also from fast-casual restaurants like Chipotle Mexican Grill and Five Guys Burgers and Fries. The parent of the Max & Erma’s chain closed eight metro Detroit locations in January.

To counter this trend, Diversified needs to do a better job of marketing Bagger Dave’s by doing things such as telling people of premium ingredients that are mostly sourced in Michigan, Ansley said.

He also is heartened to see interest in properties of the shuttered locations. This includes the one in downtown Detroit, which has garnered “a lot of offers,” he said.

The company is holding the line on the minimum staffing levels that have driven up compensation costs. “There will be a little deleveraging from” the minimum staffing levels that drove up compensation costs but “nothing substantial,” Ansley said.

No more Bagger Dave’s locations will be closed, Ansley said. If the prototype stores do well for the rest of the year, “then we will start expanding again,” he said.

The 18 remaining Bagger Dave’s restaurants are profitable, said Ansley, who is especially encouraged by the performance of “prototype” stores. These stores have the new menus and have been redesigned to be smaller and “hipper.” They are in Grand Blanc, Birch Run, Grand Rapids, Chesterfield Township and Centerville, Ohio.

The three analysts who cover Diversified’s stock are encouraged. They express concern at the company’s debt but agree that the Bagger Dave’s changes are on the right track.

“We think much of the ‘noise’ of the past few quarters is behind the company and management can focus on restaurant operations,” wrote Mark Smith, analyst at Minneapolis-based Felt & Co.


Bootler brings comparison shopping to food delivery services

February 3, 2016
Cheryl V. Jackson
Blue Sky Innovation
Chicago Tribune
January 26, 2016
http://www.chicagotribune.com/bluesky/originals/ct-bootler-food-delivery-bsi-20160126-story.html

Food deliveryA Chicago startup plans to feed on the food-delivery boom with a search engine that makes comparing costs and delivery times easier.

Bootler (at gobootler.com) launches Tuesday in Chicago with a platform that allows users to compare menu items, prices, delivery times and fees, and order minimums across a variety of services. Users can add booze to their orders through the company’s partnership with on-demand alcohol delivery service Saucey.

Founder Michael DiBenedetto says customers who use Bootler don’t have to hop from one delivery site to the next to find what they want, then evaluate costs and other information.

The site currently includes Delivery.com, GrubHub, DoorDash, Postmates and EatStreet, with plans to add Uber, Amazon, Caviar and Eat24.

“It’s a very saturated market,” DiBenedetto said.”We think it will work because of how many companies are in the space. We’re driving more awareness and traffic for all the players in the space by arranging them all in one spot.”

Users can search by restaurant or food category then see the total from various delivery services, including menu price, taxes and delivery fees. They can then click through to their preferred service to complete the order.

Using Bootler is free to consumers. The company plans to get a cut of the delivery services’ take.

One-stop shopping for online food and alcohol ordering seems a natural with the growth of restaurant delivery services, said Darren Tristano, president at research and consultant firm Technomic.

“It was only a matter of time before somebody built a site that makes comparisons,” Tristano said. “It makes sense. We’ve seen it in other types of comparative places like with travel, with airfares and hotels and car rentals.”

It could be difficult to get consumers who already order from particular sites to steer first to an aggregator, though, Tristano said.

It “will be interesting to see if they can get consumers for a few dollars’ or a few minutes’ savings,” he said.

DiBenedetto said he started working on the website in June.

“I’ve wanted to order from one restaurant and it didn’t have what I wanted, so you end up having three or four tabs open until you find one that delivers what you want,” he said.

The site began operating beta in December, he said.


Why Coffee Delivery Is the Future of On-Demand Ordering

January 25, 2016

by Gloria Dawson @ Eater
Jan 14, 2016, 12:00p
http://www.eater.com/2016/1/14/10758072/starbucks-delivery-dunkin-donuts-office

It’s never been easier for consumers to get things delivered. So why not coffee?

