Source: Beer Business Daily
July 22, 2019
Both the quick-serve and fine-dining segments posted a 3.1% gain for the past year compared to an average 3.5% gain for the past five years, according to FastCasual.com.
But the casual dining restaurant segment – think burgers, wings, and beer – only had a 1.1% gain compared to an average 2.1% gain for the 5-year period, despite a roaring economy.
What’s going on? Millennials and Gen Y are staying at home more (usually with their dogs, I always point out). However, many casual and fast casual restaurants are staying alive through home delivery apps like DoorDash, GrubHub, Uber Eats, Favor, and Postmates. In fact, the National Restaurant Association predicts that in the next five to 10 years that over 50% of revenue for stand alone restaurants will come from either take-out or food delivery.
Two-thirds of U.S. restaurants offer delivery through delivery apps, according to a survey of 400 operators by consulting firm Technomic, reported in the Wall Street Journal. Restaurants are expected to do $46 billion in delivery sales this year, up from $38 billion in 2015, according to Cowen & Co. estimates.
What does that mean for casual dining chains’ bev-alc sales? Not great. First, it’s not legal to deliver alcohol from on-premise accounts in many states. And even where it is, there are many issues to work out (like who takes on the liability for selling to minors, how to keep beer cold, etc.). As Louisiana-based Walk-Ons Bistreaux and Bar chain beverage buyer Lacey Lauderdale told me last week on a panel at the Mississippi Beer Distributors Association meeting, “when delivery services came about, our food sales increased. We gained those incremental sales, right, that we wouldn’t have had from someone sitting at home. But our beverage sales decreased, and our in-dining decreased by the same amount. Instead of going to sit at the bar and get a beer or a vodka drink and wait on your meal, there was no interaction with the consumers at the restaurant. I think it’s a no-win situation. I worry about beverage sales declining even further.”
Aaron Hahn, owner of AC’s Steakhouse and Rack’s BBQ Burgers and Brew chains, sees it a bit differently. He told BBD, “We use four different food delivery services right now. At any given point, there’s a line of drivers waiting to get their orders and take them out. The amount of money that these consumers are paying, the upcharge for it, it’s astronomical. I mean they’re paying 25 dollars for a burger delivered to their house. If I can throw them a six pack to go with it, all the better. Make no mistake, they’re ordering food to their house because they’re lazy or their high, or whatever. They don’t want to drive.”
Aaron points out that food sales are not very profitable, but bev-alc is. “If I can up that average check by giving them something like that, I think there’s a tremendous opportunity. But the legislation has to change because my license won’t allow that right now. Liability’s a huge thing, we would have to push that onto the food delivery service because whoever’s personally handing it to them hopefully that’s who’s liable for it.”
Oh, and one more thing. The U.S. House passed a bill last week that would increase the minimum wage to $15 an hour. If that becomes law, and if tips don’t count as some legislators want, Aaron says it will virtually “wipe out” the entire casual dining segment “almost immediately.”