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Morning Briefing for pub, restaurant and food wervice operators

Fri 26th Apr 2019 - Friday Opinion
Subjects: Time to take back control of delivery, outlets adapt to keep ahead of the game, to tip or not to tip, and perfect fit
Authors: Glynn Davis, Giles Membrey, Sally Whelan and Ann Elliott

Time to take back control of delivery by Glynn Davis

Rising demand for home delivery is changing the foodservice landscape as consumer appetite for meals brought to them in a matter of minutes continues to grow at an exponential rate. Spending on delivery increased 19% in 2018, according to Cardlytics, compared with a mere 3% for the overall dining market.

There’s no doubt aggregator market places such as Deliveroo, UberEats and Just Eat have brought food brands to a much wider audience by hosting their menus online and, in many cases, providing the delivery infrastructure.

What’s not to like? Well, there’s the fact they charge a hefty commission for their efforts – about 30% of each order – and sever the link between food company and customer, starving the operator of important data.

This troublesome combination means foodservice brands are finding it tough to make a profit on a transaction they feel they have little control over and that isn’t necessarily driving loyalty to their brand. According to CGA, less than one-fifth (19%) of business leaders reckon this disconnected home delivery scenario is having a positive impact on consumers’ brand perception.

To steal the well-worn slogan of the Leave camp, it might be time for the restaurant and foodservice industry to “take back control” of home delivery. This is certainly happening in the US, where Chipotle, Papa John’s and Dig Inn among others are working hard on driving more home delivery transactions via their own apps.

They are partnering with specialists such as Olo and ChowNow, which help them develop online and app ordering platforms through which they can tap into third-party delivery providers such as Relay and DoorDash. Orderswift provides a similar service in the UK.

A flat fee is charged by the ordering platform provider and also the delivery company, with the benefits indisputable, according to Orderswift co-founder Matt Gilbert. He says: “Every order that can be funnelled through an in-house service means significantly more profits versus orders from third-party market places.”

The total cost per home delivery order could be closer to an average of 15% for a restaurant that uses its own ordering platforms and the services of specialist delivery companies in the UK such as Stuart versus the typical 30% charged by the market places.

The reality for many food firms is they will find it tough to wean themselves off the delivery companies. However, there’s evidence from Luke’s Lobster in the US that shows offering better menu pricing, exclusive offers and promotions, and menus optimised for delivery (which arrive at customers’ homes in prime condition) can provide an opportunity to migrate some people from market places and on to the restaurant’s own app or website when placing their order.

Foodservice companies taking back control in this way might become increasingly important because it’s clear the big move by Deliveroo and UberEats is to develop their own virtual brands with food produced in purpose-built dark kitchens. Many of these in-house brands have been created to satisfy demand for a particular cuisine in a specific geographic area.

The growth of these brands could lead to a Google Ads-type scenario in which restaurants are fighting (paying) for a high position in search results against in-house brands when customers type “Thai food in London N8”, for example.

This paints the picture of a potentially harsh environment and suggests an increasingly fractious relationship between market places and the restaurants and foodservice companies. Perhaps it’s time for them to consider how they handle the food delivery phenomenon and assess their relationships with the delivery companies.
Glynn Davis is a leading commentator on retail trends

Outlets adapt to keep ahead of the game by Giles Membrey 

Outlet shopping first appeared in the US in the 1930s in the shape of standalone stores that allowed brands to sell-through damaged or excess goods. In the 1970s this developed into the concept of a multi-store shopping mall, a hugely exciting idea for retailers and shoppers alike. 

Large-scale US schemes were the trailblazers, with function and delivery taking precedence over design and layout. Given the excitement surrounding outlet shopping at the time, the promise of serious bargains and access to brands that would normally be prohibitively priced was enough to drive shoppers and footfall.

Schemes across Europe and the UK followed suit as the outlet concept bridged the Atlantic. Building on a solid retail concept, European developers enhanced it to appeal to the continental shopper, creating an attractive environment as well as an enticing retail offer. As consumers became increasingly savvy, European outlets were the first to acknowledge and answer expectations by providing beautiful spaces, village streets and piazzas, which improved customer experience and created longer dwell times.

