Once upon a time it used to be easy to be a restaurant product manager. Your #1 job was to find ways to get more people to come to your restaurant to eat. You could offer discounts, have special events, and even add unique things to your menu. However, then times changed. That internet thing arrived and all of sudden your customers are all walking around with their faces buried in their mobile phones and nobody comes out to restaurants nearly as much as they used to. However, what people do now is to order meals to go. This is good news for restaurant product managers; however, it comes with a catch that is causing them to rethink their product development definition. What apps are your customers using to order their food?
The Problem With Food Apps
First off, let’s take a moment and get our hands around just how big of a deal food ordering apps are. Right now, approximately 50% of the US$17B online takeout-and-delivery business are being handled by online ordering apps. Over the next few years, this number is expected to grow significantly. Restaurant product managers who can find a way to work well with the food apps will have something that they can add to their product manager resume. The restaurant app companies are saying that their goal is to find ways to better serve both restaurants and their customers. However, it is turning out that their business models are starting to disrupt the relationship between a restaurant and its customers.
Different food apps operate differently. The current market leader, Grubhub, is what is called a “partnered service”. What this means is that Grubhub signs agreements with restaurants laying out how the two firms will work together to get food to customers. This arrangement can be both good for the restaurant product managers while it can turn out to be limiting for the food app. Grubhub has 105,000 restaurant partners. Their competition, DoorDash, delivers food from restaurants that they both have agreements with and ones that they don’t have an agreement with. They are able to offer their customers nearly three times the number of restaurants to order from.
The good news for restaurant product managers is that food apps can increase the number of customers who are buying food from the restaurant. However, at the same time the apps can create problems for restaurants. Some food apps build a menu for a restaurant by scraping their web site. However, having less contact with the restaurant can cause problems such as when a customer orders something that is no longer on the menu. Another problem that a food app can create is slamming a busy kitchen with more orders than they can handle during a busy part of the day. There are ways around these problems. Uber Eats, another food delivery service, has gone so far as to incorporate restaurant point-of-sale software into their corporate software in order to find ways to prevent miscommunication.
The New Reality Of Ordering Food
Restaurant product managers may be tempted to sit back and watch the food ordering apps battle it out. The app companies don’t think that the intense competition in this market is necessarily a bad thing. They believe that competition serves to bring more customers online to order food. The thinking is that this will boost sales for both the ordering apps and the restaurants. Studies have shown that customers who order food tend to do it using only one app. The leader is currently Grubhub with Uber Eats in second place.
What’s it going to take for a ordering app to survive in this market? Right now Grubhub has a market valuation of US$7B. They are growing at a rate of 40% year over year. It’s also important to understand that Grubhub has been around for 14 years. A competitor, DoorDash, has been able to raise an additional $400 million and they are currently valued at $7.1B.
This market and its competition between ordering apps has been having an effect on restaurant product managers. One of the biggest unanswered questions is what ordering app will customers use? Will they select an app and then only order from the restaurants that they can access through that app? Or will they pick a restaurant and then select the ordering app that the restaurant uses? There is always the possibility that the popularity of a given ordering app could cause customer’s loyalties to shift.
What All Of This Means For You
Restaurant product managers are finding themselves in a difficult position. The arrival of food apps have allowed customers who don’t want to come to the restaurant to still order food from the restaurant. This is good news for the restaurant product managers. However, there are a number of complications that may make their lives more difficult.
The food app market is turning out to be a very large market. It’s big now and it is expected to become even larger over time. These apps are starting to disrupt the relationship that restaurants have with their customers. Some food apps set up agreements with the restaurants that they provide service for. Others don’t and this is where things start to get a bit tricky. Food apps can increase a restaurant’s business. However, they can also cause problems when customers order food that is no longer on the menu or when a lot of orders come in when the restaurant is very busy. Studies have shown that customers tend to find a food app that they like and they stick with it. This can cause problems for a restaurant if they are not served by that app. The food app market will probably consolidate over time. Restaurant product managers have to be careful because what food app a customer uses could cause a customer’s loyalties to change.
How customers order food from restaurants is changing. The arrival of food apps makes it easy for a customer to get the food that they want even if they don’t feel like going out to a restaurant. However, even though this can boost revenue for a restaurant product manager, the challenges that come along with this new technology can have a big impact on their restaurant in the long term. Restaurant product managers need to look at their product manager job description and find a way to work with the food apps so that their restaurant will be an option that customers can select. They also have to make sure that when food is ordered it is on the menu and it can be delivered quickly. Restaurant product managers who figure out how to do this correctly are the ones who will end up being the most successful.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: How can a restaurant product manager make sure that their restaurant is part of every food app?
Click here to get automatic updates when The Accidental Product Manager Blog is updated.
P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!
What We’ll Be Talking About Next Time
Let’s face it, being a product manager for a movie theater chain was not an easy job before the Covid-19 virus showed up. Netflix and other streaming services were cutting into people’s desire to go out and purchase movie tickets. Now that the virus has arrived, movie theaters have been closed and even more people have become comfortable sitting at home watching TV instead of going to the movies. It looks like these product managers have a real challenge in front of them. How are they going to change their product development definition in order to get customers to come back to the movies?