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Archive for the ‘Restaurants’ Category

Screenshot 2020-06-27 16.13.04A recurring theme in how the pandemic has changed operations has been that firms are limiting variety. If a firm is having a hard time keeping up with demand surges and shifts, then a basic step is to drop the low runners and focus on the products most in demand. Now the Wall Street Journal has some data on just how significant the impact has been (Why the American Consumer Has Fewer Choices—Maybe for Good, June 27). The graph above shows compares several weeks in May and June this year with the same span last year. The average across all categories is down 7.3%.

There is a similar story at restaurants, where firms have limited their menus to simplify operations,

Screenshot 2020-06-27 16.13.45

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One of my favorite examples I have learned from doing this blog is Chronodrive, a French chain specializing in pick up groceries. Specializing in the sense that this is all that they do. It makes for a nice example since it allows for a contrast between a firm that has tailored all of its operations for one niche against conventional supermarkets that have tried tacking on pick up or delivery onto standard stores.

Of course, in the current environment, lots of firms have had to tack on pick up or delivery options onto their existing stores. To paraphrase Don Rumsfeld, sometimes you have to serve customers with the processes you have, not the processes you might want or wish to have at a later time. But will pick up — some form of click and collect — have legs?

The Wall Street Journal reports that for both restaurants and grocery stores, pick up has been a good business and has been holding up even as states have reopened (Pickup Gains Ground Over Delivery, June 25).

Pickup grocery sales were up 81% in the week ended June 13 from the start of this year, according to Nielsen, while delivery sales rose 33% in that time. At restaurants, carryout accounted for 42% of orders by dollars in May, according to data from research firm NPD Group Inc., compared with a 13% share of sales for delivery. Carryout has maintained its share of restaurant sales since dining rooms began to reopen in May, NPD said, while drive-through and delivery have lost some ground to dine-in orders.

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A short follow up on Gad’s post from earlier this week on Uber’s interest in Grubhub. There’s a blogpost on The Margins about pizza arbitrage via Doordash (Doordash and Pizza Arbitrage, May 17) that has gotten some attention this week. In a nutshell, the story concerns a pizza shop run by the author’s friend who discovered that (a) Doordash had posted the shop’s menu and started placing orders without telling the pizzeria and (b) Doordash had posted the wrong prices. Wrong as in Doordash was selling a $24 pie for $16. So if the pizzeria owner were to have an accomplice order ten underpriced pizzas through Doordash, he would quickly pocket an extra $80 relative to selling the same pizzas to a real customer. Since Doordash was doing this on their own, that would be $80 of Doordash’s finest venture capitalist supplied cash.

It’s a fun read and worth checking out if only to enjoy the line “Was this a bit shady? Maybe, but fuck Doordash. Note: I did confirm with my friend that he was okay with me writing this, and we both agreed, fuck Doordash.” But there is also an interesting analysis of whether Doordash and its ilk have a feasible business model.

How did we get to a place where billions of dollars are exchanged in millions of business transactions but there are no winners? My co-host Can and my restaurant friend both defaulted to the notion “delivery is a shitty margin business” when discussing this post. But I don’t think that’s sufficient here. Delivery can work. Just look at a Domino’s stock chart. But, delivery has been carefully built as part of a holistic business model and infrastructure. Maybe that’s the viable model.

After the start of this pandemic, my friend actually launched in-house delivery at one of his restaurants. He said he’s starting to get a sense of the economics and explained he’s starting to get a sense of the volume required per location to make the economics reasonably work. That’s what is so odd to me about third-party delivery platforms. The business of food delivery clearly is not intrinsically a loser. Domino’s figured it out. Every Chinese restaurant in New York City seemed to have it figured out long before any platform came along. My friend is figuring it out.

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Last week I posted on the challenges Starbucks was having with an increasing number of mobile orders. Now, it seems that the company is going to test a different approach: A location that only takes mobile orders (Starbucks to test mobile order and pay-only store at headquarters, Mar 30, Reuters).

Starbucks’ headquarters has two cafes that serve the more than 5,000 company employees who work there. One of those cafes, which is available only to company employees, is among its top three stores in the United States for mobile ordering.

Mobile orders from the building will be routed to the new store, which will have a large window where customers can pick up drinks and see them being made.

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In a perfect world, technology solves problems instead of creating them. Things don’t always go that way. Take, for example, Starbucks’ mobile ordering. This is, in theory, a convenience for users of their app. They can place an order before hitting the store, pay automatically, and get their drink and food without waiting in line.

Or at least that is the theory. The reality is that a surge in mobile orders has created a bunch of headaches for the coffee chain. Here are some details from when they announced their earnings at the end of January (Starbucks Tempers Revenue Forecast, Jan 26, Wall Street Journal).

Mobile order-and-pay represented 7% of U.S. company-operated transactions in the quarter, up from 3% in the prior year. The number of its highest-volume stores for mobile order-and-pay, where orders placed via the app account for more than 20% of transactions during peak hours, doubled to 1,200 stores over the prior quarter.

The high rate of mobile ordering was blamed by Starbucks for increased waits and with that lost customers. In the last quarter, dollar sales were up because the average purchase size outweighed a 2% decline in transaction.

