Since the rise of independent food delivery services such as Uber Eats and Deliveroo, the Australian market has seen the disruption of its traditional dine in and take away models. With consumers investing millions in food delivery there is speculation over where the future of the food industry is heading. Over time consumers preferences have changed from dine-in to drive-through and now as eating in becomes the new eating out, food delivery is becoming king.
Australian restaurants have been quick in adopting the use of food delivery apps, as it broadens their potential market and provides another channel to get food into the customers’ hands. Another driving force behind the rapid uptake is fear of being left behind, as many of those who don’t get on board face a drop in business.
As a result of the growing demand placed upon restaurants to adopt one of the many food delivery services, some restaurants are opting to open a separate kitchen in a more affordable industrial area. Often referred to as ‘Black Kitchens’ or ‘Dark Kitchens’, these locations are not customer facing and operate purely to meet the demand for food delivery whilst offsetting the costs.
However, for Quick Service Restaurant (QSR) Franchises there are more barriers to entry, with the implications of adapting their service models often proving costly. Many QSR franchise systems are keen to get on board the food delivery trend, and for individual franchisees, apps such as Uber Eats offer a more affordable option than employing their own full-time delivery drivers.
Despite the image of convenience and affordability these services offer to businesses, with franchisees already required to pay royalty on their sales, the concept of paying a fee to a food delivery service can mean a significant cut to profits. Although it is not officially published, most businesses say that they are being charged between 25-35% of the order total for the delivery service.
This is where the issues arise, as franchisees often have to pay royalty on the full price charged to a customer, and for sales made through a food delivery app, the cost of the service fee to the delivery company isn’t taken into consideration. As a result, franchisees profit is being reduced dramatically and this can pose a threat to the long term operation of the business.
As this dilemma places many franchisees in a battle between generating profits and adapting to meet customers’ needs, there has been a call for franchisors to take a second look at their franchising agreements, and make changes to address these rapid movements in the food service industry.
As independent food delivery services continue to gain popularity, it is clear that consumers’ preferences are changing, and whilst challenging, it is vital that businesses in the QSR industry move quickly to reflect this.