Remote working has exploded during the pandemic, and it has had various effects on the economy.
The restaurant industry has been affected in a number of ways, including the increase in demand for digital orders and deliveries, which has also resulted in third-party applications such as DoorDash (NYSE: DASH) even more vital. At the same time, remote working has favored restaurant chains with drive-thru, a strong digital infrastructure, and those located close to where people live, as opposed to chains located in city centers or in destinations in the city. trip.
In this fool live Segment recorded on July 2, Fool.com contributors Jeremy Bowman and Jon Quast, and bureau chief Corinne Cardina discuss the many implications of the increase in remote working on the restaurant industry.
Corinne Cardine: Yeah, another one, I guess that would be a headwind for the restaurant business, is remote work. In many ways, people are going back to work. Maybe you see that the business lunch hour is picking up, but there are a lot of people working remotely who are here to stay. Many companies have completely pivoted. Jon, what can you tell us about the categories that are really going to be affected by the continuing remote working trend?
Jon Quest: Yes. One of the things I think we can take from Darden’s results. Darden Restaurants (NYSE: DRI), it’s Olive Garden, LongHorn Steakhouse. What’s the other fat guy? It escapes me at the moment, but anyway, they have a whole portfolio of restaurants that they operate. One of them is Capital Grille, and it’s in their gourmet category. When you look at where Capital Grille is, it’s in a lot of major cities and downtowns and those comparable sales are still very much down. It was the worst performing part of Darden’s business in 2020. When you think of when people use this restaurant, it’s often like a business lunch. You go to the office, you have lunch with colleagues in a place like this. It is still very difficult. Luckily for Darden, they’re not pure play on this subject, so it gets absorbed into their overall business results. A company that was public a few years ago called Del Frisco’s was more of a pure play. I imagine they are going through a very difficult time as remote work is. At least here in a hybrid fashion, it looks like some of us are going back to the office, but maybe not as much as before the pandemic.
Cardine: Yeah absolutely. It will be one to watch. I certainly don’t see this immediate rebound in the more refined type of meal. Let’s talk briefly about delivery. The pandemic has been a tailwind for delivery. Some delivery stocks are better than others. Big names DoorDash, Grubhub, Uber (NYSE: UBER) Eat, Postmates is, I believe, private, correct me if I’m wrong. Jeremy, are there among these most attractive delivery stocks today compared to traditional delivery stocks?
Jérémy Bowman: Sure. I think going into the pandemic I was pretty bearish in this whole area. I think the unit economy really looked pretty lousy in a lot of ways. They squeeze customers on one side, then restaurants too. Some cities have even put a cap on the commissions of delivery apps during the pandemic. I think I saw San Francisco even vote to make theirs permanent. But I think what has happened is that the pandemic has just transformed the industry. The delivery is not going away now. I think we know that. These companies have resulted in millions of people signing up to use these services over the past year. We got used to them too. Restaurants have also added the infrastructure and they are used to doing things that way. I think the big three here and Postmates, you mentioned. Uber actually acquired Postmates.
Archer: Yes. There has been a lot of consolidation in the industry over the years, and Grubhub is acquired by Just eat take out (NASDAQ: GRUB), which is a European company. I think every business brings something different to the table. Grubhub was the first disruptor with the online ordering interface, but was later disrupted by Uber and DoorDash who had their own armies of drivers working for them. Next, DoorDash now has a majority market share in the industry, with around 57% as of the last check. I think they were so successful because they went out into the suburbs and had a lot of chain restaurants that you might not consider ready to deliver like. Cheesecake Factory, those laid back eating places, and I think they’re working more with the restaurant side to develop those sales. You think Uber has a reputation for being more aggressive and just grabbing market share, I think they may have lost restaurant customers that they would otherwise have. DoorDash has a broader idea of simply being a delivery app for everything, whether it’s your order from Walgreens or your supermarket or something from a hardware store. I’m thinking about these companies right now, I like DoorDash the most. It’s the most interesting, and for me, it’s the most interesting to watch in space.
Cardine: Impressive. Let’s talk about the side you don’t think about with the delivery. Who makes these applications? Jeremy has some really interesting stock that is new to me and that we are going to talk about.
Archer: Yes. I was also going to talk about it a little later. Olo (NYSE: OLO), they are in a way the counterpart of the delivery applications facing the restaurant. They just had their IPO in March. Olo stands for online ordering. This is basically what they do for restaurants. They were founded in 2005, but their growth has really exploded during the pandemic and in recent years as online order delivery takes off. They work for restaurants. You think of Uber and DoorDash and all that. They really get the end customer to order through them, and then obviously they have to get food from restaurants, but they’re more in touch with the customer. Olo is also interesting. It is really a technological stock. They’re using the SaaS model, software as a service, which has been a great model for a lot of cloud actions we’ve seen recently. I think they may be a better option than DoorDash because restaurants want to work with them. Restaurants hire them directly, unlike tensions with DoorDashes and Uber Eats around the world. I think Olo might be a better place to watch.
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