Is restaurant delivery dying? It's for sure matured into the late stage partnerships world.

What happens when two industry giants like Amazon and Grubhub join forces? This episode unpacks the latest integration that allows Amazon customers to order directly from Grubhub via Amazon's platform. We'll explore the ripple effects this move could have on competitors like DoorDash and Uber Eats, and speculate on further collaborations that might completely reshape the food delivery landscape. Amazon's increased stake in Grubhub is a game-changer, and we dissect the benefits for restaurants and Prime members, as well as consider the ever-growing importance of subscription services in today's market. 

Consumer insights researcher Lisa Miller joins us to shed light on the declining trend of delivery services, especially in the full-service restaurant sector, attributing this drop to rising fees and quality issues. We also discuss the potential shift from QR codes to NFC technology for a smoother dining experience and delve into the skepticism surrounding lab-grown meat. Survey findings from YouGov show a significant hesitation among consumers to embrace lab-grown meat, and we analyze how education, branding, and positive messaging can shift public opinion. Tune in for a comprehensive look at the future of restaurant technology and evolving consumer preferences.

Transcript

Speaker 1: 0:00

Grubhub and Amazon deepen their ties. The end is nigh for cookies, says Google. And will NFCs replace QR codes in our restaurants? That's all ahead on this week's Digital Restaurant. The Digital Restaurant works like this we're going to ask each other five questions about headlines that affect the worlds of restaurants, off-premise and technology, but in some way tie back to our book series Delivering the Digital Restaurant. Are you ready? Let's go? Good morning, Meredith. How are you doing today? Very good, Carl. How are you doing today? Very good, Carl. How are you? I'm okay. As you know, I had surgery a week ago, so I'm hobbling around, so I'm very grateful for the doctors and nurses that looked after me a week or so back, because they took good care of me as are we, Carl?

Speaker 2: 0:59

Glad you're back.

Speaker 1: 1:01

Yeah, and thank you to everyone that has reached out over the course of the last week just to check in on me. Sam Stanovich very kind. He sent me a nice little note. I had other friends send me little care packages. I felt very loved. Appreciate you all. Anyway, lots to talk about. Busy Newsweek, as always, and I think you have the first question for me.

Speaker 2: 1:18

I sure do. This is exciting. So Grubhub has opened up a new way of ordering on Amazon. You know they've long had a partnership, but now it seems even more so. We'd love to hear about that.

Speaker 1: 1:30

Yeah, amazon is now allowing customers to order food from Grubhub directly through Amazoncom and the Amazon app, so the integration is part of their growing partnership. As you say, that began, I think, in July of 2022. So it hasn't been around for too long and it started, of course, with a deal offering Amazon Prime members a 12-month free Grubhub Plus subscription, and the new agreement extends that benefit indefinitely, making Grubhub Plus a permanent perk for Prime members. Now, as a result of this change, amazon has increased its stake in Grubhub from 4% to 7%, with options to acquire up to 18% based on the partnership success. And, of course, it's going to boost, I think, grubhub's visibility and customer base majorly by Amazon's vast user network. For restaurants, of course, this means more exposure and potential orders, while for Amazon, it enhances their prime membership value. This really helps because Grubhub's been facing many challenges, I think recently lagging behind competitors like DoorDash and Uber. However, it has been making some improvements. It's obviously revamped this Grubhub Plus platform. It's been lowering its service fees, it's been trying to enhance its delivery speed and I think they have something like 375,000 businesses nationwide on their platform now the key business benefits. Have something like 375,000 businesses nationwide on their platform. Now. The key business benefits are very much about visibility right More orders for Grubhub. Being able to own a section in the Amazon app ensures continuous customer engagement and awareness, and the Grubhub CEO, howard Migdal, highlights that as a critical factor for growth. Of course, it's also good for Amazon Prime members because that, as a permanent benefit, really enhances the value of the Prime membership and that's going to help them attract and retain more subscribers, and that certainly aligns with Amazon's strategy to offer more diverse perks to keep the Prime members engaged. Don't forget they only recently increased the cost of that service.

