Pho MD: Deliveroo has potential to become a restaurant brand

By Sophie Witts

- Last updated on GMT

Pho MD: Deliveroo has potential to become a restaurant brand

Related tags Restaurant Soup

The managing director of Pho has warned that Deliveroo has the potential to become a restaurant operator to rival its delivery partners.

Speaking at the Casual Dining Show in London this week, Mark Smith said it was “common sense” for the company to eventually launch its own delivery-only restaurant brand using its bank of customer data.

“If I was Deliveroo, I’d be looking at becoming an operator…so they [could] start to become a competitor of ours as well,” said Smith.

“They control the customer data. They know all the Vietnamese noodle customers who’ve ever ordered Deliveroo through us. Combine that with a dark kitchen and the data, that’s really powerful for them to start thinking about being an operator.”

He added that restaurant brands would struggle to handle the logistics associated with launching their own alternative delivery apps. PizzaExpress trialled its own​ delivery service in 2015, but signed on as Deliveroo’s largest restaurant partner​ less than a year later. 

A challenge that's here to stay

Smith said that he was also sceptical the ‘dark kitchen’ model pioneered by Deliveroo Editions​ would be a long-term success.

“I’ve spent a lot of time looking at the economics of these models, you’ve’ got operators that are now dropping out,” he said. “I cannot see Deliveroo Editions working as a model.”

Burger brand MeatLiquor has already stopped working with Deliveroo Editions.

Smith admitted to struggling with issues such as the lack of control over drivers, dishes not travelling well, and packaging costs. He said Pho’s soups, its best-selling dish, needed eight different items of packaging to travel.

“A typical packaging cost is around 5% on top of what you’re already paying [delivery providers], ours is slightly higher than that,” he said.

But he admitted that restaurants would have to evolve their offer to embrace the growth opportunity presented by delivery, rather than avoid it.

“It’s a threat, it’s a challenge, but it’s here to stay," said Smith.

“Our eat-in customers are always going to be the most important.

“[But] If we don’t want to be caught by the likes of Deliveroo increasing their rates we need to make sure we’ve got a solid business that we can control, yes it’s in slight decline but we’ve got to evolve that.

“Operators need to think about what they can do to mitigate that risk.” 

Deliveroo said in a statement it was continuing to roll out its Editions kitchens, which it saw as beneficial for restaurants.

"Deliveroo’s Edition kitchens allow our restaurant partners to reach even more customers without needing a high street presence while providing our customers greater access to incredible food," a spokesperson said.

"Deliveroo works hand in hand our with partners to work out where they should expand and provides customer insight so they can tailor their menus to that specific area. 

"Editions are good for restaurants, good for customers and create jobs for the local economy. No other platform is offering restaurants this ability to grow which is why we are investing heavily in more Editions kitchens to help more restaurants benefit from this opportunity." 

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