Why was six afraid of seven? Because seven eight nine.
That was a schoolyard joke when I was in kindergarten.
Well, here’s a version for the stock market…
Why are the big fast food companies scared of Uber?
Because Uber Eats Domino’s!
As in Uber Eats — the offshoot food delivery service from Uber — is eating up all the traditional food delivery companies’ business.
Except this version’s no joke.
We can see it happening all around us. And to be honest, I’m not surprised.
When Uber itself burst onto the scene as a peer-to-peer ridesharing company, it was an absolute game changer. Taxi drivers were enraged.
Customers, on the other hand, were stoked.
The days of having to try and wave down belligerent taxi drivers who would size you up and ask you where you were going before even letting you in the car were over. And the Uber app became a mainstay on everyone’s smartphone.
When Uber launched Uber Eats, it was only natural that the world would get around it like dogs to a holiday ham.
Uber Eats is now the US’ most popular food delivery app and offers a delicious plethora of restaurants to choose from — from your greasy local burger joint to a new up-market pasta bar in the city.
But you already knew that, because you’re having it for dinner tonight, right?
Oh, just me then? (It’s an occasional indulgence, I swear…)
But the beauty of Uber Eats isn’t only in its convenience, its catering to the entitled, ‘give-it-to-me-now’ attitude that dominates the modern age of instant gratification.
It’s also in its sheer variety of options.
It’s an aggregator after all, not a producer of food products in and of itself.
It merely takes a cut from the profits, pays the drivers and that’s business done.
A simple model if there ever was one — no (chicken) bones about it.
So it’s no wonder that humble fast food joints are feeling the pinch from monster aggregators like these.
But let’s take a look at what’s really going on, here. [openx slug=inpost]
Choices, discounts and deals — oh my!
Back in the old days, you had about three to five options for your fast food needs: Chinese, Indian or your local pizza joint. Maybe Thai, if you were lucky.
Come to think of it, only up until a few years ago, many rural Australians had even less to choose from.
But then came the age of apps and menus on our smartphones and greater delivery coverage…
And now we have a buffet of culinary opportunity at our fingertips (and tastebuds). Whatever we want, on demand.
The industry’s been revolutionised in the blink of an eye. It’s no wonder some companies are falling behind, coughing on the dust from the trailblazers ahead.
Restaurant industry analyst Howard Penney put it more plainly on Yahoo Finance the other day saying, ‘These [pizza] companies are under siege.’
He’s not wrong. When you look at the grim first quarter earnings from both Pizza Hut and Domino’s, it’s clear to see there’s been a massive impact.
Dominos in particular saw a pitiful plummet of over 50% in its same-store sales growth.
Another factor contributing to the popularity of Uber Eats and other food aggregators like US-born Grub Hub and Door Dash is price slashing.
Third-party services tend to offer more aggressive discounts than traditional sole operators in fast food.
So why doesn’t Domino’s just jump aboard the Uber Eats train?
A war of words
It’s a busy space, no doubt.
Yet McDonalds has seen success from being on the website, enjoying a bump in sales since the team-up, according to the fast food giant’s CEO.
But CEO of Domino’s, Richard Allison said in a conference call to Wall Street this week, ‘I don’t see any need for us to go onto these third-party platforms’.
‘We have an incredibly strong digital channel in our business. We’ve got a loyalty program with 20 million-plus active members, so it’s just not clear to me why I would want to give up our franchisees margin or give up the data in our business to some third party who will ultimately use it against us.’
Fair play. Allison also reckons that having a driver in a Domino’s uniform is important — for both service and cost.
‘When a customer orders from Domino’s, I want a Domino’s uniformed driver to show up and deliver that pizza,’ he in the conference call. ‘It helps us to control customer experience and also the quality of our product.’
Will this sense of pride only worsen the pinch for Domino’s and its investors moving forward?
Only time will tell…
But let’s not forget that Google’s just launched the world’s first food delivery drone.
As a result, we’re soon to enter a period of exciting developments in drone food delivery technology over the next decade or so.
According to global market research, key players to look out for will include both Uber Eats and Domino’s Pizza.
These companies of the future will need to be able to keep up with a fast-moving digital society just as hungry for convenience and luxury as much as food…
And stay on our minds as well as our palates.
After all, you’ve got to adapt to survive. And as Albert Einstein said, ‘the measure of intelligence is the ability to change.’
Interesting times lie ahead!