Speaker 1: 3:22

I guess one of the questions I have is is this going to be something that deploys itself further in utilizing Amazon Fleet or FlexDrivers to support Amazon and food deliveries in time, where we see, perhaps, retail items being also upsold alongside food items? You know that would be some pretty amazing synergies if we can see that happen, but there are some limitations as well. Right, I don't know what the latest percentages were, meredith, maybe you'll know, but the amount of restaurants on the Grubhub platform relative to the DoorDash and Uber of this world, it's not as much. Right, there are certainly fewer restaurants on their platforms as opposed to DoorDash and Uber Eats and of course, that might be very locally specific. I suspect if you're in Chicago, where Grubhub has a strong foothold, cancel your Dash Pass right, because in many ways that's going to be a great way to be able to get a lot of customers coming your way, because they've got a lot of presence for Chicago restaurants.

Speaker 1: 4:16

I'm also curious to see what does this mean for DoorDash and Uber Eats. What are they going to do to strengthen their partnerships, their integrations? Could we see a DoorDash option appear on Walmartcom or an UberEats through Targetcom at some point in the future? But one thing's for sure subscription services aren't going away. They certainly are showing this level of value across multiple e-commerce channels. What did you make of this?

Speaker 2: 4:41

Amazon is the everything store, right, and it's hard to be everything without restaurants, so it makes a ton of sense. They've made so many attempts at trying to get into this business and this seems like a really logical one for them and, of course, for the consumers you said it's a huge win because consumers love easy. And what is easier than I go to Amazon all the time to order things? So while I'm there, using all of the exact same tools, I will just order dinner as well. You know me.

Speaker 2: 5:09

I immediately signed up, registered my Prime with Grubhub and tied my credit card to it, and there's like two or three steps, super easy, to get it going.

Speaker 2: 5:18

But I noticed all of the communication was around free Grubhub, $0 delivery fees, and naturally I was very curious to see what the deal was with service fees, because I think it's disingenuous, frankly, of DashPass and Uber One and everybody to say it's free delivery when it's not free delivery.

Speaker 2: 5:40

Right, you have a $0 delivery fee, but then you have all these service fees. Delivery right, you have a $0 delivery fee, but then you have all these service fees. Interestingly, all of the promotional materials for Amazon and Grubhub said it was a reduced service fee that Prime members were eligible for. But when I went through and checked out first in that cart it was an 8% service fee that showed up on what I put in there, but then when I actually got to checkout it jumped up to 12.4% with no explanation, literally just one page to the next it went from 8% to 12.4%. I think that's very disingenuous to call it free when it's not free. First of all, and second of all, in keeping with our last podcast, it will be interesting to see what they do in the state of California with these fees.

Speaker 1: 6:21

Well, from that subject on to the next we noticed on LinkedIn. Initially, Lisa Miller was putting out some latest results from some of the surveys that she does through her business, and she was asking the question is delivery in danger? Well, is it, Meredith? Is delivery in danger?

Speaker 2: 6:37

Lisa Miller for those who are not familiar with her does consumer insights research and she's actually been fielding her own surveys and polishing them since the beginning of COVID, and you can go on her website to see what consumers have to say, which I think is super interesting. It's lwmassociatescom and she's got all kinds of interesting blog posts there and, of course, you can follow her on LinkedIn. She talks about a lot of it, but she's been routinely asking people about delivery and their feelings about delivery, among other topics in the restaurant space, and her thesis out of all of this is that consumers want to experience joy and when they experience joy, they do more of it, and when they don't, they do less of it. And her thought around delivery is that there is no joy there and so delivery is likely to be declining. And in fact, in the FSR space full service restaurant space she reports that the percentage of consumers in her survey who have ordered over the last three months has fallen 10 entire points to 22%. That's like a 30% decline. That's huge in FSR and I think that is probably indicative of what we're seeing in a lot of the earnings reports for these restaurants. She did not give the same number for QSR. Hopefully that will be in a coming blog post to Lisa, if you're listening.

Speaker 2: 7:54

However, she did give some reasons why these numbers might be falling. The first one is that consumers report experiencing an issue 80% in FSR and 82% in QSR. Meanwhile, they report that delivery fees have gone up too much 41% of QSR respondents in our survey. So the delivery fees specifically not the price of the food, but the delivery fees specifically have gone up too much. That's up six points versus last year. Meanwhile, the quality is getting worse. So 24% of QSR patrons report a quality issue. That is up seven points versus last year. 24% also in FSR, up four points from last year. Temperature issues also abound. So you've got the situation where I'm paying too much for something that isn't that great and I have an issue most of the time the vast majority of the time that I do it so you can see where she's getting to. That doesn't feel like a joyful experience. I would expect that people will do it less and less, free delivery from Amazon notwithstanding.

