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Are Food Delivery Apps the Chain Restaurants’ Trojan Horse?

Restaurant delivery app Olo Founder & CEO Noah Glass has been making the rounds to talk up his company’s recent integration with Google, which he is positioning as an alternative path to working with popular delivery apps like GrubHub, DoorDash, and Uber Eats. He argues the delivery platforms (or marketplaces as he refers to them) do not have the best interest of the restaurants in mind.

Olo’s Google integration lets consumers order food delivery within Google Maps, Google Search and Google Assistants.

Glass argues in an interview with PYMNTS, the marketplaces run Google ads on branded search queries (e.g., “Applebee’s Cheeseburger delivery”), which usually land on a branded page within a marketplace but can also divert users into the general marketplaces, where they may end up choosing another brand to satisfy their cheeseburger jones.

“Logically speaking it’s just not true that in these cases, marketplaces are a great discovery tool. The customer is actually looking something up by name on Google and getting diverted to a marketplace,” Glass told PYMNTS.

We experimented with this and found that in most cases, a delivery app like Postmates or DoorDash appears at the top of the (paid) results, but in most cases, we were directed to a branded page for that brand within the delivery service.

See the example below for the search, “deliver Applebees Cheeseburger.” Of course, there is no reason UberEats couldn’t intercept that search with a message that was only about ordering cheeseburgers vs ordering an Applebee’s cheeseburger. And if the brand isn’t available in your area, the service redirects you to alternatives.

 

So what does Olo offer as a buffer against these marketplaces? According to Glass, quoted by Yahoo Finance, “When a customer starts their search on Google, they want that customer to then place the order on Google and not get diverted off to a third-party marketplace where the restaurant has to pay a 20 to 30 percent commission and doesn’t actually own that customer or get that data.”

Olo offers restaurant chains an alternative to either building their own delivery apparatus and relying on costly marketplaces.

From the PYMNTS article:

Olo’s digital ordering platform also connects restaurants to its dispatch network — that entire experience also means they can offer delivery via application programming interface (API) connection to a third party operator instead of having to either build in-house function, or rely on the marketplaces. More streamlined and less friction, [Glass] said, means bigger and more frequent basket sizes — as well as more profitable ones since restaurants don’t pay 30 percent of that sale to an aggregator.

More importantly, Glass noted, the integration with Google is helping to keep the customer connected to the restaurant brand itself, and away from the next round of challenges that these delivery marketplaces are beginning to mount against them.

Another of the challenges the PYMTS articles references are “cloud kitchens” (it uses the term “ghost kitchens”), which are beginning to pop up as generic food preparation locations that exclusively serve food delivery apps.

The cloud kitchen concept is still in its early stages (and not without its skeptics), but has attracted investment from Amazon, a logical entrant into the food delivery space, what with Amazon Prime as its ready-made supply chain (e.g., Wholefoods).

The cloud kitchen facilities can be used by restaurant brands as food preparation outposts to expand their delivery footprint without opening new full-service locations. But they also offer the possibility of a third party like GrubHub, or Amazon, to create its own food delivery brand, and completely disintermediate restaurants. And the most likely targets are not the authentic local dining establishments offering a unique experience. The most likely victims are the Applebee’s of the world, who offer the same experience in Cincinnati as they do in Cleveland and whose brand loyalty is easily diverted.

We’ve written a bit about cloud kitchens, and we talked about it on a recent analyst roundtable, which you can view here.

 


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