As many older US outlets began to show their age, European schemes were able to learn from their mistakes, often taking classical and local architectural cues to create an outlet at ease in its surroundings. A perfect example is McArthurGlen Provence in Miramas, France, which was designed with a decidedly Provencal look and feel. Similarly, plans for the forthcoming Grantham Designer Outlet Village have been inspired by the Lincolnshire countryside, with buildings conceived in a traditional village style using contemporary materials.

Leisure elements including F&B are also becoming integral to the outlet experience and can be the differentiating factor for success – on both sides of the pond. It’s an ever-evolving element – while the US originally leaned towards functional offerings such as a standard food court or coffee and muffin shops, this provision changed in the UK and Europe. 

The advent of food culture, rise of celebrity chefs and widespread interest in gastronomy has fed a healthy and necessary evolution. Europe led the way in focusing more on table dining experiences and the US followed, leading to a mix of offers to suit all tastes and requirements. The next stage in this evolution is already visible in the US, with the latest trend of street food markets that will inevitably translate to Europe sooner rather than later.

Outlet destinations are ideal for F&B brands as visitors will often travel 90 minutes or more to get there. This means they are likely to have planned ahead and set aside a sizeable spending budget, while their dwell time will generally be longer – perhaps a full day. Eating out will naturally form part of this visit and they’ll want an enjoyable dining experience – an ideal set-up for many F&B brands.

It could be argued a strong F&B offering is more important to an outlet than a full-price scheme. If a full-price scheme is predicated on a wide catchment area with a long dwell time and additional leisure elements, then F&B is just as important. However, as this description fits most outlets but not most shopping centres, F&B is always significantly important to outlets.

The evolution of F&B is part of the wider trend of enhancing customer service. Having started as a fundamentally functional retail service, outlets on both sides of the Atlantic have realised that to make the best of a profitable opportunity, the in-store experience – design, display, graphics, customer service – should at least match that of full price. If customers understand the brand identity, the value derived by the customer from a discounted price is enhanced. Design and attention to detail have vastly improved as landlords and brands both acknowledge the whole environment needs to be brand-enhancing.

Today the US is driving outlet innovation once more, not only applying European learnings to new schemes but also enhancing the customer experience directly with VIP suites and loyalty schemes.

While the leader may fluctuate, ultimately the UK and US will innovate and influence each other. Global and local trends, including F&B movements, will drive customer expectations, economics will play its part, and all this will affect both markets. Outlet retail will absorb all this, adapt accordingly and forge ahead to the next stage in its development.
Giles Membrey is managing director of Rioja Developments, which is behind the forthcoming Grantham Designer Outlet Village

To tip or not to tip by Sally Whelan

It’s the age-old debate that has many layers and divides consumers and operators alike. Originally introduced as a sign of gratitude, tipping was an accolade for good service and whole-heartedly handed over by the customer. However, in a modern world where restaurants, coffee shops and hotels pop up on every corner, has the original idea behind tipping got lost in translation and led consumers to part with their money as a rite of passage? Overhearing a discussion in the office recently (with many points of view) got me thinking about the general tipping consensus within hospitality and how it compares with what consumers actually want.

“Do I have to pay 10%?”, “but the service was mediocre”, “they’ve already included a service charge, shall I still add a tip?” – are just some of the thoughts that cross our minds when eating out. But while as industry professionals we may have our own opinions on each, we should be guided by the public. Are our perceptions based on truth or simply culture stereotypes?

Service charge versus the tip
Our research found that while more than three-fifths (61%) of consumers understand what the service charge covers, less than one-fifth (17%) are happy for it to be automatically added to the bill. For those times when service has already been included, only 5% of consumers consider adding a tip on top.

The service charge carries with it a raft of controversy, whether it’s customers thinking they’ve had to pay a double tip or the embarrassment of asking whether waiting staff will receive any of it. It can be intimidating and it takes a brave diner to ask for it to be removed. When it comes to giving up their own money, consumers should be in total control of when they give a tip – it’s not for the restaurant to decide what they should do.

