What a wonderful time we are living in! With the arrival of the internet, all of sudden there is no longer a reason for any of us to have to go out to a restaurant any more. Instead, all we have to do is to bring up one of those online ordering applications, select what we want, and then greet the driver when they show up at our front door. What could be better? Unfortunately, what product managers are starting to discover is that the brave new world of unlimited food delivery comes with some downsides.
What’s Wrong With Food Delivery
So what’s going wrong in the world of food delivery? I like to call one of the problems that “soggy French Fry” problem. You know how great French Fries taste when you get them hot out of the fryer at the restaurant. However, if those same French Fries spend a half an hour traveling across town from the restaurant to your home, then they are not going to taste as good when you finally get your hands on them. Restaurant product managers may need to change their product development definition in order to make this all work out.
Another problem with delivering food is that there is a cost to doing it. Product managers for restaurants understand that they have a couple of options when it comes to having the restaurant’s food delivered. They can go out and hire their own drivers to take food to people who have ordered it (this is what pizza product managers have done). Alternatively, they can partner with one of the many food delivery services (Grubhub, DoorDash, Postmates, etc.) and pay them to do it. If a customer orders a US$4 burger, then the restaurant owes the delivery service 80 cents and the customer will probably end up paying the delivery service also. From a restaurant’s point-of-view, up to 10% of a store’s sales may be via home delivery in some markets.
The advantage of offering home delivery of food is that the restaurant now has a way to boost incremental sales and customer loyalty. Home delivery can have a real impact on a restaurant’s bottom line. The cost of delivering food to homes can take as much as 40% of the revenue that a sale brings in. The result of this is that there will be little left over for the restaurant. More and more, product managers are starting to think that perhaps delivering a $10 meal may not make either strategic or economic sense.
How To Make Food Delivery Better
So what’s a restaurant product manager to do? The challenge that they are facing right now is that restaurant product managers feel that they are being asked to give up too much of the profit from individual sales along with having to hand over too much of their valuable customer information to the delivery services that they are using. Even though the majority of sales that a restaurant makes are made in the store, restaurants simply can’t ignore the power of the internet. Restaurants, just like everyone else, have to find ways to do battle with Amazon and the rest of the other firms that are willing to offer food online.
Right now, the impact of the internet on the restaurant business is fairly small. Food delivery currently only represents 3% of all restaurant orders. However, that number is up 6% from the previous year. The challenge that restaurant product managers are facing is that the number of people who have been visiting their restaurants has been slipping over the past few years and is flat since last year. Online ordering, including when people pick up their own food, has increased by 25% over the past year. If product managers can find a way to tap into this growing market successfully, then they’ll have something else to add to their product manager resume.
Measuring the financial impact of offering a food delivery option can be a challenge for a restaurant. In order to get the food delivery business correct, things are going to have to change at both the restaurants and the delivery services. A number of the delivery services are currently working to create automated delivery vehicles that would allow them to eliminate the possibility of human error. The concept of adding a deep fryer to a delivery vehicle has been considered, but so far nobody has committed to doing it. The challenge of getting French Fires to your house while they are still warm remains a real challenge.
What All Of This Means For You
The world around us is constantly changing. What this means for product managers is that we need to look at our product manager job description and stay in touch with our customers and make sure that we understand what kinds of products and services they are looking for. In the restaurant business, what product managers are discovering is that customers want to stay at home and then pick up the phone and call to have restaurant food delivered to them. This leaves restaurant product managers with the need to decide if they want to hire people to make deliveries or partner with a company that already does this. No matter which way they go, their business is going to be affected. Are they ready?
One of the biggest problems that is facing restaurant product managers is that often their food does not travel well – by the time that it gets to a customer, it has become cold an unappealing. Another issue is that delivering food is an additional expense both for the restaurant and for the consumer. Up to 40% of the revenue from the sale of a meal may be consumed by the delivery service. Currently, the impact of the internet and home delivery on the restaurant business is fairly small. However, this part of the business is growing very quickly. In order to make things work out, both the restaurant product managers and the food delivery services are going to have to change.
In the future, having your food delivered from a restaurant is something that we will all probably do at least once a week. However, in order for that day to arrive, a number of different issues are going to have to get sorted out. Assuming that this can happen, eventually we’ll be able to have hot restaurant quality food delivered to our homes at a reasonable price. I’m getting hungry already!
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: How much of the cost of a meal do you think that the delivery service should be allowed to keep?
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What We’ll Be Talking About Next Time
In order to make sure that people want to buy their products, product managers have to stay on top of changes in the technology that people use to make payments. This used to be fairly easy: once upon a time everyone used cash, then they migrated to using credit and debit cards, next came PayPal and the like. Over in China product managers are once again moving forward in the area of payments and they are making changes to their product development definition. Chinese product managers are trying to get people to put their mobile phones away and make payments using facial recognition systems.