When Yum Brands announced its partnership with Grubhub earlier this year, the company made sure that the delivery integration would work out favorably for its franchisees.
According to details of the partnership terms discussed at Yum Brands’ annual investor day, Taco Bell and KFC franchise owners aren’t paying any extra delivery fees, but are instead making the same profit margins on delivery and in-store orders.
“We have a unique relationship with [Grubhub], which is incredibly beneficial to them: We give them all this scale that they can use to enter markets that they wouldn’t be able to go into otherwise, and we ensure that our franchisees have a great partner that really is committed to our success with good commercial terms,” David Gibbs, Yum Brands’ president and chief financial officer, said at the company’s annual investor day. “So, every incremental delivery transaction for our franchisees [produces] the same profit as any transaction that takes place in the store.”
For most restaurant operators, that is not the way that delivery transactions work. Delivery typically eats up 15 to 30 percent of a restaurant’s profit margin on an order, which often leaves smaller operators questioning the business sustainability of the channel.