How Food Delivery Service is Reshaping the Restaurant Industry

The global market for food delivery services represents about one percent of the entire food market and accounts for four percent of sales generated by restaurants and fast-food chains. Food delivery services have already matured in most countries, with an overall annual growth rate projected at approximately 3.5 percent for the next few years.

The most common form of delivery service remains the traditional method: consumers place orders with local restaurants over the phone and wait for the food to be delivered to their doorstep. This traditional model holds 90 percent of the market share, with nearly three-quarters of these orders still made via phone. However, like many other industries, the rise of digital technology is transforming the restaurant sector. Consumers, particularly those accustomed to the convenience and transparency of online shopping through apps or websites, are increasingly expecting a similar experience when ordering meals online.

Options for take-out food at restaurants in urban areas have multiplied exponentially and continue to grow. With just a few clicks on your computer or taps on your mobile phone, you can order a full meal from a local upscale restaurant and have it delivered to your door in as little as 30 minutes. In today’s smartphone and touchscreen-driven world, apps and digital technology have become integral to restaurant management, enhancing service and customer satisfaction—whether at the restaurant table or the customer’s doorstep. Food delivery has evolved into a tech-driven service, as digitally savvy customers expect seamless access to everything, from fashion to food, via their smartphones.

However, the challenge of maintaining food quality and customer service standards while minimizing disruption to traditional dine-in patrons remains a pressing issue for both restaurants and third-party delivery services. Ensuring that orders are delivered promptly without compromising the quality of in-house services is a shared responsibility that weighs heavily on both parties. Additionally, the food service industry is rapidly evolving into an increasingly crowded marketplace, as customers with disposable income demand their favorite meals on demand. While some restaurants stick to traditional delivery models, others are adapting and tailoring their strategies to meet both their business needs and the evolving expectations of their customers.

The shift in consumer behavior from brick-and-mortar shopping to online retail has dramatically impacted the retail sector. Chains like Walmart, JCPenney, and Sears are losing market share to online giants like eBay and Amazon daily. Similarly, in the restaurant industry, the use of online food delivery services continues to rise. Fast casual restaurants, in particular, have experienced the most significant shift in the food service sector. With substantial consumer and investment money flowing into this market, it is no surprise that the fast food sector in the US, currently valued at around $30 billion, is projected to reach $100 billion in the near future!

In the US alone, weekly use of food delivery services provided by restaurants doubled between 2010 and 2015. Food delivery orders are also growing rapidly in other parts of the world, increasing by 20 percent annually in India. In the UK, the use of delivery services is expected to triple by 2020. However, one drawback is that people are spending less money on fast-food meals, instead seeking more convenient dining options. A global survey revealed that 53 percent of respondents consider online ordering the most important technological feature a restaurant can offer—valued even more highly than digital menus and loyalty programs.

The growing interest in and adaptation of food delivery is undoubtedly reshaping the restaurant business. It has opened many career opportunities, with restaurant owners seeking staff to handle orders and package meals for delivery. While it’s easy to assume that restaurants are benefiting from a bottom-line increase with the advent of food delivery services, the reality is often different. Many restaurateurs report that delivery services are shrinking their profit margins. In addition to hiring more staff to manage orders and deliveries, the delivery process itself incurs significant costs. Moreover, high-profit items like beverages are less likely to be included in online orders. Although demand for online food delivery continues to grow, it is not yet substantial enough to offset the additional labor and operational expenses.

When executed effectively, food delivery services can foster customer loyalty, enhance profitability, and drive higher sales. Customer-facing technologies are designed to provide a competitive edge, albeit at a cost. Restaurants, particularly chains struggling with low foot traffic, are increasingly turning to delivery as a way to attract both existing and new customers. Some have even announced plans to launch their own delivery services and mobile ordering apps. While significant progress has been made, rapid advancements in technology are accelerating changes in the industry. Delivery is anticipated to have a transformative impact, making it an essential component of the food service sector in the coming decades. Although some chains are not yet ready to offer delivery services, they are encouraged to confront and consider this initiative as part of their long-term strategy.