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Competition heats up for on-demand delivery

by / 0 Comments / September 14, 2015

As restaurant brands continue to roll out their own delivery plans, Amazon is following in Uber’s tracks by testing a meal-delivery service of its own. According to GeekWire, Amazon is testing the service in Seattle by allowing employees to order meals from restaurants in conjunction with the new Prime Now delivery service.

Several new Prime Now drivers have told GeekWire they’re the same ones handling restaurant deliveries and a sign inside Amazon’s new Prime Now distribution facility offered instructions to drivers on how exactly to make restaurant pickups.

The news of Amazon’s test came on nearly the same day as FOCUS Brands announcement in regard to a partnership with Postmates for on-demand delivery services for all six brands in the FOCUS portfolio, inclusive of Cinnabon, Auntie Anne’s, Carvel, Moe’s Southwest Grill, Schlotzsky’s, and McAlister’s Deli.

The service will launch at 34 participating FOCUS Brands locations in Dallas and Austin, Texas, Atlanta, Los Angeles, New York, San Francisco, and Portland, Ore. If the test goes as planned, additional markets will be added throughout the year, with delivery expected in all high-density markets by early 2016.

“We see on-demand services as a market disrupter with big potential as an innovative tool to help our franchisees grow their businesses,” said Steve DeSutter, CEO, FOCUS Brands, in a news release. “We are delighted with the traction we have seen at Postmates and their ability to provide a positive alternative and another way for our guests to enjoy the brands they know and love.”

The popularity of new on-demand food delivery services is being driven by consumers and by restaurant operators looking for additional ways to increase sales.

“Delivery is the next generation of convenience,” said Darren Tristano, executive vice president at Technomic. “It’s now an expectation of consumers that they can get what they want when they want it and delivered the way they want. I think everybody also is trying to find ways to increase their sales or create new opportunities, and Amazon is in a great position with the number of consumers who use their services to be at the forefront of this trend. Additionally,  Amazon is a big force in the industry and clearly they have the biggest opportunity to grow and succeed under that model.”

For restaurant operators, one of the big questions is can it be profitable?

“It’s an enormous undertaking. And it’s not a system consumers want to pay a lot for because they are used to free delivery now,” he said.  “I also think brands are going to have to figure out how to integrate whomever they go with into their system to make it more seamless. It may not be a good decision to go with one versus all. Restaurants will have to look at where there is opportunity. And anytime you take food off premise every second deteriorates the integrity and the quality of the product.”

While the question remains surely, concepts such as Starbucks and FOCUS Brands are betting that it will be.

Postmates has been so successful with its service that it is now available in 24 cities, according to data from CB Insights. (Click here to view a chart of food delivery companies by cities served.) Analysts speculate the reason for its success is the company’s approach to the food delivery market as a third-party service provider. In addition to FOCUS Brands and Starbucks the company has signed deals with Pinkberry, 7-Eleven and Chipotle.

* Flickr photo by Michael Stern.

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