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Delivery is the world's fastest-growing foodservice channel, according to Euromonitor International, while digital functionality has made the process of obtaining a high-quality meal easier and more seamless than ever. New restaurant formats known as virtual restaurants, or delivery-only restaurant concepts, are optimized for these occasions. Early models have emerged, each with their own set of challenges, and some have even failed, but there is clear potential for operators that can successfully navigate this new delivery parad
Enabled by technology
Looking at Euromonitor International's consumer foodservice data, there are clear opportunities in delivery, especially when digital channels are used to place orders. In value terms, growth in delivery is outpacing all other foodservice channels globally, as modern consumers, with busier, faster-paced lifestyles, increasingly opt for convenience.
The demand for delivery is enabled by technology. A significant and growing number of consumers are connected to the internet via mobile devices, and foodservice operators can leverage digital channels to make themselves more accessible. The process of obtaining a high quality meal is, therefore, easier and more seamless than ever, and consumers can now use their mobile devices to find restaurants, surf menus and place orders.
Delivery-oriented chains, such as Domino's Pizza — which receives more than half of all orders online — are outpacing competitors simply because they use technology to be hyper-accessible. This is the opportunity that virtual restaurants hope to capture.
What is a virtual restaurant?
Virtual restaurants are delivery-only restaurant concepts in which the kitchen is optimised for processing and producing delivery orders. Cuisine types, menu offerings and even packaging may be engineered to ensure the food retains its maximum freshness, aesthetics and quality amidst a rigorous delivery process.
Virtual restaurants are just starting to gain traction, with two distinct models having emerged. The first relies on an app as the focal point of the concept, and the restaurant manages every "touchpoint” of the process, which includes delivering the meal. One example is Foorban, a Milan, Italy-based online restaurant start-up that cooks and delivers about 4,000 meals per month. Another is Ando, which makes and delivers its Korean and Thai-based recipes to New Yorkers.
The second model outsources the "service” element to a third-party player, such as Grubhub or UberEATS. Without a dedicated app, this model may operate multiple brands within a single kitchen, to maximise appeal. Green Summit Group is an example of this model.
Given the significant opportunities in delivery, two distinct models have emerged that try to meet consumers' expectations of a better delivery experience, and to do so in the most effective way. The two models offer a spectrum of concepts that incorporate varying degrees of control over the touchpoints of the business, but also in terms of being able to market the brand effectively and engage consumers.
Virtual restaurant models
Branding through touchpoints
Finding ways to engage the consumer is a very modern, very novel consideration for restaurants, which have always traditionally engaged — and received instant feedback from — their customers on the restaurant dining floor. Without an in-store experience, virtual restaurants must find ways to engage consumers effectively and promote the brand.
Partnering with local businesses or tying the concept to a recognizable brand, for example, could help ground the virtual restaurant "in reality" and make the concept more relatable. Building trust between the concept and the consumer is just as important for virtual restaurants as it is for traditional bricks-and-mortar restaurants.
Consumer-facing touchpoints are also important for branding the concept, as well as in retaining customers after the initial attraction. Understanding what the touchpoints of the business are, and how the consumer perceives them, is crucial in this process and will largely dictate how the brand resonates with consumers. Consumer-facing touchpoints, in this sense, are marketing; those touchpoints reflect the brand.
Consumer-facing touchpoints include elements of the service that consumers interact with, from the app to the food that is delivered in its final state, and everything in between. The app, for example, should be attractive, functional and simple, allowing the consumer to navigate the menu seamlessly, place an order and make the payment. The packaging will reflect the brand as well, and the delivery itself must be executed as promised. These touchpoints will go a long way in enhancing the experience and getting the consumer to use the service again
Virtual restaurants and the way ahead
Once an effective and scalable model emerges, virtual restaurants will accelerate the demand for delivery, taking share primarily from dine-in occasions.
Likewise, this opportunity will be captured by bricks-and-mortar concepts tapping into delivery as well, and one likely scenario will be out-sourcing delivery orders to off-site operating stations, separating the delivery and dine-in food preparation processes, which helps the bricks-and-mortar concept focus on the dine-in customers who expect a high-quality in-store experience. Finding a way to grow in delivery without compromising the in-store experience is key, but this could allow bricks-and-mortar concepts to compete with virtual restaurants.
Delivery is, however, the future of the restaurant industry. The more connected consumers are, the more they will want restaurant-quality food with the simple push of a button.
Graphsource: Euromonitor International; "Virtual Restaurants: Challenges, Opportunities and The Road Ahead" — June 2017
Cover photo: iStock
As a Consumer Foodservice Analyst at Euromonitor, Stephen Dutton analyses the global foodservice industry, providing insight on key trends and markets, competitive landscape and growth opportunities to help companies make informed business decisions.www