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Published in FSD Update
Operators find valuable revenue streams with minimal investment in meal delivery programs.
Imagine if you could add a new revenue stream with minimal investment and boost customer satisfaction. It’s not too good to be true—meal delivery programs are providing operators around the country with exactly that. We talked to four operators to find out their delivery do’s and don’t’s.
University of Massachusetts
To build new revenue streams in the non-meal plan area, Ken Toong, executive director of auxiliary services at the University of Massachusetts, in Amherst, implemented a late-night meal delivery service for students who live on campus (roughly a two-mile radius). That option is offered between 9 p.m. and 3 a.m. Sunday through Wednesday and until 4 a.m. from Thursday to Saturday. “Our students typically order late-night snacks from downtown restaurants, so in order for us to compete head-on with those restaurants, we had to make sure the quality was there and the price was competitive,” says Toong, who offers simple comfort foods in the program, like pizza made with fresh dough and four varieties of chicken wings alongside a dozen dipping sauce options.
Though Toong could have opted to partner with an existing restaurant and charge a commission on sales, he decided competing for the business was a better way to serve customers, as it provided them with a new brand and a higher level of service. As such, all orders are placed online or by phone (an app is in the works), and students must pay with credit or debit cards or their university currency—they can’t use the meal plan, but there is no delivery fee. Once an order is received, it’s sent to the production facility where it is made fresh.
“Our goal was to develop a sustainable delivery program for items made on site, using our existing facilities that are [normally] closed at night,” Toong explains, citing an initial investment of $25,000, namely for the POS equipment, the wiring for installation of the POS and additional phone service. All deliveries are made by bike, or on foot when snow and ice are an issue, by student employees. “There’s nothing better than students serving students; plus, they live on campus so they know the community.” To keep food warm, dining services uses insulated bags and compostable containers.
The return on investment happened quickly—in less than three months. “We’ve gained $10,000 weekly in revenue with a profit margin of 20%,” Toong says. “The students love it; they love the convenience, the quality and the fact that we deliver quickly. Plus, we created more jobs for them, and the local restaurants are even complaining that our food is so good we took away business from them.” Toong’s secret to success: “Provide a premium service and make sure you charge for it.”
This August, Cedric Junearick, director of food and nutrition services for Huntsville Hospital, in Alabama, started a delivery service as a way to cater to hospital employees with busy schedules. “We were experiencing a lot of frustrated customers with time restrictions who couldn’t come to eat at retail,” Junearick explains. “After observing a lot of other food establishments coming in and out delivering, I knew I needed to figure out how to create a culture where our staff doesn’t have to order out. Rather we can bring comfort foods to their desks.”
His solution: Steak and Chicken Express, a delivery and takeout option run out of the hospital’s catering kitchen. Orders are taken online between 11 a.m. and 2 p.m. only, Monday through Friday, and customers pay with their employee badge or credit card (cash is not accepted for the safety of the runners). Deliveries are guaranteed within 45 minutes, though 30 minutes is the goal. There’s no delivery fee and tips aren’t accepted, and deliveries are made by foot or using the catering arm’s delivery van. “To keep up with deliveries, we maneuvered our staff around, relying on the current catering staff and four PRN’s (employees who are called to fill in for absent workers) on an as-needed basis,” Junearick says. No new employees were hired for the program. The minimum delivery order is $7.
Initially, a variety of chicken and steak dishes (filets, sandwiches, salads and potatoes ranging in price from $2.39 to $9.39) were the only options. Customers can also get a 9-ounce rib-eye steak meal for $12.99. However, Junearick is changing the name of the program to Gallatin Express in order to expand the menu and offer barbecue, deli sandwiches, gyros and dinner options.
In September, after a trial period, Chicken and Steak Express was introduced systemwide. In only three hours a day, the program is bringing in a minimum of $100. “The first month, we made around $1,100, roughly $75 per day,” Junearick says. “But come October, [we had nearly sextupled] our daily profit to roughly $425 per day. Our customers love it. One day in September we did $500, and I don’t think the program has really taken off yet.”
Chartwells Higher Education Dining Services
In order to support commitments to health and wellness, and to provide a safe alternative mode of transportation on campus, Chartwells dining operations recently launched a new program called Green Fleet, a project in collaboration with Republic Bike that provides associates with custom bikes, helmets, delivery carts and baskets. “This program allows people to effectively and efficiently move about campus without contributing to greenhouse gas emissions,” says Laura Lapp, director of nutrition for Chartwells Higher Education Dining Services.
Though the initiative isn’t directly related to meal delivery, one of the program’s pilot locations (Southeast Missouri State, in Cape Girardeau) will be using the bike to provide delivery for its Subway location, and small catering set-ups like box lunches and cookies will also be delivered by bike instead of truck.
“Because the program just launched in October, we have not fully evaluated any impact on sales or customer satisfaction,” Lapp explains. “But initial response from both campus management teams and clients has been supportive of the initiative.” As such, Lapp’s team is still evaluating food delivery implementation, but they’ve noted several considerations: load balance and weight, navigating hills, weather conditions and maintaining temperature for hot or cold foods as necessary. “For example, those campuses that are in cold climates can only use the bike for transportation on a limited basis,” Lapp says.
University of Wisconsin-Madison
Not every delivery program is a hit, though. Up until recently, the University of Wisconsin-Madison offered an extensive food delivery program—pizza, nachos and sub sandwiches were the dishes du jour. But since last fall, when the university opened three new marketplace operations, delivery sales have declined.
Joie Schoonover, director of dining and culinary services, suspects this drop is due to a number of reasons. The first reason is that students love the new facilities, and thus are actually spending a lot of time eating there. “In the past, our facilities were really not attractive and people didn’t want to come in when they could have it delivered,” Schoonover explains. Second, with so many different food products, Schoonover was hesitant about making it all happen at the new, larger facilities, so they scaled their delivery options back and now offer only pizza. “We are a marketplace with 11 different venues, so if you had to go to each different area to get the different items, we’d have people running all over the place and the delivery times would be horrible,” says Schoonover, noting that people expect delivery in 15 to 30 minutes, which simply wasn’t possible with so many dining options.
However, even though delivery sales have declined, Schoonover still believes delivery programs can be successful if the marketing and quality is there. “If you don’t have a delivery business, students are going to go elsewhere and you’ll miss a revenue opportunity,” she cautions. A few secrets to success:
•Allow students to pay for deliveries using their student accounts, “meaning mom and dad paid for it, unlike when students order off campus,” Schoonover says.
•Use university or student employees for deliveries so customers can receive deliveries directly at their door, as opposed to off-campus vendors that can only access the lobby or common areas.
•Allow customers to order online. “Nobody wants to pick up the phone and call anymore, so if you don’t have a website for customers to order from, it’s never going to work,” she advises.
•Keep the delivery radius restricted to the campus so that deliveries can be made by foot. Then there’s no need for expensive transportation equipment and liability insurance.
•“Packaging is important, so be sure to test how long something will hold in a warmer or insulated carrier and then outside,” Schoonover explains. “When it’s 90 degrees, it’s not so bad, but when it’s cold, like it is here, that becomes an issue.
•“Talk to students when they first come to campus before they establish patterns of ordering from off-campus vendors,” suggests Schoonover, who also hangs fliers, passes out free pizza and distributes coupons to boost delivery sales.