Food delivery businesses set to cause 'big shake-up' in hospitality property sector

Thursday, 26 April 2018

Food delivery apps, such as UberEats, are starting to drive a change in the food and beverage property sector, leading to 'ghost restaurants', a retail estate agent says.

Bayleys head of retail Chris Beasleigh said restaurants used to have a 'fool-proof safeguard' against the online work because customers had to physically visit them to enjoy their offerings.

But now, food delivery businesses were forcing restaurants to re-think their space and offering, as millennials opted for the easier option, Beasleigh said.

As popularity of the apps increased, food and beverage providers' property requirements would begin to change, in terms of location and capacity for pick-up services, he said.

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Global company UberEats is one of the biggest players in the food delivery service sector. It launched in new Zealand in March last year.

'Operators will increasingly need to factor in food delivery services when making leasing decisions,' Beasleigh said.

'Properties that have good street frontage to attract customers and can accommodate parking for delivery bikes and cars will be in demand.'

The apps would also increase development options for secondary space close to major arterial routes, as digitally-savvy operators looked to establish 'ghost restaurants', he said.

'Ghost restaurants' were kitchens set up solely to service delivery customers. They do not have tables and chairs to eat in-house.

'Ghost restaurants allow operators to run a viable business with a minimal footprint,' he said.

Some operators could also decide they did not need prime real estate to capture business any more, Beasleigh said.

First Retail Group managing director Chris Wilkinson said food delivery businesses had transformed consumer behaviour and expectations.

Bayleys head of retail Chris Beasleigh says some restaurateurs may decide they don't need prime real estate to capture business anymore.

'Food operators, particularly quick-service restaurants and takeaways, [now] need to have a delivery solution, either provided by a third-party service or managed by themselves.

'Restaurants are using the likes of UberEats as a way to stay on the radar in their marketplace,' Wilkinson said.

'For most, it's about profile, especially given the margins home delivery operators charge, which does challenge profitability for many restaurants whose operational costs are already high.'

Food delivery businesses were unlikely to change the property requirements of restaurants at the upper end of the market, Wilkinson said.

'Quality restaurants can rest easy, as UberEats is unlikely to change the needs and expectations of their customer base.

'Their property needs will likely remain unchanged. For them, high profile locations still have the power to create awareness and stimulate walk-in custom.'

Delivereasy is another food delivery service that teams up with restaurants to deliver meals to customers by scooter.

Beasleigh said the opportunity to capture food delivery sales should be at the forefront of restaurateurs' property requirements.

'Operators could risk losing out on a growing revenue stream if the location of their business is not within 30 minutes' drive of their target market, or in areas not covered by delivery services such as UberEats.

'This could lead to a clustering of food and beverage businesses in high-custom locations that offer easy access to motorways and major arterial routes,' he said.

'Partnering with food delivery companies is a way for restaurant businesses to diversify their revenue streams, and, ultimately, make more money, which is better for landlords and investors.'

The overseas trend

Wilkinson said some overseas food and beverage providers' had already changed the way they catered to customers, by leasing additional property space to service the online ordering market.

In Australia, some of the popular restaurants have created dedicated facilities entirely for pick-up services, he said.

'This is to ensure their existing operations and goodwill are not compromised.'

Meanwhile, in the United States, some of the big fast food operators' best performing stores have little walk-in traffic as consumers shift toward online ordering, Wilkinson said.

'For those that do, it's increasingly a transactionless pick-up as customers come in once to collect their food after ordering and paying online.

'These are examples of stores near large University campuses, demonstrating how one demographic's purchasing behaviour can change seismically.'