Imagine a piping hot coffee delivered to your office or home at the proverbial “click of a button.” For consumers, it’s perfect. For the coffee companies attempting to provide these services, it’s a bit more complicated. But two of the major chains, Starbucks and Dunkin’ Donuts, are ready to give it a try.

2015 was a big year for Starbucks, which added several services designed to be quick and convenient. In September, the company rolled out nationwide availability of Mobile Order & Pay through its apps, which allows customers to order ahead on the app and pick up in-store without waiting. In October, Starbucks announced a pilot project: It started bringing coffee and other items to employees of the Empire State Building through an in-house service, Starbucks Green Apron Delivery, which promised items “delivered by Starbucks baristas right to your office.” And in December, Starbucks officially debuted its previously announced partnership with start-up Postmates, allowing customers in Seattle to order delivery using the Starbucks app.

It’s not just Starbucks getting into the delivery game. In November, Dunkin’ Donuts launched two programs designed to “make it even easier and more convenient for people to run on Dunkin’ from morning to night,” announced a company press release. On-the-go ordering — which works with the company’s app in a similar style to Starbucks Mobile Order & Pay — first launched in Portland, Maine. Dunkin’ Delivery, meanwhile, first launched in Dallas as a partnership with the on-demand delivery start-up DoorDash, and both services have expanded into other cities.

Although fast-food and coffee chains have great convenience, the expectation by consumers to get food delivered is increasing.

But why coffee delivery? “Both ordering methods are simply new ways to… meet customers where they are in their day,” says Starbucks spokesperson Maggie Jantzen. Apparently, the most-asked-for service on the My Starbucks Idea blog was, “When will Starbucks just bring me coffee?”

According to Darren Tristano, the president of food industry research firm Technomic, “with the rise of on-demand delivery services like Postmates and others, many operators have researched the opportunity to outsource or build delivery services,” and that includes brands already known for convenience. “Although fast-food and coffee chains have great convenience — including in-store and drive-through options — the expectation by consumers to get restaurant food delivered is increasing,” he says, “and broadening across new segments.”

But anyone who has waited longer than expected for a food delivery, received a dish that had cooled in transit, or not received what was ordered, understands that delivery logistics are complicated. Unlike Amazon shipments, there’s only a brief window of time that most food items can be delivered before getting cold or spoiling, and some might say that the window is even shorter for coffee.

“The flavor and aroma characteristics of hot, brewed coffee drinks change quite rapidly as the temperature decreases,” says Nick Brown, editor of Roast Magazine‘s Daily Coffee News. “And while everyone drinks their beverage at a different pace, the most loyal of customers may have some sensory expectations tied to their favorite drinks. Time and temperature seem to be the two biggest obstacles here in repeating the experiences consumers have come to expect within the brick-and-mortar retail locations.”

“Given the number of locations that each brand has, it should be relatively easy to develop delivery options,” Tristano says of the logistics. “Challenges facing both operators will include peak time service, logistics in-house, and managing the delivery in a way that doesn’t impact the on-premise operation or the brand quality as products leave the store.”

Starbucks’s rollout of Green Apron delivery seems to take these concerns into consideration. The company used existing infrastructure for its Empire State Building delivery: The building already had a Starbucks café, and the company uses a separate kitchen for the Green Apron orders. There are more than 12,000 employees in the building, but they are all just an elevator ride away. Customers place orders on a fairly simple website. Orders arrive in approximately 30 minutes, according to the company. But Ashley Fleishman, a lawyer who works in the Empire State Building, reported coffee delivered in 10 minutes. And yes, “the coffee is still hot,” she says.

Starbucks’s “Green Apron Delivery” service is designed for deskside deliveries within large high-rise buildings.

Green Apron Delivery partners are discouraged from accepting cash tips, says a company rep, but the company is working on adding digital tip options to the website. And although Starbucks did not share plans for expanding Green Apron, Jantzen describes the service as one “for customers within a designated high-rise building.”

The company has, at least, one new customer. Fleishman used to get her caffeine fix from her office’s Keurig machine. “I am not a religious coffee drinker,” she says. “So with Starbucks, I probably drink more than I previously did before delivery was offered.”

