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Is it a restaurant or a tech company?
The new answer to this question is different than it used to be.
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Just before the holiday break, McDonald’s announced it would sell Dynamic Yield, the tech company it bought a few years ago for a reported $300 million, to Mastercard. The sale was a long time coming; McDonald’s indicated last year that it was considering a sale or at least a partial sale of the company. Terms of the deal were not disclosed.
McDonalds made headlines with its 2019 purchase. It was the company’s largest acquisition in two decades; an investment in the future of the business. While the price tag was hefty, the deals would presumably pay for itself in the form of increased sales from personalized menus and order suggestions — plus there was Dynamic Yield’s other business outside of the restaurant industry.
Its promise was partially realized; McDonald’s uses the tech in drive-thrus and ordering kiosks around the world “in several markets,” per CNBC. Dynamic Yield’s revenue doubled under its fast food parent, too. Dynamic Yield works with over 400 brands in retail, finance, travel, and restaurants, according to a release.
This could signal a coming shift in tech strategy for big restaurant brands. “Restaurant companies have to decide what business they’re in,” Meredith Sandland, a former executive at Yum Brands and Kitchen United told me during an interview for a recent Insider piece ($). That is, large restaurant chains with deep pockets may no longer be acquirers of technology companies unless they fill a major shortcoming for the restaurant or give it a huge competitive edge.
Instead, restaurants are more likely to partner with or license software from companies to do the heavy technological lifting as they focus on their core business: operating stores and building a customer base to serve. The restaurant that was a tech company is a restaurant again.
I’m old enough to remember when a restaurant declaring itself a technology company was a way to signal it was serious about growth and expansion in the 21st century. Dominoes did it, Sweetgreen did, too. Their point was that technology powers a modern restaurant business, and in order to succeed in this market, a business should think like a growth-minded tech company. The promise of growth was paramount, with plenty of innovation and disruption along the way.
But — in what has come to be the best phrase I coined in 2021 — salad doesn’t scale like software. Plenty of restaurants understand the need to embrace new technology and even to think like a tech company, but the days of actually being the tech company — or at least buying one — may be behind us.
Slow and steady might win the ultrafast race
Restaurant delivery walked so grocery delivery could run… or something. Now that demand has been proven and geographical expansion deemed possible by all the major players in the food delivery landscape, the next generation of on-demand delivery is taking over, fueled by a *whole lot* of investment dollars and interest in winning the race.
Except, as the Information reported, winning this race might involve going a little slower. Apparently, instant-delivery companies in the US are burning through serious cash even faster than they are in other parts of the world.
Jokr, a company that announced a month ago it had raised $260 million in series B funding at a valuation of $1.2 billion, told investors it would experiment with slower delivery and a subscription model to help stem the bleeding. (According to the report, in August Jokr was losing $159 per order.) That is: the company will hook new customers with its heavily subsidized promises of speed, then work to keep them with a more realistic offering.
Given the economics at play, this strategy makes sense. But it is curious that the premise that these companies are built upon just… doesn’t work. At least, not yet.
Meanwhile, another rapid delivery service, Buyk, brought on a new CEO who has already expanded the company from New York to Chicago. Buyk’s advantage, he says, is controlling the inventory and last mile — by owning the dark stores goods come from and employing the couriers that deliver items to consumers. This model is common in rapid delivery — DoorDash even acknowledged as much when it created DashCorps, a small group of couriers that work as employees, not contractors, to deliver convenience orders.
What else is happening?
DoorDash employees have to deliver food now and some are… not happy. Okay, admittedly it was one post from one employee that maybe got some outsized attention, but it’s not a good look, regardless. DoorDash announced it would reinstate its WeDash program, which requires all corporate employees — including those in the c-suite — to make deliveries at least once per month. If they can’t, they’re required to choose a related experience, like shadowing customer service. The goal is to help corporate employees understand how the product they work on is used, according to a DoorDash spokesperson, and the employee’s post does not reflect the sentiment of the company’s employees, generally.
A new bill in Texas gives restaurants the right to sue third-party delivery companies if they violate certain terms. The bill spells out certain working terms between restaurant and delivery service: no using the restaurant’s trademarks in a way that implies endorsement; all terms must be agreed to in writing; delivery services must remove restaurants that don’t wish to be listed on the platforms. (Worth noting that the large delivery companies support this bill. Also, that last regulation I listed is backwards from some other legislation passed in places like California, where restaurants must specifically opt in to listings on third-party sites.)
Speaking of regulation in California, state Assemblywoman Lorena Gonzalez is resigning. Gonzalez was responsible for some of the state’s toughest legislation targeting third party delivery: AB5, which required companies to classify drivers as workers (though we know now how that ended); the bill that required delivery services to get permission from restaurants before listing them on their platforms; and the bill that required delivery services to list commissions and other fees so consumers know where their money goes. Gonzalez is assuming a leadership role at the California Labor Federation.
Delivery Hero acquires a majority stake in Spanish delivery company Glovo. Delivery Hero upped its stake in Glovo to about 83 percent in a deal announced in the final hour of 2021, paving the way for an eventual takeover, per a Reuters report. It’s the latest in global delivery consolidation, just months after DoorDash announced its $8.1 billion acquisition of Wolt, a Helsinki-based delivery provider. Glovo operates in over 1,300 cities in 25 countries, with 3,500 employees and over 15 million users. Perhaps most importantly, the companies don’t compete against each other — their geographical footprints are completely different.
Sweetgreen joins the subscription craze. Subscription programs have proliferated in the restaurant industry. Brands like Panera, Taco Bell, and Pret A Manger have all found early success in the space, which has expanded 435% over the past nine years. Sweetgreen’s testing the waters with Sweetpass, a $10 subscription that gives customers $3 off their purchase every day for one month. It's a natural move for the recently IPO’d company, which saw 68% of its revenue come through digital channels last year. The service is available for purchase through Jan. 16, and can be applied at all 150 Sweetgreen locations.