In online takeout, it is getting harder to understand who is serving whom.
While the U.S. online food-delivery market continues to burn hot, data from KeyBanc suggests growth in restaurants offering the service may be slowing. That could limit the whole sector’s long-term growth, as restaurant selection is key to consumer adoption of delivery apps.
Funding for food-delivery apps continues to roll in. Since the beginning of 2018, privately held players DoorDash and Postmates have raised $1.8 billion and $450 million, respectively, according to Citi Research. This cash has been deployed in large part to marketing efforts in a battle for share among private players like these and public companies such as GrubHub and Uber.
But while eaters keep spending, restaurants themselves could temper market growth. Citing company reports, KeyBanc shows the number of total unique restaurants with online delivery grew 10% from February to June. That compares to growth of 36% across platforms over the same period last year.
While delivery apps have demonstrated success in bringing many restaurants new business and repeat customers, some eateries pay dearly with commission rates reportedly as high as 30%. The economics still make sense for big chains with regular takeout traffic. They don’t for everyone.
…Some restaurants are scaling back on third-party delivery. Flynn Restaurant Group recently tested opting out of delivery for its Applebee’s restaurants in three markets and noted in-restaurant dining subsequently increased, according to Restaurant Business. KeyBanc data shows that, while large chains broadly are adopting third-party delivery at a higher rate than the overall restaurant category, at least one major chain seems to be scaling back significantly. KeyBanc found 30% fewer Burger King restaurants listed across delivery apps, which analyst Andy Hargreaves notes could imply “franchisee unwillingness to participate on third-party delivery marketplaces.”
Leading delivery apps will do just fine. Despite slowing growth overall in restaurant additions to delivery platforms, KeyBanc estimates that DoorDash grew restaurants 28% between February and June versus growth of 20% for UberEats, 16% for Grubhub and 8% for Postmates over the same period.
U.S. online food-delivery revenue is approaching $20 billion, according to various estimates, so the prize is certainly worth fighting for. To keep up growth however, the industry will have to offer its restaurant customers better value.