The Trust Landgrab: How Trust Will Define The Future of The Restaurant Industry And Why We Must Kill The “Ghost”
The jury is in. Delivery is going to be a thing.
According to Morgan Stanley, food delivery will be a $470 billion market by 2025, an obvious mark of shifting consumer behavior and the premium we place on convenience. A new restaurant model has emerged to meet this demand, accelerated by the pandemic and built specifically for off-premise dining. This model is commonly referred to as “ghost” or “dark” kitchens: operators launch restaurant brands from within existing restaurants or lease turnkey commercial kitchens near dense urban centers. The lower start-up costs and possibilities for non-linear growth are exciting, but success will encompass much more than simply embracing “ghost” kitchens. It will come down to one thing: trust.
At Salted, we’ve been building better-for-you, digital native restaurant brands for the last three years and now have 17 locations (and effectively 500 storefronts) live across the country, making us the largest delivery-first restaurant group in the US. We often think about how the trends we’re seeing in the food industry today have already played out in other industries moving towards a new digital age: it was once crazy that someone might trust the quality of new eyeglasses without trying them on in a store (before Warby Parker), or that someone might prefer to discover a movie online when they could just as easily browse the aisles of a local Blockbuster (before Netflix). And yet, we’ve never referred to Netflix as a “ghost movie rental store.” Why?
Because successes like Warby Parker and Netflix were not premised around their asset-light business models; they were built on the value they provide to their customers. Equally important, these companies solved real problems using data and technology, which led to high trust customer relationships. This same opportunity exists today with the digitization of the restaurant industry.
We believe there is much more at stake than a transfer of revenue from one channel to another. It’s going to be a landgrab for trust. Over the next 10 years, there will be many new winners, especially in the QSR space, where billions of dollars are at stake, good curation is scaling slowly, and Subway remains the largest “healthy” restaurant in the world. What will it take to build an enduring, trusted restaurant brand? To build longstanding value and be more than just a ghost? Here’s my take.
Solve a Problem
In many ways, it’s never been easier to open a restaurant than in today’s digital-first world. The default path begins with finding a category or cuisine that looks interesting (usually because of a gap in the market or counter-intuitively, a low barrier for execution) and then start building. Thus the proliferation of virtual burger, wings, cheesy-fill-in-the-blank food concepts. While this sometimes works out, we think the most successful brands will care more about the underlying problem they’re trying to solve and then layer in the actual product (in this case, the food, menu, and brand identity).
Starbucks solved the “third place” problem. McDonald’s solved the “feed the family quick and cheap” problem. Domino’s solved the “it’s late and I’m stoned” problem. What are the other big problems out there left to be solved?
The benefit to this approach is that it’s less reliant on trends that might prove fleeting. When companies solve for the underlying problem, they can represent something beyond what’s on their menu and evolve with customers over time. At Salted, we’re using our platform to make healthier food as convenient as Domino’s. In other words, “fast food” but with values (high quality ingredients, sustainability, transparency) more aligned with a new generation of consumers.
Hospitality Wins
One question we ask ourselves at Salted is “how can we replicate that feeling of hospitality we get when we visit our favorite restaurants?”
In some ways, it’s a fool’s errand, because there truly is something irreplicable about being in the same physical space as another person. But at the same time, it’s a reminder that technology can be a powerful tool, when used with a customer-first mindset, to deepen relationships and win trust every day. And fortunately, a lot of this customer-first playbook has already been written by direct-to-consumer companies in other categories over the last 20 years — most famously, Zappos with their commitment to “delivering happiness” to customers.
It starts with understanding your brand’s values and making sure those values are reflected in how you treat your customers. The mistake we see with many digital-first operators is believing that since they don’t have a traditional physical experience, they can’t or don’t need to deeply focus on their customer experience. We think the opposite is true, especially given the limited curation that exists today and low signal-to-noise ratio. How should a customer know who to trust? Here are a few things we do:
- 100% happiness guarantee. We refund any order that a customer requests, even if it’s a delivery partner who dropped the ball.
- Omni-channel customer support from 10am — midnight every day.
- A commitment to high quality ingredients and transparency. Zero preservatives, 100% gluten-free, heavy focus on delicious, plant-based options. And every recipe is rigorously tested specifically for the at-home dining experience (and travel time).
- Storytelling through packaging. We use eco-friendly products so we can limit the environmental impact inherent in delivery. We also include a little postcard with each order that details what makes us different.
- A straight-forward rewards program. Get $10 for every $100 you spend.
Apart from our operational systems, we’re using technology and data to find ways to maximize customer happiness, and standardize the customer experience down to the smallest detail. A Salted meal should look, and taste and even feel like a Salted meal, every time, whether you’re in Atlanta or Portland or somewhere in between. A few examples:
- Live camera feeds in every kitchen for remote quality control so we can see every dish that leaves a Salted kitchen.
