The COVID-19 pandemic is affecting industries around the world, but few have been hit as hard as restaurants. Social distancing and stay-at-home orders have resulted in restaurant traffic sinking by 70 percent in the last two weeks of March alone, forcing these eateries to generate their revenue solely from takeout and delivery services.
Many restaurants are relying on third-party apps like Grubhub and DoorDash for delivery services, but these come with challenges of their own. Their commission fees can range as high as 40 percent of each order and eat into restaurant margins, which even in the best of times are thin. Restaurants thus face a catch-22: continue using these apps at a severely reduced or even negative margin, or cease using them and risk losing one of their only revenue streams.
The May Mobile Order-Ahead Tracker® explores the latest digital ordering developments, including new mobile ordering features from restaurants to shore up declining revenue, growing tensions between quick-service restaurants (QSRs) and third-party ordering apps, and how the increasing threat of digital fraud is being fought with new artificial intelligence (AI) and machine learning (ML)-based security systems.
One example of an app expanding its delivery services in the midst of the COVID-19 outbreak is Germany-based Delivery Hero, which recently added more than 50,000 new restaurant partners in the last three weeks of March alone. The app is canceling delivery fees in order to drive business toward its partners, and is instituting contactless drop-off and cashless payments to reduce the risk of COVID-19 transmission from its staff to customers. Delivery Hero is also increasing its payment frequency to ensure its staff and partners have a steadier cash flow to help them through the economic downturn.
Restaurants are also developing new mobile ordering and delivery features in an attempt to stave off declining industry revenue. Fast-casual chain Noodles & Company is introducing contactless curbside pickup, for example, with food runners dropping off meals directly into customers’ cars. The chain is also launching an in-house delivery service to avoid paying third-party app commission fees and offset its 46.3 percent sales decline between March 11 and March 31.
The mobile ordering industry is also seeing some new and unexpected players meeting the demand for delivery in the midst of stay-at-home orders. The small Wisconsin city of Watertown recently authorized three local taxi companies to provide delivery services from businesses that do not typically offer them, such as grocery stores and pharmacies. These deliveries will be available for a small fee, but the city said that the fee would be waived for food banks.
For more on these and other mobile order-ahead news items, download this month’s Tracker.
How QSRs Face The Twin Threats Of Digital Fraud And Third-Party Mobile Ordering Apps
The restaurant industry faces more than its share of obstacles even in the best of times, with razor-thin margins meaning that any small setback in their profits could spell disaster. These setbacks consist not only of digital fraud, but also the high commission fees of the third-party apps on which restaurants are relying in order to stay in business amid the COVID-19 pandemic. For this month’s Feature Story, PYMNTS spoke with Michael Mohammed, CEO of fast-casual Mexican chain Chronic Tacos, about why the first problem has a potential solution in the form of AI, but the second is a dilemma with no clear answer.
Digital fraud is one of many issues plaguing QSRs and their customers, with 49 percent of customers worried about stolen credit card data and 41 percent concerned about account takeovers (ATOs). Many chains deploy static rules-based systems to stop fraud attempts at the point of entry, but these solutions run the risk of accidentally blocking legitimate customers by mistaking them for fraudsters. This month’s Deep Dive examines how many QSRs are deploying AI- and ML-based fraud detection systems than can help reduce these false-positive rates by up to 60 percent.
About The Tracker
The monthly Mobile Order-Ahead Tracker®, a Kount collaboration, offers coverage of the most recent news and trends and a provider directory highlighting key players across the mobile order-ahead ecosystem.