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The fast-food chain El Pollo Loco is reportedly partnering with the drone operator Flytrex for food delivery drone drops in Southern California. With delivery sales up, the restaurant opted for a delivery alternative that won’t cut into that profit.
With restaurants and indoor dining opening back up throughout the country, it is expected that food delivery — which grew substantially during the pandemic — will become an essential part of the restaurant business. However, food delivery remains a conundrum for the industry, as costly marketplace fees put a dent in profits.
In 2020, delivery sales for El Pollo Loco reportedly increased 250%, but the delivery fees, which are known to be high, are cutting into the company’s profits. Their delivery sales tripled during the pandemic and now represent 10% of total sales. The chain now raises menu prices on delivery orders by about 15%, on average, to offset the cost of delivery fees.
Food service delivery fees typically average 15% to 30% and have been a major point of contention for both customers and restaurants using the service. The markup does not reflect on the delivery worker’s payment either. A New York Times story in Feb. 2020 found that food service delivery markups can cost up to 91% more than if you ordered a meal directly from a restaurant.
And while the restaurant chain wouldn’t disclose the fees it was paying Flytrex, the company said it was “substantially less expensive than what we’re paying today” for third-party delivery. “It’s no secret that the delivery business model is very challenging for restaurants,” Andrew Rebhun, the vice president of digital at El Pollo Loco, reportedly told Insider.
But with this new alternative to third-party operators, El Pollo Loco announced its plans to become the first national fast-food chain to launch door-to-backyard drone delivery via a partnership with the drone operator Flytrex. The first test launched a few weeks ago at a store in Corona, California. Later this summer, the so-called Air Loco drone service will expand to at least 10 locations, setting the stage for other fast-food chains to join the drone-delivery bandwagon.
Flytrex reportedly said its drone deliveries are faster and more efficient than third-party deliveries made by independent contractors working for Uber Eats, DoorDash, and Grubhub. Instead of a gig driver transporting two and a half deliveries an hour by car, the company’s drones could complete about 10 deliveries in the same time span at a much lower cost to restaurants, according to the company. El Pollo Loco’s drone service will take about four to six minutes once the order is processed.
Flytrex is already using drones to deliver Starbucks drinks in North Carolina, but the deal with El Pollo Loco is its first partnership with a national restaurant chain.
California recently passed a bill requiring food delivery apps to provide an itemized breakdown of costs to both customers and restaurants for each transaction. This means that it must list food price, fees, tips, and commissions separately. Though the original bill proposed putting a permanent cap on delivery fees, the version that passed prohibits companies like DoorDash, UberEats, Postmates, and GrubHub from charging higher prices for food than what the restaurant charges its customers.