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Anonymous

Former Head of Sales at Just Eat, Spain 

Just Eat & Online Food Delivery in Spain

CEO & Founder of Elmenus

Elmenus & Egyptian Food Delivery

Former Head of Enterprise Sales, EMEA, Uber Eats

Online Food Delivery: Spain Labor Law & Market Structure Changes

{audio:0:04:22} Could you describe Burger King UK in terms of the store count and sales per store?

{audio:0:04:32} Burger King in the UK has approximately 500 restaurants, 200 of which are in travel locations like railway stations and motorways and the balance are more traditional and are elsewhere. I cannot give specific sales data but we are currently opening drive throughs which is working well. We will open a significant number of new restaurants in 2021 and are happy with our situation and the way the market is moving.

{audio:0:05:27} Is the drive through a traditional model for non-digital orders only?

{audio:0:05:38} No, we will also deliver from the drive throughs. QSR historically had takeaway, dine in and drive through but, over the past five years, the change to digital has been extraordinary. Not only incremental delivery volume but kiosks, loyalty, click and collect, curbside and digital menu boards. With this layered complexity, businesses are challenged to keep up with consumers.

{audio:0:06:28} Have you seen that digital mix change from pre- COVID until today?

{audio:0:06:36} We were clearly marching toward digital before COVID. We bought the UK master franchise for Burger King only three and a half years ago and inherited many legacy systems. I am not making excuses, but changing legacy systems to contemporary applications is challenging. The most significant change for us over the past year has been the extraordinary growth of delivery. It is very unprofitable for us from a percentage margin point of view, but it is revitalizing our high streets which we previously thought were potentially dead and buried.

{audio:0:07:35} You have to embrace both digital and delivery. You have to find more profitable ways such as white label delivery or click and collect. You have to embrace them all because, if they are not coming to you, they will go to other people.

{audio:0:07:54} What is your current delivery strategy?

{audio:0:07:59} We are currently with all three aggregators. We have very good relationships and work individually with aggregators who offer exclusives, new product launches and promotions. From a delivery point of view, we try to talk to the consumers very regularly. We try to offer our customers either something new, reduced or some other hook to drive that frequency. We would like to talk to them on a monthly basis without shouting and the delivery aggregators support us. We do joint investment because when we drive volume, the aggregators benefit.

{audio:0:08:49} Are some products on offer or exclusive to a different platform each month?

{audio:0:09:01} Yes and that is not giving away any secrets because most people work like that. Our preference is to maintain healthy relationships with all three aggregators to stop them fighting. All those businesses are run extremely well and we get on and work well with their teams.

{audio:0:09:23} Does it not make sense to be exclusive to one vendor and get a better fee?

{audio:0:09:32} That is a fairly circular question. Currently definitely not, due to the volumes. The lack of cannibalization between aggregators would mean impossibly low exclusivity fees. If that changes between aggregators we might go back. I have been exclusive with Deliveroo at GBK for a period of time so I am not averse to that at all. You can also offer time-limited or tactical exclusivities to aggregators. You can give them an advantage for a period of time or a specific thing.

{audio:0:10:38} Such as marketing or products which can shift the demand?

{audio:0:10:45} It is interesting how these aggregators actually have different customer bases. I use all three of the apps and I would think that most people use more than one but it does seem as if they don’t cannibalize each other too much?

{audio:0:11:03} They do cannibalize each other but I will not go into how much that is. By the same token we all have certain apps. If I look at my use of the railways, I probably have one app on my phone versus the three or four which all offer an equally good service. I tend to go back to that app because I do not want all four. From an aggregator brand point of view, Just Eat might be stronger in one part of the country whereas Deliveroo is stronger in another.

{audio:0:11:47} A restaurant wants to maximize their access to customers to fill the funnel so it does make sense to work with all three of them?

{audio:0:12:00} It currently suits us but the last year has taught everyone to be agile. You cannot sit down and say, tell me the exact rules and what the government will do because they do not know. You have to be a bit fleet of foot and if you are, you will likely be more successful rather than less.

{audio:0:12:33} What do you think about owning your own delivery and going direct?