While the Green Apron delivery seems to focus on office delivery, “customers aren’t just in office buildings,” according to a Starbucks press release announcing the Postmates partnership in Seattle. “They’re at soccer games with their kids, at home with family, or gathering at the park with friends.” To get those skinny lattes to soccer games, Starbucks teamed with Postmates, a delivery company that has a love-hate relationship with the restaurant industry. (Postmates often offers delivery from restaurants without their consent.) Despite the complicated relationship with restaurants, Starbucks considers Postmates “an industry leader in the on-demand delivery space,” writes Jantzen. “They have the technology and expertise to scale this program with Starbucks.”

It’s safe to say Postmates is committed to the relationship: According to the company, they’ve designed a new carrier “so that we could ensure that the coffee would arrive the way it left the store.” Customers order through the Starbucks app, which has been modified to use Postmates’ ordering and delivery technology, the first and only food company app to do so. Users in Seattle and elsewhere can still order through Postmates directly, but having delivery built into Starbucks app allows customers to customize orders, the company said in a press release. For Postmates deliveries, Starbucks charges a $5.99 delivery fee.

Jantzen also says that Starbucks has “no additional plans to share in regards to other food delivery companies.” But it would not be uncommon for large chains to test our various food delivery options. For example, 7-Eleven is working with both Postmates and DoorDash in different cities. In terms of logistics, Slurpees have a lot in common with coffee — a delivery that’s just a few minutes late can be problematic.

Dunkin’ Delivery customers can order only through the DoorDash app — DoorDash has experience working with chains including Taco Bell and Kentucky Fried Chicken. The partnership probably made getting the program of the ground easier for Dunkin’ Donuts, but will most likely limit the information they can gather from their customers. For the partnership, DoorDash began deliveries at 7 a.m. or 8 a.m., a few hours earlier than the typical 10 a.m. start time, in order to serve breakfast. Breakfast and food in general is a growing category for many fast food companies, according to Brown.

“This strikes me as a relatively low-risk channel to explore, especially if the technology bears out.”

“While breakfast has been a strong suit, we’ve seen roughly one-third of coffee orders come after lunch,” says Prahar Shah, the head of business development at DoorDash. Office deliveries are popular. “We see three to four folks on a team doing the ‘coffee run,’ but doing it with DoorDash.” Dunkin’ Donuts’ Box ‘O Joe, which holds 10 cups of coffee in a box, are popular with the late-afternoon office crowd, says Shah.

This partnership has expanded from Dallas to Washington DC, Chicago, Atlanta, and Los Angeles/Orange County. And Dunkin’ Donuts is looking to expand delivery, with or without DoorDash. “As we continue to test Dunkin’ Delivery, we will look to explore options for other partnerships and integrations with the DD Mobile App,” writes Sherrill Kaplan, who works on digital marketing and innovation at Dunkin’ Brands.

“Both companies have made big strides in their app development and mobile ordering platforms, and it makes perfect sense that they would try to leverage that loyalty through a new channel,” such as delivery, writes Brown, the Roast editor. “This strikes me as a relatively low-risk channel to explore, especially if the technology bears out.”


Bloomin’ Brands Struggles in Quarter, as Chain Restaurants Face New Chef-Inspired Concepts

November 9, 2015

Justine Griffin
© 2015 Tampa Bay Times
http://www.tampabay.com/news/business/retail/bloomin-brands-struggles-in-quarter-as-chain-restaurants-face-new/2252436

While the “anti-chain” movement across the U.S. isn’t new, it is slowing down sales at some of the best known restaurant brands, including Outback Steakhouse and Carrabba’s Italian Grill. Bloomin’ Brands, the Tampa parent of Outback and Carrabba’s, is the most muscular restaurant company in Tampa Bay with $4.4 billion in revenue last year and 1,500 restaurants worldwide. But it’s anything but local to consumers here.

