Deliveroo adds mentoring to the menu
Like many restaurant owners, Rose Chong started her eatery in Box Hill, Victoria, Madam Kwong, to share her love for authentic Malaysian food with others.
A passionate if untrained cook, Chong was committed to serving “quality not quantity” food and connecting with customers who walked through her door. Soon, Madam Kwong became a cult favourite in the southeastern suburb of Melbourne, drawing visitors from interstate and even overseas.
“Some customers went back to Hong Kong and when their friends would come to Melbourne, they would come to Madam Kwong and take food back to Hong Kong,” Chong told Inside Retail Weekly.
So it came as a shock when Chong decided to close up shop in November of 2018.
“My customers were very sad when I told them,” Chong said. “It wasn’t because of sales; I was tired and [realised] I had to love myself, or else I would fall sick.”
Staffing was a constant headache, the 56-year-old said, and doing so much work herself was stressful.
The hospitality industry is notorious for its long hours, slim margins and intense competition. In its 2015 report on the sector, the Productivity Commission found that one in two restaurants close within four years of opening, and the figure is nearly 60 per cent for non-employing businesses.
Like most retailers, restaurants are grappling with the rising cost of rent and wages at a time of sluggish consumer sentiment. They are also facing disruption from food-delivery platforms like Uber Eats, Deliveroo and Menulog.
The latest figures from the Australian Bureau of Statistics show the trend estimate for cafes, restaurants and catering services fell 0.2 per cent in August, while it rose 0.1 per cent for takeaway food services. The National Australia Bank’s Online Retail Sales Index consistently finds takeaway food to be the fastest growing online sales category year on year.
More sales, less profit
These platforms present something of a double-edged sword for the restaurants that sell on them. Even if they lead to an overall increase in sales, they must sacrifice margin to reach new customers and tolerate the constant flow of delivery people through their restaurant.
And since delivery has become more commonplace, online orders are starting to cannibalise sales restaurants would previously have made in-store.
“Five to six years ago, people looking for delivery weren’t going to walk into the store anyway. That’s how [restaurants] justified the fee,” Anna Jones, principal at management consultancy 257 Consulting and former CMO of Guzman y Gomez, told IRW.
“Back then, I would never think of getting delivery for lunch, but now I think I don’t want to bother walking to the food court, or I might be craving something that isn’t at the food court.”
Choosing not to participate in the on-demand economy isn’t really an option.
“Delivery is here to stay,” Jones said. “You could say I won’t play, but that’s impractical.”
Delivery platforms a challenge and an opportunity
But blaming food delivery platforms for the industry’s challenges would be an oversimplification, according to Deliveroo’s head of corporate affairs, Joanne Woo.
“Owning and operating a restaurant has been challenging since the day the first restaurant ever existed, but it’s more so today because they’re facing higher costs with electricity and rent and increased competition,” Woo told IRW.
“Food delivery platforms are transforming the way people are eating, but at the same time, they’re creating an opportunity for restaurants to grow their revenue stream and reach markets they wouldn’t have had access to in the past.”
Woo points to the sheer number of restaurants – 11,000 – that are on Deliveroo’s platform as proof. This figure has more than doubled over the past 12 months because businesses see the commercial benefit of selling online, Woo said.
Last week, Deliveroo launched a new service for these businesses called Restaurant Revival, formalising the consulting service it had been providing previously on an ad hoc basis.
The small Restaurant Revival team includes a former restaurant owner, who sits down with businesses and provides advice on how they can improve their end-to-end operations, from making their procurement process more efficient, to developing their branding, to examining their finances.
“Many restaurants are founded by people who are passionate about food but in terms of running a bus and having that commerce acumen….it’s beneficial to have an outsider,” Woo said.
One of the first businesses to work with Deliveroo’s Restaurant Revival team was Madam Kwong. Chong recently relaunched her business as Madam Kwong’s Nyonya through Deliveroo’s Editions kitchen in Collingwood.
As a virtual brand, Chong no longer has to deal with staffing a bricks-and-mortar restaurant, and has received advice on the pricing and marketing of her food. And while she has yet to see a big difference in sales, she is reserving judgment for now.
“I just want to have a go,” she said.
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