- Prep time monitoring that lets us track, in real time, how quickly orders are leaving our kitchens and throttle demand accordingly.
- Text support systems with feedback and NPS scores automatically piped back into our kitchens’ Slack channels. If you order from one of our brands, you’ll be hearing from “Sam” via text, our version of Alexa. :)
- Remote data entry tools that track health, cleaning, and sanitation procedures and feed into each kitchen’s weekly scorecards.
- Aggregating 2,000–3,000 customer data points (ratings, comments, support tickets) across our kitchen network to better understand and make improvements on the end-to-end customer experience.
Successful brands, especially ones focused on delivery, will put customers first and try their best to explain how they’re doing so. Not just because it’s the right thing to do, but because it builds loyalty and that’s how we’ll ultimately measure the difference between a brand that turned out to be clickbait and ones that end up becoming the next Subway or McDonald’s.
Data is Our Friend
In today’s digital-first restaurant world, there’s a vast amount of data at our disposal. The hard part is figuring out what’s important.
For starters, not all revenue is created equal and it’s very easy to use top line growth to tell a story of brand-market-fit when it doesn’t actually exist. The more important pieces of data are customer-centric and get to the heart of the trust landgrab: lifetime value, NPS score, and conversion rates. Some of this data might be gleaned from sales on marketplaces like DoorDash and UberEats but we think of these partners primarily as customer acquisition channels that feed into our own e-commerce platform, which is a much richer data source. With a direct channel (ie, yourrestaurant.com or your restaurant’s app), you can start to run a restaurant like a traditional e-commerce business and get a detailed view for what’s working and what just seems like it’s working.
We’ve found that the most valuable data point here is the percentage of customers who make a second purchase within 30 days. This number doesn’t just tell us how well we’re doing on the first experience with our customers but it suggests how much they trust us to hit a homerun twice in row. To put why this is important into perspective, consider that repeat customers generally spend up to 3x on their second purchase (compared to their first) and that they’re 53 percent more likely to make a third purchase after they’ve made a second one. Pretty big swing.
If less than 20% of your customers are making a second purchase in 30 days, something is missing. If it’s over 25%, you’re winning trust with customers and you may be approaching brand-market-fit. Either way, the beauty of this digital-first world is how we can use data to maximize wins when things are working and minimize losses when they’re not. The key is to focus on the right metrics, which are the ones tied most closely to customer behavior.
The Future is Multi-Channel
Domino’s is the undisputed heavyweight champion when it comes to delivery. They’ve been thinking about how to deliver a consistent experience to customers a lot longer than most of us and their success speaks for itself. This $15 billion pizza brand has over 17,000 stores and has posted same store sales growth for 38 quarters consecutively in the US and 107 quarters internationally, even opening hundreds of new stores during the pandemic.
However, despite their dominance in delivery and focus on digital ordering, 45% of their sales are typically carryout. 45%. Why does this matter? Because it shows that delivery is really just a single channel and in order to maximize lifetime value and build deep relationships with customers, you’ve got to be everywhere.
We’ve seen this trend play out with countless D2C brands who originally launched to disrupt a giant, asset-heavy industry — Warby Parker, Everlane, Bonobos, etc — and one by one, in a pre-pandemic world, they opened physical storefronts. Why? Primarily as marketing engines (ie, “try before you buy”), but also to create a more three-dimensional customer experience, tell their stories more completely, and win trust.
At Salted, our brands are multi-channel. Delivery is the tip of the spear (and the easiest way to get data on new brands, menus, and markets), but we still see 50–60 percent of the sales on our direct e-commerce channel as pick- up orders. Customers want the physical touchpoint. As a result, we’ve been doubling down on carryout and are launching branded, brick-and-mortar storefronts to complement our digital-first ones across the country. The first one launched this past year in LA, under our moonbowls brand, which serves gluten-free, Korean-inspired bowls. Lots more to come.
Final Thoughts
In 2021, the global online food delivery market is expected to reach $151.5B in revenue, a 10% jump up from 2020. Crazy numbers. And yet, we’re in the earliest innings of delivery.
As this shift plays out, new brands that we haven’t even heard of yet will emerge and define the industry. They’ll find ways to use technology to foster hospitality and provide layers of personalized service. They’ll use data to make smart decisions about their costs and invest savings back into the quality of their products. They’ll use online marketplaces as launch pads for multi-channel brand experiences that feel relevant and positive for the world and their communities. And they probably won’t refer to themselves as “ghosts”. Instead, they will define themselves by their core values and the ways they’re able to earn and keep their customers’ trust over long stretches of time. It’s an exciting journey ahead. We’re glad to be a part of it.
A condensed version of this piece originally ran in QSR Magazine.
