UAE’s food apps are spicing up the F&B sector

Discovering a new restaurant or ordering delivery is all going online

Image Credit: Zarina Fernandes/Gulf News
Ali Sinaei of RoundMenu with chef Ioannis Psalidakis of Intercontinental Dubai Marina. Ali Sinaei believes that already far too many food apps are focusing too much on the delivery services.
Gulf News

Dubai

Want to check out a restaurant in Dubai and book a table? Get your smartphone out.

And if you feel like staying put and ordering home delivery, there are any number of online options for that too. Food apps are clearly riding a growth wave in the local F&B industry, so much so that online transactions generate 5-10 per cent of the business for some F&B outlets. And these can only get bigger.

Food apps are crowding out the screen space on mobile phones, offering up all the menu choices out there. Whether it be dining out or dining in, these apps cover all bases ... even down to the delivery.

The fast-track roll-out of new delivery services — UberEATS being the latest — is transforming the F&B business done via the smartphone. In its launch announcement, Jambu Palaniappan, head of UberEATS EMEA, said, “Dubai has become a culinary powerhouse in recent years, with an average of four new restaurants opening every day. We are a key part of Dubai’s infrastructure and we know how this city moves. UberEATS uses this knowledge to help deliver people’s food more efficiently than ever before.”

According to a recent KPMG study on Dubai’s F&B space, 82 per cent of industry respondents said they are “already listed on all the food apps in the market” and found value in them.

For one operator quoted in the KPMG study, nearly 20 per cent of its orders are now done online. Industry sources suggest online or app driven transactions would be averaging around 5-10 per cent for the bigger names. McDonald’s UAE licensee recently confirmed that it be adding delivery options as part of an upgrade to its app. More brands would be headed the same way.

“Having captured a sizeable share of the delivery business, food apps are now playing a role in restaurant reservations as well as table management, going well beyond just lead generation,” the KPMG report adds. And 36 per cent of the F&B operators are seeing “reasonable bookings” from the apps.

But Ali Sinaei, Managing Partner of RoundMenu, believes that already far too many food apps are focusing too much attention on the delivery services. “My belief is that at some point there will be a consolidation in the number of players focused on F&B delivery as a big part of their business model. It cannot be that all those who have entered will be able to survive.

“Food delivery adds a cost to the overall business model and, because there are far too many operators — it already feels like a million and one are out there — this cuts into the margins.”

There are others in the industry who echo these views. More so after UberEATS came into the picture. Their reasoning is that app users who have got used to using Uber for their rides will get comfortable with using UberEATS for their orders. Brand recognition counts for all.

Meanwhile, food apps like RoundMenu prefer to stay focused on the restaurant-discovery side of the business. The way this works is the apps sign up for annual retainer fees from the listed restaurants on it. (According to Sinaei, most hotels prefer not to deal in a flat-fee annual contract rather than the percentage cut of every order that the food app sends its way.)

If an app manages to generate a sizeable user base, this obviously would translate into a better bargaining position vis-a-vis the hotels and restaurants. “Restaurants do shy away from exclusive tie-ins with any food app because it could ultimately handicap that business,” said Sinaei. “The contractual structure represents a win-win for all parties ... and it’s left to the food app to create the business volumes to sustain itself.

“Unlike with apps offering delivery services as well, there’s still a lot happening in Dubai and other cities in the Gulf for food apps in restaurant discovery to remain profitable side by side.” (Apart from the listings, RoundMenu’s value-add services include offering 360-degree videos of the outlet and lining up special deals. In the first quarter of next year, the plan is to launch its own rewards programme.)

RoundMenu, which has been operational for three years, says that its user makes on average 22 reservations via the app each year. And as the comfort levels rise with using food apps, what was earlier confined to making that odd reservation at a fine dining restaurant is now being tapped for that everyday lunch takeaway or even a coffee-break at a nearby cafe during office breaks.

According to the KPMG report, “Food apps continue to evolve, looking to offer new propositions to consumers that drive convenience and add value. What started with search and discovery reviews, was further augmented with capabilities to call and order and then online ordering and delivery, allowing customers to order with a few clicks.”

And those clicks are cooking up a perfect growth chart for the UAE’s F&B industry.

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