Speaker 1: 9:03

Yeah, I think you heard that Lisa. Right, meredith wants more data. She'll send you the request by email soon. Hi, carl, here Just to interrupt the show briefly to remind you that if you have yet to get your copy of either of the Delivering the Digital Restaurant books, now is the time to get one. If you head to thedigitalrestaurant, you're going to be able to get the best price available. You can also listen to both books, with yours truly talking about them, on Audible. You can get a copy of Amazon if you'd prefer to order through them, but if you haven't got the books yet, get them. They really are going to transform the way in which you look at the restaurant industry and the way in which technology is disrupting it.

Speaker 2: 9:43

Okay, I think we've talked about this one for years now. Qr codes dead again. Also, it seems like they're constantly dying or dead or being proclaimed dead by the media. It seems that it's happened once again. Is NFC the solution here?

Speaker 1: 10:01

You know, it's true, meredith. I think we often find that there's lots of articles about the birth of something like a new innovative startup doing something really interesting gets a lot of trade press, and also a lot of trade press goes towards things that are dying ghost kitchens, virtual brands, all that kind of stuff we always hear but actually, in many ways, it's just a point in transition of innovation, and I think what we're sharing here are two articles. The first one was in the Wall Street Journal about QR codes, and, of course, qr codes became particularly popular in restaurants for their convenience during the pandemic, because it allowed customers to access menus and order without contact. Unfortunately, a lot of them led towards PDF menus, therefore not mobile optimized, and as a result, the whole thing has become something that has faced a bit of a backlash from diners, who now find them rather cumbersome and less personal, and you know the idea of having to squint to read the menus on their phones, or maybe even concerns about privacy and a disruption to the overall ambience of of dining in a restaurant. You know, for example, os de soleil left the restaurant without ordering because navigating the QR menu felt like work. In the article, rich Fox from yes, parade Restaurant Group noted that QR codes reduced check averages by 10% as customers didn't explore all the menu options, leading to lower tips for servers. Again, all of that points to is that the design of the menu, as opposed to necessarily the QR code that got them there. But there's also something here which I think is important, and that is the generational differences.

Speaker 1: 11:32

The reception of QR codes varies by age. Younger customers at Farmbar in Chicago appreciate the efficiency of them, while older patrons struggle with the technology. Joshua Hampton was referenced in the article he's a server at Farm Bar highlights the challenge of encouraging customers to use their phone to access menus, and you can imagine that, right? I mean, if we were to bring our parents into a restaurant and bring up a QR code, they'd probably find it a little bit more difficult than if you and I had to do it ourselves. So no huge surprise.

Speaker 1: 12:02

But then the second article talks about near-field communication NFC for short and some reference to it at the National Restaurant Show a few weeks back, where companies like Flash Order are showcasing NFC-enabled solutions. Now what is that? That's where you tap your phone on an NFC reader, which could be a sticker for all intents and purposes, and customers can access a restaurant-branded app instantly, therefore bypassing the need to download a full app. Of course, that mirrors the convenience of a digital boarding pass that you might have when you're flying somewhere. So a number of advantages here.

Speaker 1: 12:39

Nfc technology provides a streamlined ordering experience without the need for, perhaps, kiosks. So if you're someone that's thinking about kiosks, which are all the rage this year, but don't necessarily have the capital to invest in it, maybe this is a solution that could work for you. According to the Flash Order co-founder, john Lund, nfc mini apps offer that kind of familiar app experience, but are more convenient. Grant Russell from Curate highlighted the cost savings for restaurants because they don't have to spend out on kiosks and, additionally, these NFC mini apps can stay on a customer's phone for 30 days, encouraging them to download the full app later.

Speaker 1: 13:14

So I really like the idea of this piece around trying to remove the friction out of it and to be able to help the customer get to the order and experience faster, and because it's on a mini app type of interface, therefore designed so that you're not having to squint your eyes or find it challenging to use, you're going to have a more optimal menu experience. So, yeah, interesting. I don't think QR codes are necessarily dead. I think what we'll find is that they might be used as promotional activation points. I think we're going to see them as a tool for operators to be able to use to help make sure that they're replacing, perhaps, the physical checklists or training tools within a restaurant, but certainly for the customer, at least when it comes to ordering interfaces themselves. Maybe the NFC solution is the way things are going to head in the years ahead.

