Are you selling your restaurant for free?

The biggest restaurant in town is no longer a restaurant, and restaurateurs are building it!

Most restaurateurs start with a dream. They love to cook, people love to eat their food, they want to share the love and along the way, let's make some money whilst doing the thing they love. People will come and enjoy eating in the restaurant with their friends and family. There will be happiness and joy and the restaurateur will be happy to know they have many happy customers.

Of course, all this will be hard work and every customer will be treasured as a valuable source of income. Competition is tough, there are so many other people with the same restaurant dream, but, by being careful and diligent then it can work. Of course, you would never invite any competitors to come into your restaurant and know your customers - or would you?

The reality is that every day restaurateurs are doing just that - because any restaurant that becomes a service kitchen for most of the food delivery companies is actually selling their customers for free!

How can this be you ask? And the answer is shown in the growth of Foodpanda in India, so let's just take a quick review of this.

Foodpanda has huge financial pockets and can sustain losses for years, just like all the major delivery companies. They have a long term strategy, which is not profit, but user acquisition. They want to grow and grab millions of foodie users who want to order food. So they connected with restaurants and offered outsourced delivery and the promise of a new market on top of their current in-house sales. Now they service the restaurant customers, the same people you worked hard to attract and keep. However, the thing is this...... the customer now becomes Foodpanda's, not the restaurants. The customer passes over! But everyone thinks all is well because the restaurant has more sales.

But, there is a problem, because actually the only winner is the customer. This is because most restaurants cannot afford the 30% commissions, and on the other side, Foodpanda cannot make profit with 30% commission - which is why they are losing money! No company can lose money indefinitely, not even the mega food delivery companies, so they move the strategy on to the next phase. The Foodpanda India solution is to launch their own brands and their own kitchen and then sell their food to your customers. In May 2019, after recruiting thousands of restaurants, serving millions of foodies, they suspended delivery services.

Image courtesy of livemint

Foodpanda India have built a huge database of millions of foodies - the restaurant customers. Now they want to use that customer base to sell their own brand food - and restaurants can do nothing about it. Not only have the restaurants given their customers to the competition for free, now they have the double whammy of losing the additional business this competitor promised.

Foodpanda are not unique and they are just part of the charge to cloud kitchens - restaurants without tables and chairs! We have talked about this in our blogs, and it will be seen how all this plays out, but there is little doubt that there is massive consumer driven change and smart restaurant owners have to respond.

Of course, many restaurateurs feel they are immune from the delivery explosion by not signing up for these massive companies, but this probably misses the reality. People mostly eat just 3 times a day, and if there is mega food company, like Foodpanda and the rest that is providing food, it means there is less chance for restaurants to get that customer. The biggest restaurant in town is no longer a restaurant - it's the company built on the backs of restaurants, the delivery giants.

But all is not doom and gloom because there is a technology that is perfect for restaurants to fight back - the mobile phone. The food delivery revolution is here to stay, so it is only the smart restaurants that embrace the digital revolution that will prosper. Platforms like enable a new way of doing business where restaurants keep control, don't give away their customers, and where they can increase sales AND profits. There is a fantastic future but it means a new way of looking and working, call it the 'brick and mobile' restaurant.

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