The delivery of food from restaurants is gaining momentum in most major cities. Logistic companies are providing a superior way to service consumers and are allowing restaurants to sell outside of their physical box.
This is a subset of the last mile delivery that exists because demand, technology, the shared economy and capitalism have all joined in to serve customers. For years, pizza and, in major metro areas, Chinese food, have offered delivery. Now every restaurant can compete.
The number of current players is growing and include: UberEATS, GrubHub, Google Express, Instacart, Deliv, Postmates, Sidecar, Lyft and Favor.
I was recently invited to a series of entrepreneurial presentations in Austin and listened to Ben Doherty, CEO and Founder of Favor Delivery. Ben started the business initially in NH four years ago and was the most skilled of the founders by his experience as a pizza delivery driver. He officially launched at Cal Poly in San Luis Obispo, CA delivering beer and burritos. The first month, Tim Draper invested $100k in Favor. Draper founded his firm Draper Fisher Jurvetson Investments in 1985 and has been a highly successful Venture Capitalist in Silicon Valley. DFJ put another $13m investment in Favor this spring.
Favor runs from an app on a smart phone that Ben and team have perfected. Favor is headquartered in Austin, recently completed its first 500,000 deliveries and has expanded to Houston, Dallas, Boston, Atlanta, Denver and San Antonio. Next cities to be added are Indianapolis, Miami and Washington, DC.
Ben’s beginning in Austin was rough. He slept in his car the first two nights and only had 17 deliveries a day. Then he sent a text message to 200 Austin contacts and the business took off. Favor calls its drivers Personal Assistants and trains them accordingly. The PAs are measured using the star system similar to what Lyft uses. If a PA can’t earn 4.7 out of 5 stars from customers, they are not invited to clock in.
Ben clearly perceives the delivery of hot food to be his number one goal. As an aside, it really is something to be in a high tech entrepreneurial office these days. Casual dress is way lighter than business dress (CEO had on flip-flops, shorts & a Favor t-shirt), coffee and food are free, pcs, iPads, mobiles, white boards and sofas are everywhere.
GrubHub, Inc. is by far the biggest player in hot food delivery with over 900 US cities and London being served. They list 35,000 restaurants and are listed on the NY Stock Exchange—GRUB. They have grown organically and thru acquisition since 1999. First quarter results grew by 51%. They launched a seamless app to Apple Watch in April.
The dual ride sharing and food carrying business possibilities that Uber, Lyft and Sidecar have as part of the “shared economy” are tantalizing. These firms experience what we used to call a trough at FedEx between 10:00 am and 2:00 pm that essentially mean the drivers aren’t productive. Will food delivery be a natural trough filler that would begin to open the window for moving almost everything for same day delivery directly to consumers? I have talked separately to a dozen Lyft drivers who all love the idea of dual workloads.
Amazon is considering developing its own app that would offer the opportunity for a broad range of people to deliver packages, perhaps on their way home.
Meanwhile, back in the business of dimensional weights, UPS is apparently holding the line with customers and is ending discounts for oversize packages.
Both of these developments coincide very well with the CEO and Founder of FedEx, Frederick W. Smith’s quote in The Wall Street Journal: “I think there’s just an urban mythology out there that the app somehow changes the basic cost input of the logistics business…That’s just incorrect.”
Rob Shirley is CEO of ExpresShip www.xpship.com, a strategic consultancy in the global supply chain.
