Coming To A Restaurant Near You: Online Food Delivery

This week's eyebrow-raising $49 million round of funding for German food-ordering site Delivery Hero as well as a flurry of similar recent deals, indicate that consumers and restaurant owners want digital delivery. 

The U.S. restaurant industry is enormous -- $632 billion in annual sales, according to the National Restaurant Association -- but also cruelly efficent. The rate of business failure is legendary

But, online food delivery is growing again after furtive entrepreneurial efforts during the Internet boom. And one of the safer bets in the food business has to be on the automation of putting food in American stomachs.

According to a study by the National Restaurant Association, 39% of consumers say they would use electronic ordering to buy meals if it were available. That, perhaps prompted 55% of restaurant owners in the same study to say electronic payment systems, essential to online ordering, will become more important to the industry. 

While some restauranteurs choose to build their own systems, third-party systems vendors, like U.S. market leaders Living Social, Seamless and GrubHub, are a more popular choice as most businesses don't have the time or ability to create their own options for customers. 

A host of similar, smaller services are gaining restaurant clients, too, and the reason is clear: They're easy to use, and that functionality keeps customers engaged. 

Chris Webb, chief executive at Venice, Calif.-based delivery site ChowNow says his company is succeeding because online customers order "again and again and again." ChowNow allows customers to order from restaurants via its site and mobile app, and also creates custom menus as well as websites to host restaurant's content and promote them. In addition to custom client menus and sites, ChowNow provides restaurants with the spending and eating trends of their customers. 

"If they (restaurant managers) know what a customer is worth to them, a restaurant then knows how much they should spend to acquire more customers," said Webb.

The National Restaurant Association's recent study reported that 36% of Americans have placed an order online, with 46% saying they would order via a smartphone app if that option was offered. 

Webb's service seems to be confirming this trend. "The average customer orders $46 worth of food every month at restaurants using ChowNow." 

Webb said he is confident about his industry's future. 

"GrubHub, the so-called market leader, will do about $500 million in gross billings (orders taken through its system) this year," he said. "That is a fraction of one percent of the overall market. When the market leader holds less than 1% of the market, it makes me obviously very bullish."

 

Photo by Marktee