Speaker 2: 13:57

Speaking for all glasses wearers. I'm just going to put it out there that squinting at my phone because a QR code took me there versus squinting at my phone because an NFC sticker took me there is not different.

Speaker 1: 14:09

But if you can create one of these mini apps that allows you to be able to get better access to a more that sounds awesome.

Speaker 2: 14:17

That sounds very exciting for the restaurant. It sounds fantastic. I'm just saying I'm still going to be squinting because my phone is the same size.

Speaker 1: 14:26

One of the things that I think strikes me on this is and we hear this all the time, right, especially from independents is do I need an app? And you've got to ask yourself how many restaurant apps you and I probably have more than the average person but do you really expect independent restaurants to have their own app?

Speaker 2: 14:45

In many ways I think this is a sign these mini app things as a sign of the death of the app. Right, it just doesn't make sense. It was a construct of an environment when Apple products did not use the internet the way that the internet was designed, and they introduced a new form factor, and so internet and iPhone fought, and so they developed the concept of an app and they took off. But as we change form factors in our phones, say, as we get more and more toward a vocal chat interface instead of something visual or something touchscreen, as we use smart glasses instead of a phone, as LLMs become our predominant way of searching, as all these things start to change, an app is kind of crazy. I think it really, as I've said many times, all it is is a giant billboard saying my website doesn't work well on your phone, right? And most consumers, when they want something specific, would rather just go to that website one-off rather than try to download an app for that specific thing and use it and learn how its novel little layout works, because it's so special and great. Nobody wants that, right, except for, as you said, the brands that you go to most often, and you're right. I bet we do have more apps than most people.

Speaker 2: 16:07

I would like to hear from everyone. What is the count of restaurant apps? Open your phone. I personally have a restaurant folder. Again, we're super users, right? So I have 11. I counted them yesterday in my restaurant folder that I use on a regular basis. I would like to hear from everyone else. How many do they have?

Speaker 1: 16:26

That's what I'm saying. All right, if the death of the QR code has happened, then what? The end of cookies is nigh, says Google. What is this about, marilyn?

Speaker 2: 16:35

I know, when I first read this headline and I'm sure they did this on purpose I thought restaurants aren't going to serve cookies anymore. That sounds terrible.

Speaker 1: 16:41

I don't want to live in a world without cookies.

Speaker 2: 16:44

But of course, they mean the other kind of cookies tracking cookies. So first, just to back way up, what is a cookie? These are the things that the internet uses to stalk you, and this is why when you see a pair of shoes and you do not buy it, that pair of shoes follows you until you finally give in. Marketers, e-commerce marketers in particular, use cookies to determine sources of traffic onto their website using tools like Google Analytics, so that they can determine the ROI of any given campaign. And Google, who first announced four years ago that they were going to eliminate cookies, says this is the year they're finally doing it. So certainly anyone who's a sophisticated e-commerce marketer this could potentially affect, and they might need to think about alternate ways of getting the data.

Speaker 2: 17:31

Probably only the most advanced restaurants are really using cookies to try to determine these things. I'm guessing not a lot of independents out there do, but if you do, let me know. I would love to know how you're using them. And, as we often say, it brings us right back to the same old, which is first party. Ordering is great. You'll have that actual behavioral data and you'll see, but in order to get the first party data. You want to know how you got them right. Which campaigns brought people over to your first party channels? Going to have to find new ways to do that without cookies.

Speaker 1: 18:03

That sounds kind of sad, but I suspect they'll resurface and they'll call them something other than cookies. There'll be some kind of way in which they'll find a return, of course.

Speaker 2: 18:10

Okay, last question for you, carl Cultivated meat Apparently not something American consumers want. Question mark.

Speaker 1: 18:20

Well, this is associated to a YouGov survey. Meredith Cultivated meat, of course, is the nice term for lab-grown meat Meat grown in a lab and so therefore no culling going on. So for those folks that don't like the idea of animals being killed to service their meat, well, this has been a growing area. Now only 10% of those surveyed in this YouGov poll have said that they're willing to even try it, 60% prefer to avoid it, and two-thirds of that latter group are firmly against even tasting it. So when given a choice between farm and lab grown meat, with no difference in taste or cost, 50% say they're going to prefer farm grown and only 13% choose lab grown.

Speaker 2: 19:06

Wow.

Speaker 1: 19:07

Why do you think that is 14%? Reject both. Is it just?

