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90 cents per mile: Delivery as a service

4 min read

Restaurant and Foodservice

“Who will be the first modern company to achieve a one trillion dollar market cap?” was the subject of NYU professor and L2 founder Scott Galloway’s speech entitled “Who is the Fifth Horseman?” at the DLD NYC Conference on May 6, 2015. Beyond the “four horseman” contenders of Apple, Google, Amazon and Facebook, Galloway ranks Uber as his top choice for the fifth horseman, describing the company as both the “vascular system for business” and “the broadband pipe for atoms.” He articulates a much larger vision for the company than person to person transportation. Rather, he describes Uber as a local logistics platform.

“You can take an Uber for 90 cents a mile in Chicago,” said Galloway, detailing a new efficiency shift made possible through the on-demand economy. “We have the cheapest source of real-time, on-demand labor in history.” Uber is but one example of a growing number of real-time, on-demand local logistics fleets: others include Postmates, DoorDash, Caviar, GrubHub, Lyft, Sidecar and many more, including recent local logistics efforts by both Google and Amazon (two of Galloway’s four horseman). In aggregate, these fleets represent a new workforce that is approaching one million drivers/couriers (by itself, Uber now has more than 1 million drivers worldwide). The geographic distribution of these fleets translates to the capability to locally serve more than 75% of the US population.

The implication for restaurants is a new ability to offer food delivery at scale, without having to spend money to build delivery capabilities in-house. The old model was quite different. Brands like Jimmy John’s that have been doing their own delivery service for years are said to have just as many employees making deliveries as they do inside of the restaurant serving guests and preparing food. That’s what it takes to do delivery right at Jimmy John’s: double the employees on a per store basis. The notion of doubling employee hours during a moment of increasing cost per employee hour is hard for most restaurant operators to stomach. Instead of embracing a massive headcount increase and learning how to manage the logistical challenges of a local fleet, these local logistics players can represent delivery service providers (DSPs) and provide delivery-as-a-service to restaurants large and small. The future of delivery allows all restaurant players to operate with an on-demand extension of their team by tapping into a vast fleet of delivery couriers. By only summoning a courier when the demand exists, restaurants are able to maximize efficiency along the way.

Olo’s recently announced Dispatch product helps to put all of the DSPs together on a single platform. Dispatch acts as a clearinghouse between the restaurants and all of the DSPs, coordinating when orders are fired into the kitchen through the POS and synchronizing the delivery courier’s arrival with the order ready time. The car fleets are used for arriving at the pickup location, picking up the passenger(s), and then driving to the destination. In this new model, the car drives to the restaurant, picks up the order, and then drives to the customer. The DSP manages the driver logistics and Dispatch manages the kitchen logistics of when to fire the order so that it is ready, fresh and bagged when the driver arrives for pickup.

In the Dispatch scenario, each party operates within their respective theaters to fulfill the transaction: the restaurant focuses on food requests in their POS and the DSP focuses on efficient dropoff of product, with Dispatch facilitating the logistics and ending customer confusion. It is simple division of labor/specialization that the restaurant industry knows so well in systematically breaking down the elements of food production here extending to delivery fulfillment by a third party.

The result will be far more restaurant segments beyond pizza, sandwich, and Chinese food entering the delivery service model. With Dispatch, the DSPs compete for the fastest delivery times and lowest delivery costs (one imagines in line with Galloway’s 90 cents per mile in some markets). In a world in which many families are too busy to cook and too busy to go out to eat, delivery represents peak food convenience: the ultimate arms race in the restaurant industry’s competition for the food dollar.

Noah Glass is the Founder & CEO of Olo. Since 2005, Olo has helped restaurant brands increase revenue per square foot by delivering faster, more accurate, and more personal service through digital ordering. Today, over 18 million consumers use the Olo platform to order ahead and Skip the Line at the restaurants they love.


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