How Italian Restaurants Can Capitalize on the Off-Premises Dining Boom
This month, TDn2K reported that chain restaurants finally saw strong sales growth in March with comps lifting 1 percent in the first quarter. In fact, every month since June 2018 saw same-store sales growth, excluding February 2019, which was impacted by bad weather. This is good news after several years of declining sales industry-wide. While it seems the industry is recovering, it’s important to note that business will not continue the same as it was before these declines.
Though sales are up and check sizes are higher, posting a whopping 3 percent gain over the fourth quarter of 2018, restaurant traffic is down. And while check sizes are certainly helping the gains, there has been another boon for restaurants: delivery.
Though once-busy dining rooms may now seem less populated, there is still demand for on-premises dining. NPD Group reports on-premises dining still makes up 37 percent of restaurant orders. Though this might be a stark difference over the dining scene of a decade ago, restaurant-goers don’t want to ditch the dining room altogether—they want choices.
Yet the fact remains, off-premises dining has helped restaurants attract young diners. Forbes reported a study conducted by investment bank UBS, in which researchers found that millennials are three times more likely than their parents to order delivery. As a result, many restaurant delivery apps can now be found in top 40 lists for downloads. The shift is so dramatic, UBS sees a future in which most meals diners currently eat at home would be ordered and delivered by restaurants.
Furthermore, NPD Group reports that while restaurant visits remained flat from September 2017 to September 2018 compared to the previous year, 32 percent of all restaurant traffic was consumed at home—a 2 percent increase across all segments.
That’s good news for the industry. And though millennials have lead the charge into delivery, they aren’t the only ones taking advantage of the services restaurants are now providing. NPD Group reports digital ordering now accounts for more than half of all delivery visits. Additionally, between 2012 and 2018, the industry saw a 20 percent jump in delivery sales, and a 10 percent increase in delivery visits overall, so delivery is helping brands increase traffic and check sizes. NPD Group says this traffic was driven by growth in the industry’s use of digital ordering platforms, which now make up 52 percent of all delivery transactions.
The trouble, however, is that as off-premises dining become more ubiquitous, simply having delivery and takeout options is no longer a differentiator. And because consumers are so used to having choices about where they eat restaurant food, not giving them the option to dine at home or at the office is quickly becoming a liability. This makes it crucial to not only offer delivery and take out service, but to get each step of the process right from ordering infrastructure to delivery methods.
Of course, Italian concepts have long been associated with delivery and takeout through the pervasiveness of the pizza industry. But now, with new software and partnerships, it’s possible for all restaurants to find an off-premises dining model that satisfies business needs without creating a giant headache for owners and operators.
Here are three methods restaurants are using to capitalize on the off-premises dining trend and how they can be used effectively in the Italian segment.
1. Third-Party Delivery
When considering adding delivery service, many brands feel overwhelmed by launching their own delivery services. Not only does self-delivery require the hiring and management of delivery staff, as well as extra insurance and transportation fees for drivers, but it also requires digital infrastructure many brands are not ready to implement. Instead of hiring and paying costly labor fees to develop their own apps and websites, many restaurants are partnering with services like Uber Eats, to deploy high-quality delivery services without the startup and maintenance mess.
One of the biggest benefits of services like Uber Eats is the built-in audience. Because the service has so many loyal users already, smaller and bigger brands alike may find themselves enjoying upticks in traffic due to placement on the third-party delivery service’s website. Additionally, Uber Eats provides restaurants with data about their consumers, such as where they shop after placing an order. This can help brands determine how to reach consumers for additional sales and visits.
2. Self Delivery Service
For other brands, the risks third-party delivery opens up for restaurants makes it a lackluster solution. Between the high fees paid to delivery services and lack of control over personnel, site branding, and food quality upon delivery, many brands are embracing the challenge and creating their own delivery service.
Pizza chains have long since figured out the delivery puzzle. Other Italian concepts can borrow pages from their books. Setting up convenient mobile apps and websites is crucial. Not only must they be intuitive and easy to use, but they must be well-branded to maximize sales and maintained to ensure consistently positive guest experiences. It’s especially important for multi-unit brands to implement the same design chain-wide.
Though web and app design and maintenance may be daunting for many restaurant brands, companies like Tillster can help minimize the restaurant’s burden. Additionally, with services that help expand the brand’s network, Tillster can also help restaurants drive traffic to their ordering system.
Additionally, when designed well, these digital tools help restaurants drive sales and increase transparency in the process with consumers. Owning digital platforms means restaurants also own user data, unlike in third-party apps, opening up opportunities to gain even more insights and opportunities to re-market to consumers to drive sales. Additionally, by adding simple tools that are unavailable in third-party services, restaurants can increase transparency for consumers—similar to Domino’s pizza tracker. This can help give diners peace of mind that their deliveries will arrive on time and ensure a great brand experience from beginning to end.
Carryout isn’t new, but it is still a crucial piece of the off-premises puzzle for many brands. Though delivery is definitely on-trend, it’s important to note some heavy hitters, like Darden’s Olive Garden, aren’t entirely sold on the delivery concept. Though Olive Garden’s leadership said in September they were testing delivery, the brand isn’t willing to compromise its service and food quality to make it happen and is instead standing behind its current carryout offerings.
“We're concerned about how it's executed,” said CEO Gene Lee. “We're concerned if it can create incremental growth at scale. We're not happy with the economics. We still have the issue of the data. And lastly, we have to get our arms around how we protect the profitability of our large and growing current off-premises business, which would be difficult to deal with.”
While the brand does do large catering orders placed 24 hours ahead of time, there are no plans to expand delivery for family-sized meals.
“Right now, we have no interest in delivering a $10 meal to an individual household. That's just not a business that we think we want to be involved in right now,” Lee said.
Though it may seem strange to go against the current as most restaurants embrace delivery, this can be a sort of compromise between consumers and restaurants. Diners can still eat their favorite Italian foods in the comfort of their own homes, but the restaurants aren’t forced to choose between managing the cumbersome backend of delivery service and paying third party delivery fees, losing control of delivery, and sacrificing food quality. And this doesn’t mean Olive Garden is giving up on off-premises—the brand is still committed to reaching 20 percent of off-premises sales over time.
While consumers may be willing to drive to a restaurant and pick up their favorite foods, many will see it as requiring more of an effort than delivery. This means it’s critical for restaurants that embrace carryout-only off-premises dining to ensure their systems eliminate added friction in the ordering and pickup process.
Setting up designated carryout parking spaces close to the restaurant is a simple, but much appreciated gesture to these customers. Even more importantly, ensuring technology allows diners to seamlessly place orders and receive them as soon as they arrive on site will keep busy, time-crunched customers happy.
Designing intuitive apps and mobile sites with easy customization options is the first step. Just as important, however, is the implementation of location technology that communicates to kitchens, such as Curbside’s ARRIVE technology, which alerts staff when customers are on their way and in the parking lot so that food is hot and ready when customers arrive.
By designing simple and effective delivery and takeaway options, Italian restaurants can capitalize on the latest shift in industry sales. By making quality food available in more places and more ways, restaurants can ensure loyal fans for years to come.