![]() But how much better? It’s still an open question. Aggregators process many more orders in every area of their operations than traditional brands, so theoretically their drivers can do better than two to three deliveries per hour. In California delivery cost can be as high as $6 per order - close to what it costs us in the UK (£6). For example, for our unit in Oxford, Mississippi (USA) it costs around $3 to deliver an order - and that is in one of the poorest states in America. Especially as most customers will remain price-driven, partly due to the fierce competition and lots of discounts on the delivery platforms, and partly due to the fact that delivery isn’t a cheap service by itself. So building brands and loyalty will prove challenging. And nobody will have any say in how this changes over time, just as companies have no say in how Facebook or Instagram work and evolve. Every restaurant has a profile similar to every others’. What brands are shown on the first screen is defined by algorithms. Don’t forget that they have zero control over delivery aggregators and how they are presented on these platforms. On the other hand, virtual restaurants operating from dark kitchens have limited opportunities to engage with people. ![]() It makes attracting new customers extremely expensive for brands, since offering significant discounts for new customers might remain the only way to do so. So on these digital delivery platforms, there are almost unlimited options for customers to choose from. Such obstacles cease to exist in the delivery business. There are only a limited number of restaurants that a city’s main street or square can accommodate, so competition in the traditional restaurant business has its natural limits. 2) Building brands online is much harder to do than offline So, contrary to a popular notion, going all-digital makes your business less, not more, effective. At our dine-in pizza shop mentioned above we process 700 orders daily! So $10,500 will buy you only 700 new customers. You can easily end up paying $15 for a new customer on Google Ads, if not $30. The thing is that impressions mean nothing on the web - conversion rates are what you’re after and they trend low. Which is only a bit worse than $0.02 per impression you can achieve on Google Ads, for example (if you’re lucky). So we pay $10,500 more than we would pay if it were a “dark kitchen.” 360,000 passersby see our brand every month (not even counting those who see it from the other side of the street or driving by), so the cost per “impression” (let’s borrow the term from digital marketing) is $0.03. A much worse location would cost us, say, $3,500. Such units can costs around $14,000 in rent payments a month. Every day 12,000 people pass by one of our well-located units. These things are hard to prove because lots of factors are in play. It’s your investment in attracting new customers - those passersby who will all of a sudden one day decide to give your place a shot (and some of them may turn into loyal customers if they live or work nearby).Ī paradox of our current state of affairs and the ruthlessness of online competition is that new customers attracted in this way (“offline”) can end up less expensive for the business than those attracted through aggregators or Google/Facebook ads (“online”). And nobody is saying that you’ll eliminate your rent payments altogether - you can only reduce them.Įven more importantly, renting pricey, well-located premises isn’t just a way to provide somewhere for your guests to sit. ![]() Depending on the country, payments to landlords add up to around 5-12% of a restaurant’s revenue while food and labour costs together make up around 55-65%. But rent isn't the largest contributor to losses in the restaurant business. Many people think that by lowering rent you can significantly lower your prices, which in turn will make your business grow and allow you to win the market. I think the hype about the delivery-only restaurant business is based on three false assumptions. Moreover, I belong to a small fraction of those killjoys who don't believe in the bright future of “dark kitchens”. Yet of the more than 500 units that my company operates today in 13 countries across Europe, the US, Asia and even Africa, none of them are dark kitchens. Since I got involved in the delivery-only business so early, you might expect me to be one of its most devoted adherents. The new trend has caught the attention of mainstream media. Delivery aggregators, such as Deliveroo, are launching their own dark kitchen projects. Venture capital-backed companies such as CloudKitchens, Karma Kitchen, Kitchen United, Taster and Keatz, are tackling this new market. This idea has been gaining more and more traction lately.
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