{audio:0:12:44} I have an unfair disadvantage because I ran Pizza Hut and we had both a restaurant and a delivery business. The problem with running a delivery business, when you are a single brand like Burger King, is your main focus is not on delivery but how you manage your restaurants. That includes the drive through, dining area, walk-in and takeaway customers, but my ability and skill to manage those drivers cannot compare to the clever algorithms of Just Eat, Uber Eats or Deliveroo. The real challenge is driver productivity; how many drivers do you need on Friday at 8PM?

{audio:0:13:50} You require an exponential number of drivers which you cannot afford. It is very unlikely we would do that on a wholesale basis. There is a large pool of drivers out there and these businesses have a huge amount of skill. Let me run the restaurant and let those guys do delivery.

{audio:0:14:21} If you reach a certain volume of direct delivery orders it must make sense to own the drivers, similar to Domino's, but I guess that is a very high percentage?

{audio:0:14:34} Perhaps, but then there is the problem of average order values in QSR businesses. It is much more complex than people think or I have experience which tells me it is more complex. Domino's or Pizza Hut have been delivering pizzas for 30 years and have a fair amount of expertise. You are probably right and you might do it in a super captive location, but at this stage I do not see that happening in the near future.

{audio:0:15:10} Could you have your own app, generate demand and outsource delivery?

{audio:0:15:25} That is the direction of travel. Having BK Delivers or whatever it might be called, and just like we are trying click and collect, it is the same principle but using aggregators would seem much more logical.

{audio:0:15:53} How would you convert your customers from third party apps to a BK app?

{audio:0:16:04} If you are looking for delivery you go to Just Eat, Deliveroo or Uber Eats. One is unlikely in the first instance to go to a dedicated brand unless you are a super fan, who are coming to us anyway. We need the wider pool of people residing on aggregator databases. We will clearly drive loyalty and incentivize people to come to us, but the aggregators will continue to have huge volumes because they spend tens of millions of pounds promoting their databases.

{audio:0:16:58} Effectively, those platforms generate demand by marketing your brand but they also fulfill the order. Is it worth paying 30% margin for them to generate demand as will you need to spend similar money on your own marketing to attract direct customers?

{audio:0:17:25} You can spend that money yourself and drive them to your own platform but it is much harder to drive new people bespokely to your platform. A hybrid will be the answer. The vast majority will be through aggregators and a small proportion through one's own delivery portal.

{audio:0:18:08} You could use third party aggregators to drive new customers and, over time, convert a portion of those to increase your economics in using these platforms?

{audio:0:18:25} That is the right way of putting it, yes.

{audio:0:18:31} I was reading Chipotle's and Shake Shack's reports earlier this week and they seem to be changing their pricing on third party platforms to help drive new or existing customers to their own app.

{audio:0:18:58} I am sure the aggregators will have something to say to them about that. Delivery customers are more price sensitive than many brands believe they are. When Just Eat or Deliveroo do an offer with one of their partners, the volumes to that particular user go through the roof. That may seem obvious but if they were that inelastic, they would stick to their favorite brand.

{audio:0:19:59} Value is not only price but real value is key for the long-term health of a business. Simply putting your prices up to drive profitability is very naive on delivery platforms.

{audio:0:20:17} That will make your offering far inferior to others if you have a higher price point and if that elasticity is true, but do you own the customer relationship?

{audio:0:20:40} Data is key to the aggregators but there are many ways we can own our data. Once you create a white label you will own that customer data. Building other digital networks, such as click and collect, will drive your database. Delivering loyalty will also drive your database so there is no doubt that having a closer relationship with the consumer through some CRM platform will drive more sales. That is becoming increasingly important and all brands will think about it.

{audio:0:21:29} Does it worry you not owning the customers who use the aggregators?

{audio:0:21:38} We would like to own that data but there is no point wailing and shouting about it. Instead, we have to figure out ways to get enough consumers who are relevant. Once you understand what happens on their platform, you can apply similar marketing tricks.

{audio:0:22:09} Are aggregators powerful customer acquisition tools for you to attract new customers and drive traffic, then it is up to you to do a BK app to go direct?

