Food For Thought: How Delivery-Only Food Service Is Impacting Retail Real Estate

Today’s consumer is a tricky one – she is impatient and demanding.  She requires excellent service in the blink of an eye (or perhaps, more appropriately, in the swipe of a finger), and likes to eat meals made with high quality ingredients. Celebrity chefs have taken note. Chefs like David Chang, the man behind the Momofuku restaurant group, have used their name and business savvy to meld technology and food to promote delivery-only food service, a new twist on the traditional “fast food” concept.

Delivery-only food services, made possible by skillfully designed smart phone apps and masterful algorithms, have sprung up in cities like New York and San Francisco to cater primarily to busy Millennials who may not have time to leave their office for lunch or cook dinner at night. These consumers also tend to be at least semi-health conscious and do not want to break the bank to enjoy a quality meal.

Both Maple and Ando are delivery-only food services in New York City that enable consumers to order from daily offerings through an app on their smartphone. Ando is a delivery service co-founded by David Chang and Expa, a startup lab created by Uber cofounder Garrett Camp. Chang oversees the food (which consists of versions of the meals he would serve in his restaurants), Expa develops the technology and UberRush delivers the food.  Currently, Ando delivers only to Midtown East. The priciest item on the menu is $12. Chang is also an investor in Maple, another delivery-service app that delivers food below 42nd Street in Manhattan. Customers place their order through the Maple app or website, and software keeps tabs on its progress so they can track their order. Maple preps its food in an old factory in Brooklyn and performs final assembly at several distribution centers throughout the city. Each distribution center delivers only to customers located within a five-minute bike ride from the distribution center.  This system ensures that food arrives hot and in 30 minutes or less. Lunch is $12 and dinner is $15, inclusive of tip, tax and delivery.

The delivery-only food service industry is still in its early stages. However, to couch potatoes’ delight, as technology evolves to make food delivery even faster and more cost effective, more entrepreneurs are likely to enter the marketplace for their share of the pie, which could in turn impact the retail real estate industry. With no foot traffic, delivery-only food service companies require neither storefront space nor a prime location to attract their customers. Moreover, with no in-house dining, these companies can spend less on design and décor and instead focus on their technology and marketing strategy. Although a Maple kitchen is roughly the same size as a typical Chipotle (about 2,000 - 3,000 square feet), Maple avoids the premium that Chipotle must pay for prime retail locations. Maple hopes that its technology and business model will enable it to serve more customers than your typical fast-food chain but with far fewer physical locations.

Another newcomer, Umi Kitchen, eliminates the need for real estate altogether. Celebrity chef Danny Meyer’s oldest daughter has teamed up with Khalil Tawil and Derek Goffrid to create an app that allows users to choose a home-cooked meal from a selection of ever-changing daily options. The meal is then cooked in the chef’s own home and delivered to the customer by Postmates, a third-party delivery service.

As delivery-only food service becomes more popular, the food industry will once again need to adjust to a technology-driven world. Grocery stores have already been impacted by companies like Amazon, Peapod and Fresh Direct, which enable customers to do their food shopping online, and are now competing with companies like Blue Apron, Munchery and Hello Fresh, which allow customers to order semi-prepared meals that the customer is able to whip up at home, requiring minimal skill but providing the feel of cooking. Even traditional fast-food industry stakeholders are incorporating technology into their delivery operations. For example, Dominos now allows its customers to order a pizza simply by tweeting #EasyOrder or a pizza emoji to @Dominos and to confirm the order by sending a thumbs-up emoji via a smartphone, Samsung SmartTV, Pebble and Android Wear smartwatches or Ford Sync car. The Domino’s Anyware program has brought new meaning to the phrase “Get the door, its Dominos.” A common link between these companies is their use of technology to enable their customers to be more sedentary. And if the customer does not need to leave his or her office or home to shop, cook or pickup meals, then the location of the grocery store or restaurant becomes much less important.

Delivery-only food services are changing the types of space restaurateurs search for, since in this delivery-only niche, technology, quality and efficiency may be more important than where the kitchen is located or what the kitchen looks like. Perhaps soon, the old mantra “location, location, location” may no longer hold as much weight as before.

Related topics: Real Estate, Restaurants, Retail, Retail Sales, Technology