The foodservice delivery phenomenon continues at a frenzied pace, and restaurant operators, retailers and third-party platforms are stepping up to the plate to capitalize on the trend and feed growing consumer demand.
As the hospitality industry recruitment agency Horizon Hospitality reported, restaurant delivery is transforming the foodservice landscape with a dazzling array of innovations.1 From Amazon’s inroads into both restaurant and meal kit delivery, to voice-activated food orders via Siri, Google and Alexa, to Facebook partnering with delivery services such as GrubHub, Doordash and EatStreet, opportunity knocks for greater and greater market reach.
According to Statista, an online statistics, market research and business intelligence portal, online food delivery revenue for 2018 exceeds $20 billion, with an annual growth rate of 9.7% which will result in a market volume of more than $29 billion in 2022.2
While much attention is given to the rise of third-party delivery services with high brand recognition, restaurant-to-consumer delivery is the market’s largest segment by a wide margin, accounting for over $18 billion in volume in 2018.2
Gotham Goes All Out for Foodservice Delivery
In restaurant mecca New York City, where hungry consumers feast on delivery from Seamless and other online order platforms, virtual eateries like Leafage and Butcher Block are breaking new ground.
Created by Green Summit, an online restaurant and food delivery company, these “ghost” restaurants have no storefront or the overhead that goes with it. Part of a portfolio of food-delivery services operating out of central commissaries in midtown Manhattan, Brooklyn and Chicago, these brands bring a diverse range of fare to the consumer’s doorstep, from halal-style chicken and rice to meatballs, burgers and grilled cheese.
Consumers seem to be rolling out the welcome mat for these delivery-only concepts as ghost restaurants grow in number, stature and reach. A few notables are Maple, the startup backed by Momofuku restaurant group founder David Chang, ready-to-eat meal service Munchery and new concepts like Good Uncle, which cherry-picks restaurant dishes nationwide for delivery.
Ghost Restaurant Margins Deliver Less Risk, More Opportunities
Green Summit, which started with around $1 million in seed money, generated $20,000 in the first week of sales for Authentic, the company’s premiere (and still operating) online-only concept.3 And while fast casuals tend to devote 75% of their space to seating even if 90% of their customers grab and go, a ghost restaurant requires a much smaller and more cost-effective footprint of as little as 200 square feet to operate.3
What’s more, the importance (and cost) of location looms large for traditional restaurants, while ghost restaurants can save huge sums in lesser locations.
A partnership with GrubHub has played a pivotal role in Green Summit’s growth. The external food ordering platform works just as it would for storefront restaurants and Green Summit pays the same commission rates.3
But while traditional restaurants can spend around $800,000 to test new concepts, Green Summit contends that losses are limited to as little as $25,000 if a new menu fails to catch on.3
Before they can open for business, brick-and-mortar restaurants tend to need a much higher level of inventory, a more robust menu, and more staff (ghost restaurants require no wait staff since there is no onsite service). A few signature items may suffice for a ghost restaurant to entice followers and gain a foothold in a notoriously competitive market.
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1 Horizon Hospitality, Restaurant Delivery Trends to Know in 2018 (Feb. 7, 2018). Retrieved from https://www.horizonhospitality.com/2018/02/07/restaurant-delivery-trends-2018-recruiter-hospitality/
2 Statista, Online Food Delivery: United States (2018). Retrieved from https://www.statista.com/outlook/374/109/online-food-delivery/united-states#market-revenue
3 Ungerleider, Neal, “Hold The Storefront: How Delivery-Only "Ghost" Restaurants Are Changing Takeout,” Fast Company (Jan. 20, 2017). Retrieved from https://www.fastcompany.com/3064075/hold-the-storefront-how-delivery-only-ghost-restaurants-are-changing-take-out