{audio:0:22:33} If the aggregators drive penetration and get Burger King into places we are not well represented, that has to be a good thing for us. We can then remind people what we do and how great the flame-grilled Whopper is. We could reach that younger demographic we might not have. It is a great way of talking to people. Look at what happened over the past year. If it had not been for those delivery sales, how many businesses would be in a lot of trouble without it?

{audio:0:23:26} I am sure everyone is incredibly grateful for what they have done and therefore, we are still able to remain relevant to our customers. Many pub companies deliver on that but it is not the norm. The lack of relevance from some pub companies must worry them greatly.

{audio:0:23:51} Looking at your own direct delivery, instead of owning delivery drivers would you use a white label and have your own app and market your brand?

{audio:0:24:08} One would work with a partner to help develop that white label product.

{audio:0:24:20} Would you work with a big aggregators or a smaller player, like Flipdish, who are trying to break into the industry and partner closely with restaurants?

{audio:0:24:34} If you are running a QSR business the size of Burger King you are much more likely to go with one of the bigger more established operators and I mean no disrespect to the new entrants.

{audio:0:25:05} What is the biggest challenge for restaurants to take back distribution?

{audio:0:25:28} Casual dining restaurants need to be quicker from a digital point of view, whether that be queuing or payment systems. When the world opens up next week, your business is not going to go back to where it was. You have to be much more digitally savvy as a business. People order their Nando’s on Saturday, sat at the table on their mobile phone rather than queuing. You have to get the right tools in front of your customers; it is not only about delivery. When you enable your customers to reach you digitally, you will benefit from the knowledge that brings you.

{audio:0:26:43} How does QSR differ to casual diners given the lower ticket and higher volume?

{audio:0:26:59} Traditionally, QSRs had more resources and funds to get on and do it and can talk to consumers in a way other casual dining brands cannot. There are some disadvantages to that. Quite often we have the power of advertising or media behind us which allows us to talk to those consumers directly. The QSR world has been ahead of casual dining from a digital perspective.

{audio:0:27:37} Thinking about the difference in store format, do you have to repurpose your stores more than others because you have bigger drive throughs or bigger plots?

{audio:0:27:54} If 25% to 40% of your volume comes through delivery, you have to think about how you serve that channel and redesign your businesses to accommodate that. That could be delivery windows on high streets or separate areas; you have to address that in your design and layout. You may decide to build smaller restaurants because you have fewer dine in customers. The challenge is not only digital but also what happens on the high streets, which have become less relevant.

{audio:0:28:53} How do they become relevant again? One well-documented problem is that old traditional high streets charge huge rents which is not sustainable. New businesses will find a format which allows them to go on the high street and find a rent which is viable and achievable. They will amend the rateable system at some point which will help slightly. I am bullish about the future of the restaurant world.

{audio:0:29:36} If hypothetically, in seven years’ time, 40% of volume is delivery, how would a store format need to change to be able to deliver those volumes?

{audio:0:30:00} With high volumes you might end up with different cook lines for each channel. You might need a bigger kitchen and a smaller dining room. There are many ways it could change and it depends on what you sell and the traditional layout of your restaurants.

{audio:0:30:34} Are cook lines currently split in the kitchen?

{audio:0:30:55} Everyone has their own systems which they have refined over time.

{audio:0:31:03} Could you elaborate on the challenge changing your POS system you mentioned earlier?

{audio:0:31:39} Your POS system has to significantly change and adapt and so do your layouts and where you expedite your food. You make amendments as your volumes increase and the channels move around. When we first started doing delivery early on in the pandemic, we did huge volumes. Because there was no dine in or take away, you had all the room in the world. You would imagine the percentage of sales which are delivery will recoil slightly when there is more dine in, which will happen more permanently after May 17th. It is still in a state of flux but delivery is here to stay. It will not return to pre-COVID levels but you have to embrace it. We will change the layout of our restaurants and amend our working practices to avoid disadvantaging customers.

{audio:0:32:50} You mentioned you’re changing or adding drive thru lanes?

