Veteran restaurant industry analyst Howard Penney is calling it "the most disruptive change in the restaurant industry in this generation." He's referring to restaurant DELIVERY and his analyst team is hosting a special call featuring in-depth analysis of this development Thursday at 1pm ET.
Penney will discuss how the consumer's need for convenience is paramount. Access to food is no exception. With the likes of Domino's and other pizza players having had a lock on meal delivery for some time, it is now time for others to join the party.
Here's a brief look at some key discussion points.
DOORDASH | POSTMATES
There has been a spread of third party delivery services such as DoorDash and Postmates which have received considerable venture funding, and partnered with many independents and large national chains.
GRUBHUB (GRUB)
Historically, GrubHub has merely been an aggregator of orders. But now it has begun to delve into the delivery space. Both organically and through acquisitions.
GRUB's business model is under severe pressure. We see considerable downside to management's lofty top line and margin goals given competitive actions and company initiatives around delivery. The commission model is also going to be under pressure and is unsustainable at the current rates.
PANERA BREAD (PNRA)
The chain of bakery-café fast casual restaurants has been investing immense amounts of capital to push out their Panera 2.0 initiative, which is nearly completed in company-owned stores. Panera Bread's next frontier is delivery, which they anticipate will be in 15% of units by the end of 2016, and ramping to 35% - 40% of the system by the end of 2017.
We are looking at 2017 as being another investment year for PNRA and 2018 will be a much cleaner year from a profitability standpoint. We believe PNRA's ownership of delivery will allow them to maximize the profitability while having complete control of the process, yielding top of class results.
DOMINO'S PIZZA (DPZ)
Founded back in 1960, when Dwight D. Eisenhower was President, Domino's Pizza remains the darling of the restaurant industry from a technology and convenience standpoint. It trades at a premium valuation accordingly. We have not talked about DPZ much, but we now believe there is line of sight to their domination in the delivery business ending.
CALL DETAILS
If you are an institutional investor interested in accessing this call email sales@hedgeye.com.