But just how bad is the delay? That’s the subject of a recent Business Insider piece. The headline pretty much lays out the article’s agenda: We went to Starbucks every day for a week to see how the coffee giant is dealing with its biggest problem (March 19). (more…)

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We all like simple solutions. Tired after work, your teenagers have friends over, and everyone’s getting hungry? Just order pizzas and the problem is solved. But how complicated is it to get pizzas to customers? Is there much room for innovation in this market?

The answer, apparently, is yes. The NPR blog The Salt had a feature on a Silicon Valley start up Zume that aims to use robot and specialized equipment to cut the time and cost to make and deliver pizzas (Our Robot Overlords Are Now Delivering Pizza, And Cooking It On The Go, Sep 29).  This video shows how Zume (which should not be confused with a failed media player) works.

Here is the key point from The Salt article:

Here’s how it works. A customer places an order on the app. Inside the Zume factory, a team of mostly robots assembles the 14-inch pies, each of which gets loaded par-baked — or partially baked — into its own oven.

Whether the truck has five pies or 56, it needs just one human worker — to drive, slice and deliver to your doorstep.

“She doesn’t have to think about when to turn the ovens on, whether to turn the ovens off,” Collins says. “She doesn’t have to think about what route to take or [whom] to go to first. All of that is driven off of our algorithm.” …

The driver then parks, cuts the pie with a special blade and delivers it piping hot.

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The big news in the restaurant world this past week is that Danny Meyer, one of New York City’s most prominent restaurateurs, is going to be abolishing tipping at all his establishments. He discussed the move on CBS.

(He also had an interview on CNBC that covered a lot of the same ground plus a few other points that I will mention below.)

Tipping — at restaurants and in hotels — is something we have covered before. As much as I like the idea of linking pay to performance, I think that tipping is a pretty miserable custom. Meyer touches on some of these points in explaining why he is banning the pourboire. But he also highlights a completely different issue: Attracting and retaining talent.

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I have a sweet tooth. I am rarely too full to pass on dessert. However, an article in Washingtonian magazine suggests that restaurants (at least those in metro DC) may inadvertently be saving people like me from ourselves by offering less attractive options for dessert or even foregoing offering dessert all together (Why DC Restaurants No Longer Care About Desserts, Feb 4). The interesting part of this is that the retreat from dessert is largely driven by economic and operational concerns.

In the post-crash economy, pastry chefs are no longer seen as essential employees but as pricey appendages.

“It’s not just saving the salary,” one restaurant owner told me. “It’s saving the space, too. To have a good pastry program, you need a designated area of the kitchen, you need a place to store the ingredients. The 10,000-square-foot restaurant has become the 7,000-square-foot restaurant. Everything’s smaller now. There isn’t the space.”

More and more, the task falls to chefs and line cooks who, lacking any background in baking, have contrived to fill their menus with simple, quick-fix solutions. Puddings, custards, panna cotta (an Italian term for what is essentially Jell-O made with cream) don’t require a lot of effort or expense; all can be made in the morning and stashed in the walk-in refrigerator.

Some restaurants have given up entirely. “More restaurants than you would think” are outsourcing their sweets to independent bakers, says Mark Bucher, who owns Medium Rare, with locations in Cleveland Park and Barracks Row. Bucher’s is among them. “You give them your recipes and they’ll make them for you. That way you can still say that they’re your desserts.”

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Americans are drinking more hard liquor — particularly in fancy cocktails. If you run a bar, this is good news to the extent that mixed drinks typically sell for more than beer. But this is potentially also a problem. Mixing a complicated drink is more time-consuming than just drawing a beer so service slows down. Further, you need to have enough trained staff. If your bar is competing on offering a variety of fancy craft cocktails, you need to make sure you always have a competent mixologist behind the bar at all times.

But there are creative ways around this problem. According to the Wall Street Journal, bars are now putting some drinks on tap (Mixed Drinks on Tap: Faster Manhattans, Negronis and More, Sep 10).

As demand for creative craft cocktails shows no sign of slowing, bartenders have struggled with how to serve drinks quickly while preserving the taste. From small bars to hotel chains, they are making large batches of cocktails and connecting them to tap systems like those used for beer. And cocktails on tap, also called kegged or draft cocktails, make it easier to serve mixed drinks at large events.

“You can sell it with the speed of a draft beer. It’s the best of all possible worlds,” says Anthony Caporale, a cocktail consultant and representative for Drambuie, the whiskey liqueur that sponsors a competition for kegged cocktails.

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Would you be more likely to go to fast food restaurant if it guaranteed how long you wait at the drive thru? Some McDonald’s in South Florida are doing just that (McDonald’s offers a 60-second lunch guarantee on weekdays, Aug 4).

McDonald’s guests at participating South Florida restaurants will receive timers when paying for their order in the drive-thru. The timers are then returned to the McDonald’s crew member when their food is presented. This guarantee promises that customers will receive their meal within 60 seconds of paying for it, or receive a complimentary lunch item on a future visit.

The guarantee doesn’t apply all day. Indeed, it is only in effect for an hour — but it is the hour that matters, noon to one.

Let me acknowledge upfront that this is clearly a gimmick. McDonald’s has been in a funk and their drive thru times have been climbing (along with the time of many in the industry). So this offers customers some assurance and maybe puts a little competitive pressure on some of the other players in the industry.

But as gimmicks go, I kind of like this one. (more…)

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