The UK restaurant industry is under grave threat from the growing trend of customers wanting food delivered to their door according to new research.
A study by consultants Duff & Phelps found demand for food delivered to customers’ homes has grown 10 times faster than takeaway. Examples include food delivery company Deliveroo, which has already began to open its ‘Editions’ restaurants – premises which have no covers and are only available via order, called ‘dark kitchens’.
Jimmy Saunders, director at Duff & Phelps, said: “While the march of technology has offered growth in channels which didn’t exist several years ago, the disruption this has caused to the restaurant sector presents challenges and often requires capital investment at a time when the business faces many other cash flow pressures.”
Rising labour costs and business rates, a potential ban on zero hour contracts and inflation running at 3%, have all negatively impacted the UK restaurant industry.
Saunders added: “Inflation continues to run at around 3%, levels not seen since 2012, which is driving food and beverage prices up at a time when consumer confidence levels are still showing a negative downward trend.
Real wages have contracted for 10 years now, the longest period of contraction since the 1860s and whilst customers put choice and convenience high on the menu, value will always be a key decision-making factor.”
Online platforms such as the aforementioned Deliveroo, along with JustEat and UberEats charge a percentage of the order value when they deliver, usually between 20% to 25%. This charge has forced restaurant owners to “fundamentally” alter their business models according to Duff and Phelps.
Saunders said of the future of the industry: “The future will undoubtedly see the online home delivery market evolve further and we already see certain aggregators operating ‘dark kitchens’ servicing only online delivery orders.
“At the moment, smaller operators don’t have the scale or capital to do this themselves, much as independent grocers couldn’t compete with the supermarkets; however, the difference is that the aggregators are presently applying this model in conjunction with existing branded restaurant chains.”
On a lighter note for the industry, market analyst NPD reports that the food delivery market is expected to increase by 10% per year to £5.3bn by 2020.