The interplay between digital food ordering and restaurants: How is the F&B sector affected?

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As on-demand economies continue to rapidly catch on and revolutionize the lives of billions, online food ordering platforms are believed to have drastically transformed the hospitality and restaurant sector like no other, beguiling hungry diners and eateries alike.

In Egypt, and amid the country’s rising online penetration, third-party digital platforms have become an essential component of every restaurant’s success – and pretty much part of the everyday life of time-strapped people.

With platforms such as Otlob, elmenus, Glovo and Uber Eats gaining momentum day by day, restaurant operators and the food and beverage (F&B) sector as a whole have no choice but to adapt.

What does the industry look like?
The industry remains limited and highly competitive, with a handful of big players already taking the reins of Egypt’s digital food ordering. These are either food aggregators or delivery ordering platforms.

Commenting on the business models of digital food ordering, food consultant at Hero Company Ashraf Sharoba says that current players have the appropriate logistics to remain present in the competitive landscape.

“In order for these initiatives to achieve credibility and sustainability, they first collaborate with big names in the restaurant industry that ensure safety standards and good quality of the food products they provide for their customers,” he reveals.

Speaking about the impact that the online ordering platforms might have on the volume of people dining out, food and beverage consultant Joseph Magdy points out that being vividly present on these platforms does not necessarily mean that people will only rely on digital ordering; hence, dining out less frequently. “However, one may visit a restaurant they had previously enjoyed a take-out meal from.”

Current players have the appropriate logistics to remain present in the competitive landscape

The upsides of digital food ordering
“Our experience with these platforms was very promising,” area manager at Butcher’s Burger Ahmed Abdel Aal says. “These platforms improved things on our end, and definitely leveraged overall profits.”

The eatery has been a partner of Otlob for eight months now, during which its take-out business witnessed a noticeable boost.

“Online orders became typically higher than over-the-phone ones, which helped us cultivate our base of recurrent customers,” Abdel Aal adds.

According to the latest data, and thanks to these platforms, the number of loyal customers has increased, he goes on to say. “Now, new customers make up two thirds of the customer base, while the recurrent customers make up the remaining third.”

Despite the high commission rates, digital food ordering platforms introduce restaurants to a wider audience and thereby bring in more clientele, according to franchise manager at Arabiata Hussien Mowafy. The third-party platform also helps them efficiently manage day-to-day operations and soften a lot of the organizational intensity, he adds.

Digital food ordering platforms introduce restaurants to a wider audience and thereby bring in more clientele

Where do the problems lie?
Financially speaking, Mowafy explains that restaurant operators are unlikely to make a short-time buck, and in best cases, break even with the costs.

“The commission rates charged by these platforms are between 15-25 percent,” Mowafy says, which means that small enterprises could be at actual risk if they cannot afford to adapt to the third-party commission fees.

“They will find themselves unable to buck the trend, and unable to have considerable amounts of the profits creamed off due to the lofty commissions charged by these apps, which – ultimately – would make it hard for them to stay in business,” he illustrates.

On the other end, Magdy further expects both customers and restaurants to gradually distrust these platforms, since they create an additional headache to the restaurants’ operators due to delivery hiccups and technical problems, as he puts it.

“People in charge of these apps are busy spending money on offering discounts on meals to lure in more customers and restaurants alike, rather than upgrading the service itself and hiring professionals,” he adds.

Due to their low pilot earnings, these platforms witness the highest rates of turnover. Consequently, they face serious problems when it comes to labor, which in turn, would incur losses in the foreseeable future, he emphasizes. “Usually, sharing companies usually witness a strong kick-off, but then the service they provide starts to gradually fizzle,” he tells Business Forward.

What does the future look like?
While the problems that arise with the emergence of digital food ordering platforms are hefty, some players in the market have bigger plans. General manager of Uber Eats Egypt Rawiah Abdallah tells Business Forward that in an attempt to better serve the restaurant-end of the equation, the company – which relies on Uber’s logistics network – is planning to help launch new business models like virtual restaurants.

“I expect that over the coming two years, online food platforms will rule the root in the restaurant industry, and operators will have no choice but to join the online bandwagon – just in order to survive. It is a reality check,” Mowafy concludes.

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