Fast-food giants tackle Australian delivery

KFC,YUM BrandsAsk Domino’s CEO Don Meij what he thinks of Australia’s home delivery food market and before long he’ll bring up his belief that the ‘internet-of-food’ will nearly double into a $2.56 billion opportunity by 2019.

It’s well known that the pizza giant is bullish on the convergence of technology and increasing consumer demand in the convenience eating space, but although it’s undoubtedly the largest player in a category that’s traditionally dominated home-delivery, an increasing number of QSR giants are looking to broaden the market – bringing new products to Aussie doorsteps at-scale.

In the last week fast-food giants McDonald’s and KFC have both unveiled delivery trials, partnering with established service aggregators, UberEATS and Foodora.

McDonald’s is trialling the service from this week across 80 locations with UberEATS, adding a $5 dollar premium on orders within a 10 minute travel radius.

KFC Australia is running a smaller eight restaurant trial in collaboration with Foodora, starting in the next three-weeks.

KFC’s owner, American fast-food giant Yum Brands, has experience with Domino’s, having gone head-to-head with the company while operating Pizza Hut in Australia up until late last year.

Yum’s South Pacific subsidiary is taking a decidedly different approach this time under the stewardship of KFC Australia managing director Nikki Lawson, who was promoted last October as part of an executive shakeup that followed the Pizza Hut sell-off.

Lawson has told media that KFC will be adopting a careful approach to the trial, ascertaining a viable business case in Australia’s challenging delivery market while its chosen partner handles the brunt of the logistics.

Foodora sees the deal as a vote of confidence in Australia’s home delivery market, which is now starting to attract the attention of the big fish after years of market growth, through deals with small and medium sized boutique operators.

“We’ve worked with chains like Din Tai Fung and Papa Rich and the bigger brands are now seeing that it’s something that could work for them – they are starting to realise that their customers want that experience as well,” Foodora’s CMO, Charlotte Rijkenberg, told Inside Retail.

Rijkenberg revealed that Foodora is currently in talks with several other QSR brands on a similar scale to KFC, as it looks to push its offering further beyond the inner-city limits of Australia’s capital cities.

Chicken on the menu

As the likes of Foodora and UberEATS look outwards, Australia’s other major chicken chain Red Rooster is looking to use its own delivery offer to capitalise on metropolitan growth corridors.

With two-and-a-half years of Red Rooster’s delivery experience under his belt, chief executive Chris Green is looking to open 50-60 inner city locations in the next five years that use delivery, rather than the company’s traditional drive-throughs as the bedrock of convenience

“We’ve got a lot of suburban locations in Melbourne and Sydney, and we’d like to have more inner-city locations but the fact is that it’s just too difficult to get drive-through locations,” Green told Inside Retail.

“[Delivery] has opened up shop fronts similar to Domino’s with lower rent and cheaper capital expenditure for franchisees.”

Green, who has previously spearheaded the rollout of McDonald’s delivery offer in Malaysia, said Red Rooster has just opened a metropolitan store in Brisbane and is targeting ten more new formats in 2018.

Delivery is currently offered across 250 of the chain’s outlets nationwide and is being spruiked as a strong earnings channel at parent company Craveable Brand’s ongoing IPO roadshow.

“We’ve worked on it for two-and-a-half years to get it to where it is, so it’s been a long and interesting, but customers absolutely love it. Demand is high,” Green explained.

Red Rooster also started its delivery journey with a partnership, working with Menulog, but has since spent $2-3 million on a dedicated software platform to bring the entire operation in-house.

It now benefits from capturing consumer data end-to-end and has integrated its loyalty program with the service, but isn’t able to leverage the scale that aggregation services like Foodora and UberEATs are increasingly commanding.

Green says Red Rooster needs to make two-to-three deliveries per hour in each participating store to justify the service, which he admitted must ultimately be offered at a premium with a $25 minimum order.

“The unit economics aren’t easy, I wouldn’t say it’s high margin,” he said. “It’s not a value channel, it’s a premium channel…pricing is critical.”

“[But] based on the work that we’ve done, we have lower costs for franchisees, and we’ve been able to get a higher average ticket out of the customer through customising the technology,” Green added.

Driving scale will require more customers and more investment, leading the chain to begin distinguishing itself from other food delivery services with Red Rooster branded cars, local leaflet drops and intensive digital marketing.

Craveable brand’s other chicken chain, Oporto, has also trialled delivery with Deliveroo and has signalled it’s interest in pursuing the service.

Oporto CEO Craig Tozer has indicated that Red Rooster’s infrastructure could be adapted for the Portuguese chicken brand.

There’s no mention yet of drones or artificially intelligence ordering systems from McDonald’s, KFC or Craveable, but the expansion of these large-scale QSR chains into the delivery space makes chicken and burgers an increasingly real choice for Aussie families.

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