Delivery is slowing as consumers seek savings and return to in-person dining, according to Chipotle Mexican Grill Inc. and Domino’s Pizza Inc.
(Bloomberg) — Delivery is slowing as consumers seek savings and return to in-person dining, according to Chipotle Mexican Grill Inc. and Domino’s Pizza Inc.
The burrito chain said delivery sales declined in the first quarter from the prior year. At Domino’s, carryout was “strong” but “the delivery business remains more pressured,” Chief Financial Officer Sandeep Reddy said on a call with analysts. Delivery sales at limited-service restaurants advanced just 2.1% in the first quarter from a year ago, marking a fourth straight quarter of slowing growth, according to brands tracked by research provider Black Box Intelligence.
Growth cooled as in-person visits to some eateries picked up compared to the first quarter of last year, when the omicron wave of Covid-19 kept people at home, Bloomberg Intelligence analyst Michael Halen said. Some households with less disposable income are moving away from ordering in to cooking at home, Reddy said.
With menu prices already higher, the fees and tips delivery carry are becoming more noticeable. “Many consumers have begun to watch their spending more closely,” said Victor Fernandez, Black Box’s vice president of insights, in an email. “The total cost difference for the consumer is usually substantial, and we believe this has been a driving factor behind restaurant guests moving away from delivery in many cases.”
Delivery exploded during Covid-19 as diners stayed at home, but the trend waned as vaccinations increased and people returned to their usual routines, said Peter Saleh, an analyst at BTIG. That’s benefited sit-down restaurants such as Texas Roadhouse, he said.
Moreover, delivery is a “premium experience that comes at a premium cost,” Chipotle Chief Financial Officer Jack Hartung said in an interview, putting it on the list of services consumers might cut.
McDonald’s Corp. Chief Executive Officer Chris Kempczinski said delivery won’t drive growth as much in the future, in part because of the comparison to prior growth rates but also because of pressured consumer budgets. Diners are also adapting in other ways, such as ordering fewer items per transaction, for example, skipping the side of fries.
–With assistance from Leslie Patton.
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