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These 5 Chains Are Joining McDonald's in Betting on Delivery

By Daniel B. Kline - Updated Mar 15, 2017 at 10:26AM

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A lot more food is going to be available for delivery.

The outside of a McDonald's.

McDonald's believes it can make delivery an important part of its business. Image source: McDonald's.

McDonald's (MCD -0.01%) believes delivery will play a major part in its future. Never mind that Big Macs, fries, Chicken McNuggets, and much of the rest of the chain's fare does not travel very well, the company said in its recent Global Growth Plan that its "extraordinary footprint" positions it "to become the global leader in delivery."

If proximity to customers counts more than how well a chain's food travels, then McDonald's may be right. The chain pointed out that in its top five markets (the United States, France, the United Kingdom, Germany. and Canada) "nearly 75% of the population lives within three miles of" one of its locations. It also shared that it already has delivery sales of nearly $1 billion in markets including China, South Korea, Singapore, and even limited U.S. locations. That already makes Mickey D's "one of the largest providers of delivered food in the world," according to the company.

McDonald's expects delivery to help it make up for weakening comparable-store sales, specifically in the U.S., which saw a 1.3% drop in that metric in Q4. That's an idea that the company shares with a number of other food and beverage chains. Technology has made the mechanics behind delivery easier -- apps can handle billing and order-taking for example -- and third-party delivery sources provide options for chains not looking to add that infrastructure. That, plus sinking retail traffic translating to less consumers being out and about in shopping areas, makes the idea of bringing food directly to consumers seem very appealing.

The problem is that McDonald's is not only not alone in making delivery a growth priority, it's one in an increasingly crowded field where some are doomed to fail. That could be because some foods simply don't lend themselves well to delivery and because a crowded marketplace may stop some  chains from reaching the volumes needed to make the infrastructure expenses worthwhile.

A loaf of bread from Panera.

Panera Bread will bring its products to customers in a growing number of markets. Image source: Panera Bread.

Panera Bread is growing delivery

Delivery has been part of Panera Bread's (PNRA) overall plan to revive its business. The company now offers delivery from 15% of its bakery-cafes, with plans to increase that number going forward.

For Panera, delivery has gone hand in hand with its "2.0" store revamp plans. Under that program the company has invested heavily in technology, including launching app-based ordering as well as mobile payment capabilities. CEO Ron Shaich spoke about those overall efforts in the company's Q4 earnings release.

"With peak investments and significant scale behind us, we are now focused on completing the rollout of our initiatives and reaping the benefits," he said. "Because of the strength of our initiatives, we are confident our efforts will translate into market share gains and sustainable double-digit earnings growth."

Panera plans to have delivery from all of its stores by 2018. Unlike many of the companies on this list, the bakery chain uses its own personnel, not a third-party service, to deliver.

A steak and lobster meal.

Outback Steakhouse wants to bring meals like its steak and lobster seasonal special to consumers via delivery. Image source: Getty Images.

An in-home steakhouse

Bloomin' Brands (BLMN -4.70%), which owns Outback Steakhouse, Bonefish Grill, Carrabba's Italian Grill, and Fleming's Prime Steakhouse, believes that consumers want something more than pizza or Chinese food when it comes to delivery. CEO Elizabeth A. Smith said during the company's Q4 earnings call, which was transcribed by Seeking Alpha (registration required), that customers want a casual dining restaurant experience, but "not always in the restaurant."

She cited statistics saying that "off-premise visits" had grown industrywide in Q4, despite the overall down market. She said the company plans to increase its delivery availability and has been testing both third-party solutions and delivering on its own.

"We will have at least 115 restaurants offering delivery by the end of Q1," she said. "In our view, off-premise represents the first structural tailwind in the industry in quite some time. We intend to capture our fair share of these incremental occasions when dining at home is preferred."

The outside of a Starbucks

Starbucks has been delivering in some urban markets. Image source: Starbucks.

