In 1987, when Stephen Abt was a new product development executive with US Sprint, he and his wife had their first child. Suddenly their lives changed drastically. It was just like everyone said: Kaboom everything changed. Abt recalled, ‘we used to go out four to six times a month. I don’t think we went out four to six times that entire first year after our daughter was born’. Yet they didn’t always want to cook. Abt and his wife were not alone; the success of Domino’s in pioneering prepared food delivery reflected the real need that home deliverers served. People were desperate for the convenience of prepared meals for home delivery. But many people wanted more than pizza.
Seeing an opportunity, Abt left his $100,000 a year management position at Sprint and started Takeout Taxi, a third party food deliverer. Unlike Domino’s Takeout Taxi is not in any way involved in food preparation; rather it contracts with local restaurants to field orders for meals and delivers those meals to customers at their homes, offices, or hotels. Takeout Taxi focuses its energy on areas often neglected by restaurants. We’re not a food delivery service, Abt asserted. We are a marketing company that delivers. Most restaurant owners are busy running the business. They don’t have the time or the skills to do targeted marketing, Abt noted. Their primary form of marketing is through location. They don’t do much else.
But Takeout Taxi does. We can build computer databases of dine-in customers including names, addresses, birthdays, and anniversaries, Abt pointed out they use these to drive direct mail programs with trackable forms like coupons and registrations.
Through delivery orders and in store promotions, takeout Taxi captured names and personal information in a database that included more than 200,000 restaurant customers by the end of 1993. This database enabled Takeout Taxi to design incredibly effective targeted marketing programs to help increase restaurant sales. When we do a marketing promotion for them through the mail their in house business, we can have a 40, 50, 60 percent response rate, Abt pointed out. These response rates are unheard of.
Many restaurant owners initially did not response favorably to the prospect of third party home delivery. Takeout Taxi requires a wholesale discount rate on the food it delivers; its revenues derive from the difference between the wholesale rate and the menu price that the customer pays. Some restaurant owners have argued that it would hurt profits to sell at the discount rate and have therefore been hesitant to deal with Takeout Taxi. They get in their minds that a 30 percent discount will hurt them and they fail to see home delivery as an additional service that doesn’t add to staff or physical plant. Thinking about the fact that the only costs for restaurants are food and packaging, even including some staffing costs it is still more profitable than their own dining rooms.
In addition, some restaurant owners learned that entering the delivery market could jeopardize the perceived quality of their food. Protective of their core dine-in business, many restaurant owners have been reluctant to relinquish control over their meals. Their biggest fear is customers not getting a meal of the same quality. Someone goes to a restaurant and says, Wow, what great ribs and then later they call up and order the ribs for delivery. But when they get there, they are not so good, and then that customer does not go back to the restaurant. To maintain food quality, Takeout Taxi not only delivers the food in thermal containers, but it also strategically limits the service area for each restaurant it represents. The real secret to this is they have set up in certain zones where the maximum drive time to the farthest house is 15 minutes. However, it’s not all about delivery time. Some of it is ego. The $25 prime rib experience cannot be delivered.
Those restaurants that have decided to work with Takeout Taxi appear to have benefited significantly.