The company on Tuesday reported disappointing sales for the third quarter for most of its brands. CEO Liz Smith said casual dining as a segment in the hospitality industry was down from July to September, not just at their in-house brands.
“We knew the trends would be challenged,” Smith said. “And our marketing didn’t break through as expected.”

Bonefish Grill, which was intended to be the engine powering new growth for Bloomin’ Brands’ restaurant portfolio this year, saw the steepest declines, with sales down 6.1 percent for the quarter and traffic down 8.5 percent. It’s the second quarter of decline for Bonefish, which is in a competitive class of “polished casual” chain restaurants, and tends to be more pricey than dining experiences like a TGI Fridays or Olive Garden. The menu quality is more on par with restaurants like Seasons 52 or Carmel Cafe.

Carrabba’s Italian Grill reported a decline in the quarter of 2 percent sales and Fleming’s Prime Steakhouse & Wine Bar saw a 0.6 percent drop.

Outback Steakhouse, which performed well in new international markets like Brazil, was the only brand to report modest growth, at 0.1 percent, this quarter.

Chain restaurants are struggling to meet the changing trends fueled by younger demographics in the U.S., said Darren Tristano, executive vice president with Technomic, a restaurant research firm in Chicago.

“These are the same issues that most casual dining restaurants face today,” Tristano said. “Bloomin’ is no different than Darden” — the Orlando parent of Olive Garden and several other chains — “and most others in this regard.”

Another blow landed this summer when Bloomin’ Brands lost a bid to open an Outback Steakhouse and a Bonefish Grill in Tampa International Airport after $953 million in terminal renovations. The aviation authority board sought to make the airport’s restaurants feel more local, and one board member noted the company’s widely located chains made it feel less so. The Carrabba’s in the main terminal, which opened in 2008, is slated to close next spring.

Millennials and generation X-ers look for value but tend to try locally owned or chef-inspired restaurants rather than a chain, so it’s difficult for the casual dining chain restaurant to stand out in what’s become a very competitive market, Tristano said.

“It’s hard for chains to add more regional flavors to a menu, like local craft beer or local food options that the independent restaurants can do so easily,” he said. “They need to be more innovative and focus on the strengths that they do have, which usually is price, to get the attention of this next generation customer.”

Outback Steakhouse will roll out a new mobile phone app next year, which the restaurant chain has been testing in Tampa Bay. Through the app, customers can add their names to the wait list before they arrive at a restaurant, place take out orders and use to pay at the table.

“We will continue to invest in this kind of innovative tech platforms,” Smith said during Tuesday’s earnings call.

Carrabba’s Italian Grill will debut a simpler menu next year. Fewer items will be available, but the chain will add a new small plates category for tapas-style sharing at the table. Bloomin’ also changed the menu at Bonefish Grill earlier this year, with the same “less is more” theme.

“Too much on the menu overwhelms the customer,” Tristano said.

It also keeps food costs down, said Brian Connors, with Connors Davis Hospitality, a restaurant consulting firm in South Florida.

“Chains are the safe choice. Customers know what they’re going to get there and the restaurants know what they’re good at,” Connors said.

Bloomin’ Brands plans to continue to expand aggressively in new international markets like Korea and China. Much of the company’s growth has come from international openings this year.

“They don’t have to reinvent the wheel this way,” Connors said. But in this country, he suggested, they’ll need to come up with something new to keep attracting diners.

“We’ve entered this new age of adventure eating. Food recipes is one of the highest pinned categories on Pinterest,” Connors said. “People are willing and wanting to try something new.”

Bloomin’s brands: Tough quarter for sales
U.S. sales in the last four quarters
BrandQ3Q2Q1Q4 (2014)
Outback Steakhouse0.1 %4%5%6.4%
Carrabba’s Italian Grill- 2%2%1.9%0.3%
Bonefish Grill- 6.1%-4.6%0.9%0.7%
Fleming’s Prime Steakhouse & Wine Bar- 0.6%3.2%3.0%3.4%
Source: Bloomin’ Brands