{audio:0:33:22} During times when customers cannot dine in, there has been an increase of volume through drive through lanes. We have had a big focus operationally on how we can improve that to serve customers quicker, how we can get more cars past the window and serve more food.

{audio:0:34:00} Have you adapted your old POS systems to integrate all digital channels?

{audio:0:34:14} It is challenging in any legacy business where you have different types of systems. You cannot simply throw everything out and start over. Doing that is a big roll of the dice and is not without considerable risk. The route we went was to work with our existing provider to upgrade our systems to a certain level. Hardware and software was changed to enable our point of sale to talk to a digitally enabled platform which we could bolt on.

{audio:0:35:02} Do you have a separate delivery POS?

{audio:0:35:15} No, but one of our aggregators integrates orders onto our point of sale. Others have tablets but it will all be integrated. That will drive speed to customers and reduce mistakes. These POS systems are getting increasingly complex because they have to deal with a loyalty system, a kiosk and some form of drive through. Layering these different things may seem straightforward but becomes quite tricky. We spend a lot of time, effort and energy on that.

{audio:0:36:13} Do you build your own stack or use a third-party solution like Olo?

{audio:0:36:21} We do not build our own stack. For payroll we use Fourth which helps with labor productivity and we use Harri as a recruitment tool. Different platforms bolt onto the back of these.

{audio:0:36:55} Looking at third party solutions, how do you choose a provider?

{audio:0:37:15} I am not a technical wizard but I look for a commercial deal which makes sense to all parties. It cannot be open-ended and we cannot have unlimited liability in case sales of some particular thing go through the roof and they keep taking fees on that. The size of firm is relevant because the attraction to buying startup software is very high because it is very cheap. If they are writing a complex form of code or own the algorithm and go bust, you are absolutely stuffed.

{audio:0:38:15} We prefer referrals because we like understanding how other customers have done. We dislike relationships where they say it costs X, but after each sneeze it costs you more.

{audio:0:38:44} I am surprised some solutions have a transactional element where they earn a fee on everything which goes through the platform; that seems to be expensive?

{audio:0:38:57} Yes, but that goes back to my earlier point; that might be the case and they might need to do that but you cannot let that run away with you forever.

{audio:0:39:08} How important are they in the stack if they aggregate all of your orders from different channels?

{audio:0:39:24} I don’t think it is in our interest to let anyone become too powerful. One of the great things about being part of a global brand – as we are at Burger King – is the brand owner, Restaurant Brands International who are based out of Miami in Florida, did a huge amount of this heavy lifting over the past three years with their US business. We have been able to piggy back on the back of that. We have not taken everything and have obviously made amendments for the UK market.

{audio:0:43:39} How have you seen customer behavior differ between online and offline?

{audio:0:43:46} Online customers spend more because they buy for more than one person. The other interesting aspect of digital sales is that people order food differently. You need to understand and learn from those traits but you tend to have a bigger party size on a delivery order. It will be more expensive because of aggregator fees and delivery fees which means the real value customers will come to us at Burger King so there is still an opportunity and a need to serve them.

{audio:0:44:41} Do you think they could be more loyal customers or are they more transitory, ordering one offs via the aggregators?

{audio:0:45:00} People are loyal to their aggregator and to their brand but the great thing about delivery for a customer is, if you're in a house of four, you can all have different things if you desire.

{audio:0:45:29} Does the aggregator or the brand own the customer?

{audio:0:46:03} For the sake of this discussion, take a new customer from one of the aggregators. On the weekend he drives up the motorway and stops. He just had Burger King for the first time in 10 years and it was really good and now he sees it on the motorway. That might drive behavior which I know is fairly obvious, but it can be very powerful. That art of penetration, in terms reaching those customers and reminding them who you are, why you are relevant and how good the food is.

{audio:0:46:43} If brands like Chipotle and Shake Shack convert aggregator's customers direct obviously that improves your economics because you can keep the lifetime value of that customer. But then does the platform lose that customer because they only order from a few brands or do they value the convenience and retain?