Starbucks wants to come to you

Like Panera Bread, Starbucks (SBUX -1.84%) has invested heavily in mobile order and payment technology. It has also begun leveraging that technology to offer delivery in some markets. In general, Starbucks has focused on cities, including New York, where it offers "Green Apron Delivery" in the iconic Empire State Building. This is literally delivery from a store located in the building to the more than 12,000 people who work there.

The company called that program "a pilot project designed for a dense urban environment," and it's only one of the delivery programs the chain is testing. Starbucks has also partnered with Postmates for a second pilot program in its home market of Seattle.

"Our customers are highly engaged with Mobile Order & Pay, placing five million transactions a month, so delivery becomes a natural extension that provides another easy and convenient way to meet them where they are in their day," said Chief Digital Officer Adam Brotman in a press release.

Orders are placed via the company's app with customers having access to a "delivery" button in markets where the program is being tested. Starbucks has not listed specific plans for rolling out the service in more places, but the FAQ page for its Green Apron delivery service refers to future expansion.

A stack of pancakes and a banana.

Pancakes may not be the first thing people think of when it comes to delivery, but IHOP is working on packaging to help them travel better. Image source: Pixabay. 

Breakfast brought to your door

DineEquity (DIN -3.93%), which owns both Applebee's and IHOP, believes that delivery can be a major part of its recovery. The company saw a 0.1% drop in comparable-stores sales in 2016 for IHOP while Applebee's fell 5%. That negative trend accelerated in Q4, with IHOP seeing a 2.1% slide in same-store sales, while Applebee's fell a big 7.2%.

The company sees lower foot traffic and the growing trend of consumers eating more prepared foods at home as being partly responsible for its declines. To combat that, it plans to enhance both delivery and takeout. In doing that, the IHOP brand plans to address one of the biggest problems for many restaurant chains when it comes to takeout and delivery.

"We are currently beta testing our meals-to-go program, which includes proprietary packaging technology and online ordering," said IHOP President Darren Rebelez during the company's Q4 2016 earnings call, which was transcribed by Seeking Alpha (registration required). "This packaging, in development for over one year, is specifically engineered to protect the integrity of our unique breakfast foods and to ensure a quality experience for our guests."

DineEquity interim CEO Richard Dahl was less specific about Applebee's delivery efforts during the call, but he did acknowledge that it would be "accelerating the rollout of off-premise channels." Applebee's does offer delivery through third-party services in limited markets now.
The outside of a Dunkin' Donuts.

Dunkin' Donuts is using a third party to deliver. Image source: Dunkin' Donuts.

Dunkin' will run to you

With Starbucks already selectively in the market, Manhattan is becoming quite the location for people who want coffee, but don't want to leave their home or office to get it. Dunkin' Brands' (DNKN) Dunkin' Donuts began a partnership with DoorDash in August to deliver in Manhattan and Brooklyn, joining Atlanta, Boston, Chicago, Dallas, Los Angeles and Washington, D.C., as markets where the coffee-and-doughnuts chain delivers.

Those are just the top areas where Dunkin' offers delivery in partnership with DoorDash and the full list of areas served (which neither company publishes) is much longer. Customers can see if their location makes the cut on the DoorDash website.

Unlike Starbucks, which offers delivery through its own app, Dunkin' customers order through the DoorDash app or website. DoorDash has been steadily increasing its Dunkin' Donuts' delivery area, but neither company has made it clear if or when the service will be offered nationally.

Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Panera Bread and Starbucks. The Motley Fool recommends Dunkin' Brands Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
$266.54 (-0.01%) $0.04
DineEquity, Inc. Stock Quote
DineEquity, Inc.
$73.12 (-3.93%) $-2.99
Bloomin' Brands Stock Quote
Bloomin' Brands
$21.89 (-4.70%) $-1.08
Starbucks Corporation Stock Quote
Starbucks Corporation
$86.92 (-1.84%) $-1.63
Panera Bread Company Stock Quote
Panera Bread Company
Dunkin' Brands Group, Inc. Stock Quote
Dunkin' Brands Group, Inc.

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