Article

Third-party delivery, commissary kitchens help operators navigate today’s challenging foodservice landscape

Restaurant panelists describe solutions allowing them to meet the needs of today's technology savvy consumers and at the same time improve their profitability.

Alex Canter of Canter's Deli, Kyle Gordon of Dillas Quesadillas, Kyle Noonan of Mutt's Canine Cantina and Mike Mirkil of Kitchen United discuss third party delivery.

March 14, 2019 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

Technology has delivered new ways to compete in today's fast changing foodservice landscape. During the Restaurant Franchising & Innovation Summit in Louisville, a panel of operators described solutions that are allowing them to meet the needs of today's technology savvy consumers and at the same time improve their profitability.

Much of the session, titled, "Democratizing dining: How the changing restaurant landscape opens doors and cuts costs," focused on how operators are handling third-party delivery, perhaps the biggest change currently facing commercial foodservice.

One company represented on the panel, Canter's Deli in Los Angeles, has moved into third-party delivery aggressively. The company's transition from a traditional deli to one that is quickly adopting new technology was described by Alex Canter, the company's fourth-generation owner.

Canter, who has made it his mission to bring technology to a tradition steeped business, has used third-party delivery to establish a delivery-specific brand called Grilled Cheese Heaven, supported by a pair of off-site kitchen commissaries.

Canter has also created his own software solution, Ordermark, which integrates different third-party ordering services (Uber Eats, DoorDash, Postmates, etc.) in one platform which he has made available to other restaurants.

Commissary kitchens have allowed Canter's company to deliver online orders with minimal overhead, Canter said. There is no association made between Canter's Deli and Grilled Cheese Heaven, which is a delivery-only brand consisting of food that holds up well in transit.

"You don't need brand recognition today to launch restaurants," Canter said.

Third-party delivery expected to grow

Canter believes food delivery services will continue to grow, and he sees it as a good thing since it brings an additional customer base, allows a restaurant to be more efficient and operate from a smaller footprint.

"We're now a consideration for people who are using those apps," he said.

In addition, delivery tickets on average are 60 percent higher than in-store tickets.

One of Canter's two commissary kitchens was profitable from the first month, he said, a feat he said is unheard of in the restaurant business, and that has allowed the company to generate an additional $200,000 a year.

Panelist Kyle Gordon, owner of Shreveport, Louisiana-based Dillas Quesadillas, agreed that online ordering has changed the business for the better in some ways, and it accounts for 80 percent of his business. He said a restaurant no longer has to be located on a main thoroughfare to be noticed.

Dillas Quesadillas, for its part, has expanded its business using pop-up food tents selling one food item with chips at special events, which generates an additional $40,000 to $50,000 in annual revenue, according to Gordon.

Challenges remain

The panelists, including Canter, agreed that third-party delivery still has some challenges.

Canter said a number of the company's menu items did not maintain the correct temperature in transit.

He also acknowledged there were problems with driver performance when the company first began offering third-party delivery.

Dallas/Fort Worth-based Mutt's Canine Cantina, an off-leash dog park and restaurant, stopped using third-party delivery for this reason, founder and owner Kyle Noonan said.

Canter said third-party performance has improved from the days when he said he used to smell marijuana on some of the drivers. It is also possible for a restaurant to block third-party drivers that have not performed well, he said, adding that some services have better drivers than others.

Cost, which is typically 20 to 30 percent of the order for most third-party delivery services, was another issue cited.

Gordon said the only way to be profitable using third-party delivery is to have low rent.

Customers have never complained about the food quality of third-party orders, said Gordon, who puts a text number on the bag to encourage customer feedback, but they have complained about order accuracy.

Canter agreed cost is an issue with third-party delivery, but he nonetheless believes it is preferable to in-house delivery, due to the difficulty of maintaining good quality delivery drivers.

More choices to consider

Looking to the future, Gordon said he is interested in exploring the commissary option, and he is also looking for associates who will be passionate about the brand.

Noonan said restaurants today have a choice of focusing on experience or convenience.

"If you're not in one of those two, you're going to lose," he said.

Mutt's Canine Cantina, which charges a monthly $16.95 membership fee, has opted for the latter. His goal is to have 250,000 members.

For restaurants looking to expand, a commissary kitchen has a lower upfront costs than a food hall, said moderator Mike Mirkil, vice president of consumer marketing at Kitchen United, which provides commissary kitchens.