Why investors are eating up food delivery services

Aug. 21, 2014

There's a new investment trend on the horizon, and it's about everyone's favorite topic: food. People love to eat, but they also love convenience. Now imagine these two spaces combined.

It's the driving factor behind the rise of convenience commerce companies. Gourmet recipes and fresh ingredients delivered by companies like Plated and Blue Apron are logical extensions in our desire to eat better and do more, but Americans still spend 42 percent of their food budget at restaurants.

Investors are hungry (no pun intended) for food delivery services catering to a plugged-in and thinly stretched market. When run well, food delivery companies are profitable, sustainable businesses with wide appeal. Food delivery is the rising star in convenience commerce — after all, everybody's got to eat.

Why consumers are clamoring for delivery 

People value the convenience of food delivery services — and not just when they're tired and prefer to veg out on the couch with a hot meal. Delivery services make life easier for people who are caring for children, have disabilities, lack transportation, or have busy lives with no time to shop and cook.

But those aren't the only reasons people flock to delivery services. Consumers love online delivery because it's:

  • Convenient. Ordering online is faster and more convenient than calling the restaurant. Without hold times, busy signals, or having the server repeat the order back, people can enjoy more free time while waiting for their meal to arrive.
  • More accurate. There's less room for human error, so customers can rest assured they'll get exactly what they ordered. No one takes kindly to getting someone else's order or missing items at the end of a long day.
  • Timesaving. Storing past orders in customers' account history is a huge time-saver. People can have their go-to dish from their favorite Indian restaurant on its way with just a few clicks (or taps).
  • Rewarding. Rewards programs make customers more likely to return. Online food delivery service Foodler is a prime example of rewards done right. It gives points to customers for every order. Those points can be redeemed for account credits and cash, so customers can enjoy more food delivery for less.
  • Cheaper. Restaurants often offer exclusive specials and discounts to customers who order online. Saving 10 percent by ordering online sure beats calling it in.

Why restaurants jump on board

Delivery appeals to consumers because it makes their lives easier. It appeals to restaurants because it makes them money. Partnering with a quality delivery service frees up restaurant owners to focus on the food and the in-house experience while still expanding their customer base.

Through delivery, restaurant owners and managers can market their food to a much wider audience. Foot traffic expands beyond literal foot traffic, and the potential for positive word of mouth increases exponentially.

The future of delivery

While food delivery services are extremely advanced compared to just a few years ago, the delivery scene will still face considerable changes, including:

  • More competition.The increased investment interest will attract new players eager to cash in on the opportunity.
  • A convenience economy boom. It won't stop with food delivery. Alcohol and grocery delivery services are already exploding in popularity. If it's legal, it'll be delivered. Customers demand it.
  • Over-expansion.Some companies will get overly excited and expand too quickly. Those who continuously innovate will come out on top.
  • Better quality. More competition will force food delivery companies to provide better service.

The ability to enjoy your favorite dishes whenever and wherever is irresistible. The delivery industry is only going to continue to grow, and consumers and restaurants both stand to benefit.

Consumers appreciate the convenience of using an app or website as a one-stop shop for ordering Chinese one night and burgers the next, while restaurants benefit from services that allow them to do more business and increase their exposure beyond their four walls.

With delivery companies acting as the bridge, it comes as no surprise that, for investors, this industry is mouthwatering.

Phil Dumontet is the founder and CEO of DASHED, a restaurant delivery service in the Northeast. In 2013, DASHED was recognized as one of the fastest-growing companies in the U.S., ranking No. 119 nationwide and No. 7 in Massachusetts on the Inc. 5000 list.

Cover photo provided by Dashed.

Topics: Customer Service / Experience, Delivery, Operations Management, Trends / Statistics

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