Speaker 2: 19:11

because it's novel. Wait a minute, hold on, I have so many questions. Is it novel? And then let's go back 14% reject both kinds of meat. Does that mean 14% of Americans are vegetarian?

Speaker 1: 19:21

I think that's probably what it is, yeah.

Speaker 2: 19:23

That number has gone up.

Speaker 1: 19:25

Yeah, it's pretty fascinating. Look, I think this is classic change management, right? This obviously is something where something new that perhaps hasn't got the necessary level of education yet, hasn't necessarily got the necessary levels of celebrity endorsement yet, isn't really getting people to even think that this is something that perhaps is good for them or good for the world. Most of it stems from the production process rather than the product's attributes. Consumers are uncomfortable with the idea of meat just being cultivated in a lab, and this aversion is strong because 31% support banning lab-grown meat, so 31% support banning it, compared to the 36% who oppose such bans. So the rest are undecided. And guess what, in two states, florida and Alabama, they've actually banned selling and consuming not just selling and consuming lab meat.

Speaker 2: 20:20

Like it's a drug.

Speaker 1: 20:21

Like it's a drug, I guess. I don't know if it's a felony of sorts, but hey, it's kind of interesting. Now the FDA has approved lab-grown chicken from three producers last year. Commercial production remains limited, so it's not particularly available for widespread consumption, but notably high-profile chefs like Jose Andres and Dominique Crenn. They've only served lab-grown meat for publicity purposes, but they've been talking about it. Of course Now there are technological challenges that continue to hinder the production of it, especially when it comes to beef and pork. But I don't know, it's interesting.

Speaker 1: 20:55

I think there's just a perception thing. There's probably, as they call it, the ick factor, right, something associated to discomfort and distrust, and maybe just a general barrier to the acceptance overshadowing the potential benefits that could come from eating it in this way. But I do come back to that piece around education Now. I think typically consumers are more comfortable with traditional farming methods and that's just been the norm for generations, and that skepticism and resistance is largely because they don't really know how it's made and they don't know whether it's safe. And perhaps where you've got states like florida and alabama showing that they're taking some legislative action to reinforce that public aversion, that's only going to entrench those negative perceptions.

Speaker 1: 21:37

So I think really, if you are in this business, you need to invest in educational campaigns, you need more positive messaging and branding associated to it. It needs to be talked about in terms of its safety, its cleanliness, its sustainability benefits, and then it's probably around tasting, right? Do you remember at Food on Demand recently, meredith, we had meatballs for lunch and they were vegan meatballs. Demand uh, recently, meredith, we had meatballs for lunch and they were vegan meatballs and both of us said, wow, these tasted just like normal meatballs. And actually, if we wouldn't put that, if we weren't told that they were in a plant-based meatballs, we wouldn't know otherwise. I wonder whether there'll be something similar to the coke and pepsi challenge when it comes to cultivating meat further down the line here yeah, well, certainly reb, certainly rebranding it cultivated.

Speaker 2: 22:19

I mean, it's just after so many years of being told that, like GMOs are bad for us, cultivated sounds like they're doing something weird in a lab, doesn't it? And I don't know. Consumers are so funny. Yeah, they just need some branding, some celebrity endorsement, it'll all be fine. I'm personally super excited to try it. I haven't yet have you.

Speaker 1: 22:38

No, I haven't. I definitely will try it. I think there's a lot of good that can come from exploring options like that, but, as ever, it's going to be those early adopters that start to get involved in it, and then, hopefully, a celebrity or two endorses it, and then we'll go forward from there. Okay, well, look, that is it for this week's Digital Restaurant. I was about to call it the Monday Minute. Do you remember those days when we called this the Monday Minute?

Speaker 2: 22:59

Oh, thank you.

Speaker 1: 23:00

As ever, I would love to hear from you guys what do you think about the idea of cultivated meat. Are you going to try it? Are you going to be thinking about developing these kind of mini apps and using near-field communications at your restaurant? Please let us know your thoughts and, as ever, if there are any articles that you think would be relevant for us to talk about here on the podcast, send them our way. But until next time. Thanks for listening. The Digital Restaurant Podcast is available for you to follow and subscribe. Wherever you listen to your podcasts, Watch us, rate us and subscribe to the Digital Restaurant on YouTube, and follow along on all our social media digital restaurant channels. Thanks for listening.