Sites with larger kitchens fetching a premium as operators react to food delivery boom

Wembley Stadium kitchen

Restaurant sites with larger capacity kitchens or ones that can be extended to meet demand for delivery are now fetching a “premium” as growth in food delivery dramatically alters the market landscape, it has been claimed.

Research suggests the food delivery market is expected to increase by 10% a year to £5.3bn by 2020, with demand for ready-to-eat delivered food currently outpacing dine-out growth by a factor of 10.

This is creating challenges for the restaurant sector that require capital investment at a time when cash flow pressures are at their highest, according to global business advisory Duff & Phelps, which is seeing the trend impact back-of-house real estate.

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“Traditionally, the capacity of a kitchen only needed to account for the number of covers. Now, with online orders coming in at the same time, a kitchen must cater for in-house covers and delivery orders. Demand peaks surge around the same time making it potentially challenging from a capacity and staffing perspective,” said Jimmy Saunders, director of Duff & Phelps.

“The property market is therefore changing and we see properties with access for delivery agents moving away from dine-in customers; and those with a larger kitchen capacity or one which can be extended to meet the demand for take away, now attracting a premium.”

Mr Saunders suggested the kind of model adopted by Deliveroo, which has set up dozens of portable kitchens capable of servicing multiple restaurant operators, is just the start of things to come.

We already see certain aggregators operating ‘dark kitchens’ servicing only online delivery orders”

“The future will undoubtedly see the online home delivery market evolve further and we already see certain aggregators operating ‘dark kitchens’ servicing only online delivery orders. This follows the ‘dark store’ model operated by some of the supermarkets as they first transitioned into the online grocery model.

“At the moment, smaller operators don’t have the scale or capital to do this themselves, much as independent grocers couldn’t compete with the supermarkets; however, the difference is that the aggregators are presently applying this model in conjunction with existing branded restaurant chains.”

Mr Saunders noted that commissions payable to the online platforms are typically in the range of 20% to 25% of the order value. Taken with the loss of wet sales associated with delivered food, he insists restaurant owners must adapt to the fundamental shift in business model this is causing.

“It is only a matter of time before the aggregators themselves look to create white label offerings of a quality to match branded restaurant food so that they can take the additional margin themselves. While this is a clear risk, it also presents opportunities for the aggregators to exercise much more control over output and reputation. We only need to look at supermarkets to see how quickly the private label has caught up with the brands over recent years.”

Tags : deliveryDuff & Phelpsfood deliverykitchens
Andrew Seymour

The author Andrew Seymour

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