The illusive 10%
Is there a standard percentage rule those consumers who choose to tip abide by? As a society, we seem to have an unwritten rule that 10% seems fair, regardless of total cost, but can operators bank on this always being the case? Our research revealed that when eating out 60% of consumers always tip or will do most of the time, 26% sometimes leave a tip, and 12% rarely leave one. Of those tippers, more than half (55%) felt obliged to pay a minimum of 10%.

While I agree with tipping when dining out, I struggle with the expectation of a certain percentage. If I choose to buy a decent bottle of wine, should I be expected to pay the same percentage as if I ordered a £20 bottle? Equally, if you’ve gone for a fillet steak over a sirloin, is the additional tip that comes with it fair? Tipping is a discretionary act that should be decided by the diner based on service received, they shouldn’t be made to feel they have to hit the 10% as minimum.

Where does the tip go?
The ongoing conversation of where the tips go and the issue of front of house versus back of house has always been unfair in my opinion. Waiting staff are only as good as the products coming out of the kitchen so it’s important everyone is recognised for their contribution – and consumers are becoming ever more aware of this. Our research shows 63% expect their tip to be shared evenly between front and back of house but only 22% believe it makes its way to the right people.

While there have been recent movements from operators in being more transparent on where tips go, our findings show more needs to be done to educate consumers and help them feel more at ease. Trusting, loyal customers are key to any business’ success.
Sally Whelan is founding director of guest experience management expert HGEM

Perfect fit by Ann Elliott

The news in Propel on Wednesday about YO! beginning its concessions trial with David Lloyd Clubs (DLC) was really interesting. YO! has launched units in Beckenham, Cheadle, Hatfield, Milton Keynes and Leeds which, according to the company, are “going exceptionally well”, with gym-goers appreciating the “high-quality fresh and healthy Japanese food we are providing”. It certainly fits with the elimination of its belts in some restaurants too.

I have been asked by a number of people for my views on the development. 

I joined DLC in Milton Keynes about six months ago and have been merrily shelling out £100 a month without setting foot in the place – largely because my desire to get fit has been subsumed by my fear of feeling (and looking) foolish alongside a sea of size 6, blonde, beautiful people who all know what they are doing.

I can’t read the instructions DLC gave me or, indeed, the instructions on each machine without my glasses and a PhD in sports science. I can’t seem to manage to get a machine to work at the same time as the TV or my phone. I can’t get all my stuff in the locker and I can’t put my make-up in the steamy, hot changing rooms because it melts – and then I always forget the code to get out of the car park. The whole experience is one humiliation after another – and I pay £100 a month for all this as I inadvertently signed up for a year and can’t cancel my standing order. Without knowing it, the brand has turned me into a gibbering idiot – it’s all highly embarrassing.

However, having signed up for a trek in Columbia in November I have to turn this potential twice-weekly nightmare into a dream I want to keep living, even though my heart sinks just thinking about it. Yoga is much more my style but unfortunately it won’t get me in shape to climb to some long-abandoned lost city (which clearly isn’t lost as someone has found it) in the middle of a jungle.

I don’t feel quite so negatively about YO! because it doesn’t provide as many opportunities for me to feel like an idiot when I’m there. However, at times I have found the quantity of dishes on the menu mind-bogglingly difficult to navigate and have resorted on more occasions than I wish to remember to asking the server to bring me anything, just anything, to save me from the agony of so much choice. The decision to try a non-belt solution must be the right one, despite the belt being easier to choose from than the menu, because it will make the service much more personal and bespoke.

The risk in my eyes is YO! and DLC could be a terrible combination for me – humiliation in the gym followed by humiliation when trying to find something to eat. I don’t think it will be, though. I’ll learn how to manage the gym and which dishes I like at YO!

For other, more sophisticated customers this partnership would be a marriage made in heaven. DLC has, from my own experience, struggled to produce its own food consistently and profitably through all dayparts – breakfast, takeaway, post-school/pre-bedtime children’s food, Sunday lunch, ladies who lunch, and three-course dinners. It’s not an environment conducive to all these occasions either.

YO!’s menu will suit all these dayparts, audiences and occasions. I think it will work perfectly and I congratulate both parties on having the imagination and creativity to bring it to life.
Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector –

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