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Are third-party delivery services fueled by a tech gold rush?

by / 0 Comments / October 27, 2015

So we all know that delivery for restaurants is complicated.  But wait a minute. Are we talking about ‘takeout delivery’ or ‘catering delivery’ and does it even matter? I think it does, and I will tell you why.

As I woke up today scouring the industry trade publications, I couldn’t help but notice all the rage about third-party delivery services for restaurants. What’s even more concerning, are the crazy valuations that these delivery companies are getting. Why? Because they have convinced investors that “their” technology is going to disrupt the entire space.  For example, just read this article in tech crunch, The Billion Dollar Delivery Wars.

Or just watch this crazy Mad Money video about Munchery. I mean, an $85 million valuation? How is Munchery different than any restaurant? Remember, this is a trend and all trends come to an end. Don’t they?

But disrupt the space? Really? I doubt it.

So by contrast, I really love this article in Forbes, Call Food Delivery Startups by their real name.  Restaurants.

This whole market is being driven by software development. I know, because my team has been developing real software solutions for the restaurant space for almost 20 years. This is in contrast to what is being called a software gold rush, which leads to the idea of software development as hacking rather than true engineering. A description of the software gold rush can be found in another recent article. See the paragraph below:

“Gold rush software development is a high risk activity. The practices employed during a software gold rush are usually associated with hacking rather than engineering: small team sizes, informal processes, long hours, little documentation, bare-bones quality assurance practices—practices I refer to collectively as “commitment-based development” (Rapid Development, Microsoft Press 1996). Use of these practices puts all but the smallest software projects at high risk of failure.

The odds of striking it rich during a software gold rush are about as good as they were during the California gold rush—for every success story, there are hundreds or even thousands of projects that bust out. But the failures aren’t nearly as interesting as the successes, and so we don’t hear very much about them. As with the California gold rush, projects run with commitment-based development are successful just often enough, and are so enormously lucrative when they do succeed, that they convince software developers that such high-risk practices can work, thus keeping the entrepreneurial dream alive.”

And so, this really got me thinking about how all this is going to impact our catering and restaurant community?  What happens to the restaurateur during this process such as all the hard-working entrepreneurs, franchisors, franchises and independents. The people who have mortgaged their homes to open their restaurants? They are being bombarded by slick sales people who say they are adding value to the transaction process. Well, be careful, that’s all I can say.  These companies do not understand your restaurant operations.

Not only is our community overwhelmed by this technology gold rush, they are putting  our businesses at risk. As a restaurateur, if you are approached by the plethora of third-party delivery companies that are promising you the moon and riches, buyer beware. They are simply interested in the valuations that they are going to get in the market by investors who think that they are going to get rich in the process.  They are completely disconnected from the impact that their promises will have on your restaurants execution and reputation.  The one you have worked your whole life for.

My advice to all the restaurants out there that have to deal with this gold rush?  If it sounds too good to be true, it probably is.  Focus on the basics.  They always work.

* Flickr photo by Theophilos Papadopoulos.

 

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