Booming Food on Demand Market Attracts Consumers and Investors

Increasingly, consumers are staying home while consuming mass amounts of information, entertainment, and food. They insist on having their desires met “on demand,” and there are meaningful opportunities in the market for businesses that choose to participate in the “food on demand” economy.     

At Monroe Moxness Berg, we’ve been diving into food delivery as legal and business advisors and, of course, as consumers. Food delivery is here to stay and it’s reshaping the restaurant industry. Earlier this year, shareholder John Berg and I attended the Second Annual Food on Demand Conference in Chicago, Illinois, produced by Food on Demand News, where John moderated a well-attended panel entitled “The Real Cost of Outsourced Delivery.”

The major players in the food delivery industry were in attendance, including DoorDash, Grubhub, UberEats, UberEverything, Postmates, Bite Squad, Amazon Restaurants, and Google. I was fortunate to dine with Thomas Walsh, head of Autonomous Vehicle Partnerships at Ford Motor Company, who participated in a presentation called “The Future of Mobility,” where he discussed Ford’s autonomous vehicle program. We were also introduced to quite a few leading software companies in the Sponsor Hall, including ItsaCheckmate.com, Olo, and Ordermark, all of which provide solutions for aggregating online orders from multiple delivery companies and integrating them with a restaurant’s point-of-sale software (POS) system, with the goal of improving order efficiency and accuracy and saving operators money.

We noted a few predominant themes at the conference this year: Money and Delivery Costs, Third-Party Delivery Contracts, Robots, Ghosts Kitchens, and Big Data. Let’s consider the first of these themes.

Money, Money, Money

The amount of money flowing into the food delivery space is staggering, both from investors and consumers. More than $3.5 million was invested in food delivery companies in 2018, and more than $400 million new dollars were invested in the first two months of 2019 alone! This was brand new territory only a handful of years ago, and now we’re seeing major players enter the industry, including publicly traded companies and a “who’s who” of the technology word.

A tremendous amount of time and resources are being expended in an effort to anticipate what consumers will want, when they’ll want it, and how much they’ll pay for it. In turn, restaurants are focusing on how to expand their customer base, how to increase the ordering frequency of their customers, how to get their customers to order more food and beverages, and how to get food to their customers as quickly and (cost-) efficiently as possible, all the while maintaining high quality standards. It’s a fascinating riddle, and our clients are testing and implementing a wide variety of strategies in an effort to increase profitability.

Data and technology are at the heart of the solution, and we’re seeing restaurant companies spend a lot of money to figure it out. Rob Grimes, president and CEO of ifbta (International Food & Beverage Technology Association), made the observation that successful restaurant companies will always spend money on technology. To paraphrase his take, in a bad economy restaurants spend money on technology in hopes of reducing costs, and in a good economy restaurants spend money on technology in hopes of increasing revenue.

We encourage most of our clients to engage in this market and to monitor the rapidly evolving world of food on demand. Money will be the key driver of the future of food delivery, and food and delivery companies will need to be thoughtful about generating additional revenue and providing a return on investment. Contact us if you are interested in receiving guidance on how to enter the food on demand market.

In the next article: Delivery Costs

About The Author

Chris MummChris has broad experience with complex corporate and business law issues. He has represented clients in a wide range of transactional matters, from single-location acquisitions to large, multi-unit, multi-jurisdictional acquisitions. He counsels restaurant owners and companies in navigating the complex and sensitive hospitality world.