By Gareth Ogden, Partner at haysmacintyre
It is no secret that digital disruptors such as Deliveroo and Just Eat have revolutionised the hospitality sector over the past five years. Some of this success is down to the fact that it is becoming increasingly difficult for traditional bricks-and-mortar restaurants to flourish and penetrate new markets – crippling rents, heightened competition, business rates rises and increases in the national living wage are making expansion difficult. The advances in the technology of ordering takeaway food are instead presenting operators with exciting opportunities to reach a much wider market place.
In addition to its already existing aggregator delivery service, Deliveroo recently announced the launch of 30 “dark kitchens” as part of its rollout across the UK which will create restaurant food without bricks-and-mortar eateries. The kitchens are designed to house multiple restaurant brands specifically for the Deliveroo service, with the team behind the app finding the location, acquiring the site and building the kitchen with minimal contribution from restaurant owners themselves. This can be a highly appealing option for both independents and well-known chains.
Whilst offering traditional delivery service to enhance revenue growth puts pressure on an already busy kitchen, off-site kitchens can provide restaurants with access to residential areas which are currently under-serviced, without an overhaul of the business plan. The lead time in getting the additional services up and running is surprisingly quick – and this in turn leads to quick generation of extra revenues. The increase in customers reached as well as the reduced overheads (compared to a physical site) mean expansion and revenue can be efficiently generated under this model.
For those working towards opening additional sites, partnering with a delivery service can help to maintain performance against growth targets with a higher return on investment and much lower risk in the interim period. A client of ours is currently enjoying success pursuing this model whilst struggling in their search for a third central London traditional restaurant site. The centralised kitchen operations are helping them reach new customers throughout Greater London at minimal cost and with no impact on the two existing restaurants. “Dark kitchens” can also negate a drop in quality for restaurants who’s kitchens would otherwise be trying to cope with both their eat-in and delivery customers.
Making the decision to partner with a delivery service should be a considered one and businesses must factor in the operations from the outset when planning ahead. But working with such centralised kitchen models certainly takes away the risk and financial pressure of additional services – as long as margins and cash flows allow for the cut that the aggregator takes.