American consumers’ appetite to eat in at restaurants is waning these days, contributing to the industry’s sluggish sales and traffic, but there is a bright spot on the market: Delivery sales.
US restaurant delivery sales will rise an average of 12% a year to $76 billion in 2022, up 77% from $43 billion currently, according to a 70-page report published by Cowen & Co. Wednesday. With the rise of restaurants offering food delivery on their websites or onboarding such third-party platforms as GrubHub/Seamless, online is both a key disrupter and driver of growth: Cowen analysts forecast online order’s share of the restaurant food delivery market will jump to 73% by 2022 from 46%, citing NPD Group data.
That’s encouraging news in the mature restaurant industry, where Cowen estimates total industry sales will rise at a slower annual average of 3.5% over the next five years to $539 billion. In fact, the brokerage and equity research firm forecast about 30% of that industry sales growth itself will come from delivery, up from nearly 20% in 2016, it said.
On a same-store sales basis, the industry is struggling. Through May of this year, the industry hasn’t seen one month of positive same-store sales since February 2016 while monthly visits also declined during that time, according to restaurant industry market research firm TDn2K, which tracks weekly results from 28,500 restaurant units totaling over $67 billion in annual sales.
“We believe the supply of restaurants offering delivery is poised to grow, along with consumer demand for the convenience of the offering,” the Cowen report said.
Responding to that demand, restaurants from fast-food giant McDonald’s to casual dining chain Buffalo Wild Wings have all called out delivery as a key part of their companies’ respective growth strategy going forward.
“Consumer behavior is shifting rapidly,” Buffalo Wild Wings CEO Sally Smith said on the company’s Q1 earnings call in April. “Delivery is an addressable opportunity for Buffalo Wild Wings as more consumers are eating at home. We are rapidly deploying third-party delivery in company-owned restaurants.”
Initiatives including delivery that the restaurant chain introduced last year have helped the company outpace “both the negative restaurant industry and casual dining segment,” Smith said.
Buffalo Wild Wing’s research showed that customers would prefer to order delivery from the company’s local app or website, COO James Schmidt said in April, so the company is also exploring adding that feature.
More than half of the 2,800 consumers surveyed in the Cowen report said they ordered food directly from restaurants’ own apps or websites, followed by more than a third who use GrubHub or its Seamless platform.