What Does Door Dash’s Expansion into a Shared Kitchen Tells Us

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on Oct 21, 2019 5:34:33 PM
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Door Dash recently announced that it is opening its first brick-and-mortar restaurant for four of its partners in Redwood City, California.

While the building will house restaurants such as Nations Giant Hamburgers, Rooster & Rice, Humphry Slocombe, and The Halal Guys, it will also provide delivery services for 13 neighboring cities.

This move comes as Door Dash’s competitors are ramping up new programs to remain competitive. Uber Eats, Grubhub, and Postmates have introduced virtual restaurants and delivery robots that are making their services more convenient for customers, and Door Dash seems to be following suit.

But as strategic as this move is, it is also curious in that there seems to be several variables at play. Two of these variables offer a glimpse at what the restaurant industry could look like in the not-so-distant future.

Shared Spaces are Here to Stay

The restaurant industry in America has traditionally mirrored nationwide housing trends in that most restaurants announced their presence in a marketplace by purchasing their own space in a neighborhood or shopping district.

However, now that cities across the country are facing affordable housing shortages, consumers are buying properties in mixed-use developments instead of single-family homes. Restaurants are following this trend by leasing shared spaces in order to save on their property costs and provide high quality goods to their customers.

For example, Denver’s average single-family home value is nearly $500,000. Similarly, retail spaces are leasing for an average of $217 per square-foot, ranking third in the nation behind Los Angeles and Austin, Texas, according to retail market analysts at CBRE. This price has increased over 140 percent since 2012, making Denver one of the fastest growing retail economies in the country.

However, this means that small businesses that aren’t flush with cash will have a hard time affording to be a part of this growth. That’s why if you walk the tourist area of Downtown Denver, most businesses are national chains. 

Shared spaces help businesses cope with the affordability crisis by allowing them to split costs that they would incur themselves otherwise. The Stanley Marketplace in Aurora and The Denver Central Market are great examples of this trend in action.

Convenience is Key to Survival

The rise of the third-party delivery services is a sign that consumers value convenience over experience. The days of restaurants offering unique experiences are waning, and they are being supplanted by a gimme-now attitude among consumers.

According to the National Restaurant Association’s State of the Industry 2019 report, half of all consumers say that a restaurant’s delivery options is a deciding factor for whether they will spend money there. This includes 67 percent of millennials surveyed.

Another staggering statistic about how much consumers value convenience is 43 percent of adults will incorporate a restaurant-prepared dish—like a side or entrée—into their meal. That number rises to 58 percent among millennials.

By housing multiple restaurants under one roof, businesses can help customers satisfy their diversified needs without utilizing any cutthroat strategies that might return some negative PR. 

While convenience might mean shedding some traditional restaurant features, it seems as though losing that extra weight could help a business stay open in the long run. And in the end, that’s a good thing. 

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Topics: Real Estate, Restaurant Experience, off-premise, Restaurant Sales Strategy, Private Equity

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