Stand and deliver

Why have so many restaurants found online delivery an ineffective alternative during lockdown? 

For many restaurants, especially those located in the centre of the UK's major cities, dine-in custom represented most of their sales, which were lost during lockdown. The furlough scheme and business grants provided financial relief and protected thousands of jobs. However, with significant overheads remaining and the prospect of high demand, many restaurants began offering takeaway and delivery services.

Although many brands and restaurants tried their hand at delivery, the short lived presence on online delivery sites (popular restaurants such as Padella, Kricket and Honey & Co) and/or the closure of certain restaurants (notably The Ledbury) in the UK suggested that online delivery was either not effective or even an option.

We believe there are three main reasons why certain brands struggled:

Overheads and commissions 
A decade ago, it may have been more difficult to launch takeaway and delivery services so quickly, however the existence of large agglomeration players such as JustEat, Deliveroo and UberEats, makes the pivot into a takeaway/delivery business much easier. The issue, however, is whilst easy to use, these platforms impose significant charges and commissions on businesses. And therefore, as many premium/fine dining establishments work off relatively low margins with significant overheads from higher employee (particularly front of house) and rental costs, these charges reduce the ability to operate profitably in the presence of no dine-in customers.

Demand/Price 
During lockdown, Deliveroo and Uber Eats saw a fierce decline in sales when brands such as McDonald's, Wagamama and KFC temporarily shut. The fact that the establishments that remained operating did not absorb these sales is indicative of customer preferences in terms of both price and brand loyalty. For takeaways, customers are more inclined to opt for cheaper, more familiar brands. Those that seemed to struggle operated at a higher price point than typical takeaways and chains, as it was more difficult to recoup the loss of dine-in sales through takeaways. The near record low consumer confidence levels during the height of the lockdown, would likely serve to exacerbate these woes as discretionary spend was negatively impacted.

Unpredictability
The benefit of the dine-in setting, in terms of reservations and physical footfall, means that restaurants can spread their covers more easily throughout the week. Restaurants however cannot control orders through delivery apps. Consequently, when takeaway orders peak (e.g. on a Friday night), if restaurants cannot fulfil all those orders, they are unable to compensate for quieter periods within the week. Slower order fulfilment would also result in less repeat custom, a key factor in takeaway sales.

The F&B and hospitality sector has been hit particularly hard during the current pandemic, and delivery/takeaways have not always been the answer. Though some issues are specific to the pandemic, namely consumer spend, the outcomes have highlighted key differences and consideration needs to be made when operating a delivery service versus a physical space.

Nevertheless, many have benefited from offering takeaways and others have sought more creative solutions, such from "make-your-own" meal kits (offered by brands such as Pizza Pilgrims and Bocca Di Lupo) to online bakery classes (from Bread Ahead). The situation, though less than ideal, has enabled brands to experiment and test different avenues, and going forward F&B will likely be delivered to customers in a multitude of different ways.

Tejas Panchal