{audio:0:47:26} In the near term, the aggregators will remain the dominant players and will retain a significant chunk. What brands do through their own delivery will build up their core loyalty. People will go into restaurants, use their Burger King app, go home and when they fancy a Burger King, they will have seen all the banners saying BK delivers and can do it from there. You can win customers like that but, by the same token, you will see new customers coming towards your brand, and they are much more likely to come in through an aggregator initially.

{audio:0:48:09} You mentioned customers are more elastic than it may seem, given the unit economics of those aggregators; if delivery prices increase people may stop using them and prefer going direct. How do you see the economics from that point of view?

{audio:0:48:41} There will be natural ebb and flow, but currently there is downward pressure on delivery costs. If you are brand X and you offered click and collect and big incentives, at some point you and I will walk to that location and buy it because it seems to be much better value. Where that point is will differ for individual companies.

{audio:0:49:14} What is the biggest challenge for click and collect at Burger King?

{audio:0:49:22} You are adding another layer of complexity into running your restaurants. How do you signal that to your customers? Sometimes you have seen click and collect customers at other brands come in and wait in the queue. How do you efficiently manage that to ultimately win the consumer without costing you a huge amount of incremental labor? It is about getting an app to work operationally in your restaurant and signaling it very clearly.

{audio:0:50:05} It seems difficult in the store to have a delivery window because you already have a drive through. Perhaps there could be a part of the store to serve those customers?

{audio:0:50:21} People like us will try and bust the queues for customers coming in because that will drive consumer behavior.

{audio:0:51:04} What is the biggest challenge you’re facing today?

{audio:0:51:12} From a brand point of view, remaining relevant to your customers, understanding and giving them what they want, but also getting ahead of what they want because they do not know what they want a year from now. You have to keep your brand fresh and as brands get bigger, they have to invest in the infrastructure. Historically, QSR might have suffered wrongly from reputational challenge, because everything we and our competitors do from an environmental point of view is heading in the right direction.

{audio:0:52:12} How do we tell customers we are doing that? How do we reassure them we are doing that? How do they fully understand that we are serving 100% beef, real flame, English and Irish, no additives, no preservatives in any of the food whatsoever; no artificial flavorings, only grass-fed beef? How do you get them to understand all those things? It is a different thing from me saying it like I just have, and you the consumer really getting it. Those are the current challenges.

{audio:0:52:47} How attractive are dark kitchens and which brands are they best suited for?

{audio:0:52:58} Dark kitchens are attractive from a brand reach point of view. You do not see many big brands in dark kitchens so you have to ask yourself why. Perhaps the model is not quite right. There is currently an arms race with many different operators out there driving into the UK. My own view is that the economic model is not quite right yet. That does not mean you should not try it. We may end up doing that ourselves, or partner with other people and creating our own hubs rather than paying yet another third party an additional chunky fee.

{audio:0:53:59} Currently, it looks challenging but the logic is absolutely bang on. Am I better off building a smaller restaurant with a fascia on Wembley High Street than I am in a dark kitchen in an industrial estate in Park Royal?

{audio:0:54:29} For big brands who have capital to build a store it is less attractive than smaller brands who want to experiment and have low capex to get it up and running?

{audio:0:54:44} It is a good way of getting your brand going. The question I would ask and I would like to understand, which I am sure no one will ever tell me, is look at the turnover of those brands in those food units. I bet they turn over much faster than operators and individuals would like too.

{audio:0:55:06} It seems like it would suit big brands because they have the reach, whereas a small brand still has to market to drive orders from that small dark kitchen. It seems like a Catch-22 where the smaller virtual brands who are in there, cannot drive traffic to fulfill the kitchen capacity and the big brands have little incentive to go in there because they can simply build their own store?

{audio:0:55:34} Therefore, to get bigger brands in, the model potentially needs to change. I am not quite sure but I think the principle behind a dark kitchen is quite exciting.

{audio:0:55:43} It is quite attractive; you can get up and running quickly with just two chefs and pay a fee, but it’s not really for big brands?

{audio:0:55:54} If I look at some of the volumes we and our competition do, you could never do it with two chefs in the kitchen; you will need many more, and on go the associated challenges.