Taco Bell owner's $200 million deal with Grubhub gives it a leg up on the competition

There’s a good chance that the last time you ordered take-out you used your laptop or a mobile app.

Yum Brands are so keen on getting a foot in the door with online ordering and delivery companies.

Online ordering is convenient, it decreases the likelihood of an order error and gives customers a chance to browse the menu longer, often leading to bigger sales for restaurants. However, when restaurants rely on third-party ordering and delivery services, they can actually be putting themselves at a big disadvantage.

Third-party services, whether they incorporate delivery or not, charge restaurants a commission for their services and often reap the benefit of having full access to consumer data. With that data, those companies learn what customers order, when they order it, how often they are using the platform and can leverage it to bolster sales or lure in diners from other services.

“The battle between restaurants and their new digital competitors is not a fair fight,” Eli Portnoy, CEO of Sense360, told CNBC via email. “Doordash, Amazon, and UberEats can collect and use data to drive precise decisions about everything they do, whereas traditional restaurants have never really had access to the same type of data and did not make it a part of their DNA.”

That’s why Yum’s recent investment in Grubhub is such a smart move.

The Taco Bell owner bought a 3 percent stake in the online food-ordering company at the beginning of the year earning itself a seat on Grubhub’s board as well as access to the data it collects on KFC and its fast food Mexican chain.

“Having access to that data is critical,” Greg Creed, CEO of Yum, said during an earnings call Wednesday.

“One of the unique aspects of the agreement is to have the [point of sale] at all KFC and Taco Bell restaurants fully integrated with Grubhub, which will significantly aid the accuracy of the order and the speed of delivery,” Creed said.

Yum’s $200 million investment doesn’t just guarantee the company access to Grubhub’s data, it allows the online ordering platform to expand to more markets more quickly. Creed said the broader Grubhub’s presence, the better it is for Yum’s brands.

“Yum getting access to delivery data is a very big step in the right direction and will allow it to better understand how to compete and potentially win in this new data-driven world,” Portnoy said.

Sites like Grubhub make online ordering easier and convenient by displaying all of the restaurants that deliver in your area as well as menus, prices, delivery fees and the typical delivery time. Customers place their order through the site and it is sent directly to the restaurant. The restaurant fulfills the order and delivers it using its own drivers.

These easy-to-access delivery platforms not only lead to higher sales for restaurants, but also to more occasions for customers to purchase food. Those who might not have been able to travel to a restaurant for lunch because they were stuck at the office, can order their food online and have it brought to them.

In the next five years, about 25 percent of all restaurant sales will likely occur through digital ordering, Noah Glass, CEO of Olo, a software company that allows customers to order food from online menus and prepay in advance of deliveries, told CNBC in March, citing analysts. That’s about $200 billion of the $800 billion that people spend at restaurants annually.

Olo is currently partnered with EatStreet, a rival to Grubhub.

source : www.cnbc.com