Title: Thrifty Diners Fuel Growing Trend of Self-Pickup Orders, Impacting Restaurant Revenue
Subtitle: Fast-casual chains witness a decline in delivery orders as customers opt for cost-saving measures
Pasadena, California – In a significant signal that diners are becoming more budget-conscious, popular fast-casual chains Cava and Sweetgreen have observed a decline in delivery orders, with customers increasingly opting for self-pickup. This shift in consumer behavior reflects a desire to cut back on restaurant spending, as delivery orders often entail additional fees and tips for drivers, along with potentially higher food prices to offset commission fees paid to third-party delivery services.
Selecting self-pickup as an alternative enables individuals to save money effortlessly. Unlike delivery orders, pickup orders usually do not incur any additional fees, except in rare cases where some restaurants charge a nominal amount for online orders. Moreover, the “tipflation” phenomenon leads to fewer patrons leaving gratuities on self-pickup orders compared to deliveries. According to a May 2023 Bankrate survey, only 13% of consumers reported leaving tips for takeout orders.
Although declining delivery orders alleviate consumers’ expenditure, it has become a concerning trend for restaurants relying on the revenue generated from them. As delivery orders tend to have higher totals due to added charges, a reduction in transactions could negatively impact establishments that heavily rely on this income stream.
Sweetgreen, known for its health-focused salad offerings, experienced weaker-than-expected sales in the second quarter, with CFO Mitch Reback stating that the drop was partially attributed to a shift away from deliveries during the company’s July 28 conference call. The chain reported quarterly revenue of $152.5 million, falling short of Wall Street estimates of $156.7 million.
Cava, a Mediterranean fast-casual chain, witnessed strong second-quarter sales growth despite the decline in delivery sales. However, the company remains cautious about its full-year forecast. After achieving same-store sales growth of 28.4% in the first quarter and 18.2% in the second quarter, Cava now projects more subdued same-store sales growth of 13% to 15% for the entire year. Cava CFO Tricia Tolivar expressed optimism about positive traffic trends but acknowledged a slight shift from delivery to pickup orders during the company’s conference call.
Cava executives also cited concerns over rising gas prices and broader economic factors contributing to their tentative sales outlook.
Even industry heavyweight Chipotle Mexican Grill has not been immune to this trend. The burrito chain reported a 15.8% decline in delivery service revenue to $17.3 million in late July. The delivery segment, encompassing fees associated with orders made through Chipotle’s app and website, accounted for less than 1% of the company’s total revenue for the second quarter. However, details regarding the delivery business were not disclosed during Chipotle’s conference call.
Interestingly, the decline in delivery orders has not adversely affected third-party delivery companies. Uber reported a 14% increase in second-quarter delivery sales, while DoorDash experienced a remarkable 25% surge in total orders.
The exception to this trend was Just Eat Takeaway.com, the parent company of Grubhub, which reported shrinking order volumes in North America during the first half of the year.
As diners continue to prioritize budget-friendly options, the decline in delivery orders and the rise of self-pickup represent a significant shift in consumer behavior. While restaurants adapt to these changing preferences, the impact on the industry’s revenue streams remains an ongoing concern.