The onset of the pandemic saw restaurants became delivery-only kitchens overnight. Many restaurateurs used the crisis to develop delivery-only brands to leverage their existing infrastructure to maximise revenues and retain staff. Most turned towards third party aggregators to reach a wider customer base.
Mumbai-based The Chocolate Spoon Company, which has brands including The Sassy Spoon, House of Mandarin, Sassy Teaspoon, Baraza, Saffron by The Sassy Spoon and Wicked China, opted for this route too. It carved out kitchen space for dedicated delivery only brands from its existing restaurant locations.
The company’s Founder and CEO, Rachel Goenka, tells Vinita Bhatia how optimising its existing kitchen infrastructure, helped it create three delivery-only locations with minimal investment and introduce two delivery brands – ‘Saffron by The Sassy Spoon’ as well as ‘Wicked China’. At the same time, it has invested in its own last mile delivery infrastructure and leveraged the power of social media to advertise its offerings and acquire customers. After all, self help is the best help.
Over the years, restaurants often shared their kitchens during off hours or for pop ups to develop additional revenue streams. Did the Sassy Spoon ever do this?
We have never, and would probably not, rent out our existing kitchens for external brands. It is a matter of hygiene and safety.
However, we have collaborated with various chefs in the past to jointly curate menus and train our team. It was not the wholesale outsourcing of the kitchen function.
The only pop-ups where our kitchens were shared pre-pandemic was to cross-promote our existing brands or showcase unique cuisines and seasonal offerings. Given the multiple cuisines we specialise in across the group, it was easy to launch delivery only brands such as ‘Wicked China’ and ‘Saffron by The Sassy Spoon’ to develop additional revenue streams during the pandemic.
During the lockdown, restaurants that already had takeaway could adjust to the delivery-only business model easily, while others realised this was this lifeline. Which category did Sassy Spoon fall into?
At The Sassy Spoon, along with the dine-in set up, we had already tied up with Swiggy and Zomato for delivery. However, limiting our services to only takeaway and delivery-only business models did come with its own set of challenges as The Sassy Spoon is more of an experiential dining space.
We were quick to adapt to changes in the business model and continued to cater to our consumers successfully through both the waves. We also launched our own direct ordering platform, which enables a better and more personalised customer experience when they order from us directly.
How much does delivery contribute to your overall business?
Pre-pandemic, delivery and takeaway contributed roughly 20% of our overall revenue. This was driven largely by House of Mandarin (Chinese is extremely popular for delivery) as well as Sassy Teaspoon (pastries and cakes are very popular for takeaways).
During the first unlock last year, while dine-in once again came to dominate our topline, however delivery revenue grew to 30%. We were very encouraged to see that the business grew in parallel with our regular dine-in business.
What kind of initiatives did your company undertake for the delivery-first model since April 2020?
Since delivery has always been a significant chunk of our business, most of our packaging and overall marketing strategy was already in place. Once we were forced to become a pure delivery operation, we tweaked our delivery collateral by providing thank you letters for our guests as well as more information on all our brands.
More importantly, we developed collateral to inform our customers to order from us directly for the optimal experience. Our delivery bags too have QR codes that can be scanned to order from us directly.
On the marketing front, our strategy obviously was altered drastically to push delivery only. In addition to digital marketing, we focussed extensively on performance marketing, which has been highly effective. We have also leveraged social media extensively to promote our deliveries and the Order Direct initiative.
How can restaurants evaluate whether takeout is the right business model for them?
It depends entirely on the kind of restaurant you operate. We have always viewed dining in as experiential whereas dining out is about convenience. The common misconception is that a delivery-only kitchen is a more efficient business model. While it is true that you can start a cloud kitchen with minimal investment, the reality is that you need to have a large marketing budget in order to run a profitable operation.
Additionally, aggregators like Swiggy and Zomato charge usurious commissions typically between 25% and 40%. They also perpetuate deep discounting, which eventually drives down average order values to unsustainable levels.
Customers always have a deeper connect with a physical restaurant space. This is why legacy brands tend to find more success when they expand via delivery only outlets.
How can brands adjust menus, pricing, produce procurement cost, labour charge and preparation expenditure to determine the viability of a delivery-only business?
Established restaurants will find it easier to launch a delivery only brand as they can market this to their existing database and use the aggregators for discovery. A new business focused solely on deliveries via aggregators will find it extremely challenging.
In addition to the unsustainable commissions and the deep discounting, aggregators indulge in data masking i.e. they do not share customer details with the restaurants, to whom it rightly belongs. Hence, you never know who your customers are.
It is critical to invest in your own last mile delivery infrastructure, as well as leverage the power of social media to advertise your offerings and acquire customers.
How can restaurant operators counteract the leverage of aggregators to facilitate their delivery business?
Initially, aggregators treated us as partners and it made sense to outsource delivery. However, the tone has shifted from equal to dictatorial by way of usurious commissions, one-sided policies and data masking.
Today, Swiggy and Zomato are unable to cope with user demand, resulting in poor customer experiences, delayed delivery times and manhandling of the products. It is only going to get worse from here.
It is therefore critical to build out your self-delivery infrastructure, which will pay-off in the long run. We have spent the last year enhancing our direct delivery platforms by incorporating tech-enabled solutions.
At this point, we are encouraging existing and new customers to order from us directly for a better delivery experience and also to support the industry. It is not an easy battle as aggregators have burnt billions to create their marketplace. However, for longer-term sustainability, all restaurants will need to reduce their dependence on aggregators.
