Foodservice: Delivering the Goods

Speaker: Moderator: Bonnie Riggs Director, Industry Analyst Foodservice The NPD Group Ed Burcher Vice President, Foodservice FriendShip Food Stores

DELIVERY A GROWTH OPPORTUNITY ON THE HORIZON National Advisory Group (NAG) September 2017 Copyright 2016. The NPD Group, Inc. All Rights Reserved. This presentation is proprietary and confidential and may not be disclosed in any manner, in whole or in part, to any third party without the express written consent of NPD.

Availability Expanding Via Third-Party Delivery Delivery Convenient Some work with select restaurants only More Convenient Some charge restaurants fee Others offer a mix of both, charging the customer and restaurant The NPD Group, Inc. Proprietary and confidential 8

Meal Delivery Services Used 80% 60% 40% 3/4 of consumers who use delivery indicate that they use the restaurant s own delivery drivers 20% 0% Restaurant's Own Delivery Grubhub Amazon/Amazon Prime Eat24 Restaurant s own delivery driver can include outside delivery sources. Q: Which of these delivery services for restaurants or cooked meals have you used? Source: The NPD Group /Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 9

Understanding The Growth Opportunities and Potential Barriers 1 Delivery Beyond Pizza - Who s Entering the Space 2 Who s Using Delivery and Why 3 4 5 6 Needs Delivery Satisfies Satisfaction With Delivered Meals The Importance of Digital Platform Key Takeaways The NPD Group, Inc. Proprietary and confidential 10

Delivery Beyond Pizza Who s Entering The Space? The NPD Group, Inc. Proprietary and confidential 11

Industry Trends by Service Mode Delivery provides the ultimate convenience for diners Restaurant Traffic Percent Change 2017 vs. 2013 1.7 Billion Visits YE June 2017 Delivery +7% Source: The NPD Group/CREST, YE June The NPD Group, Inc. Proprietary and confidential 12

Delivery Traffic (Millions) Delivery traffic is up almost everywhere over the past years 2013 2017 1,614 1,727 604 615 536 475 444 312 162 194 Total Restaurants Big 3 Pizza QSR Pizza excl. Big 3 QSR excl. Pizza Total FSR Source: The NPD Group/CREST, year ending June 17 The NPD Group, Inc. Proprietary and confidential 13

Contribution to Delivery Traffic Growth The vast majority of delivery growth driven by QSR concepts; however, full service concepts were able gain significant ground in the delivery arena TOP GROWING CONCEPTS QSR SANDWICH MIDSCALE TOP GROWING CONCEPTS 40% 24% 21% CONTRIBUTION TO GROWTH QSR Burger 30% QSR Sandwich Full Service TOP GROWING FOODS/BEVERAGES Pancakes Sausage Breaded Chicken Sandwiches French Toast Bagels Cap/Esp/Latte Iced Coffee 29% Bottled Water Frozen/Slushy Coffee Smoothies 27% ASIAN Fast Casual 15% 13% The NPD Group/CREST YE June'17 The NPD Group, Inc. Proprietary and confidential 14

Delivery Traffic Forecast Excludes QSR Pizza Restaurant Delivered Meals Excluding Pizza Traffic Forecast 2022 vs. 2016 +20% Source: The NPD Group/CREST, 2022 vs. 2016 The NPD Group, Inc. Proprietary and confidential 15

Who s Using Delivery And Why The NPD Group, Inc. Proprietary and confidential 17

Percent Using Meal Delivery in Past Three Months One-fourth of all consumers ordered a meal for delivery in the past three months Non-Users 76% Users 24% Usage is expected to grow as more operators offer delivery themselves or through a third-party provider. Q: Which of the following have you done in the past 3 months? Source: The NPD Group/Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 18

Delivery Traffic Share by Generation Younger generations are heavier users of delivery 25% 31% 22% 22% Born 1997-2015 Born 1981-96 Born 1965-80 Before 1965 Gen Z Millennials Gen X Boomers + Index 122 122 95 71 Index to Total Traffic Share Source: The NPD Group/CREST, year ending Dec 16 The NPD Group, Inc. Proprietary and confidential 19

Top Five Reasons for Choosing to Use Delivery Delivery is all about convenience; consumers say they don t want to leave home and it is easier than cooking Top Reason % of Users I don't have to leave home 50% It's easier than cooking 38% It's quicker than cooking 28% They are quick to deliver 28% I don't have to go out in bad weather 28% Q: Why do you choose to use delivery? Source: The NPD Group /Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 20

Frequency of delivery usage 29% Nearly a third of Millennials indicate they use delivery more than once a week. 46% While nearly 50% of Boomers+ use delivery less than once a month. Q: How often do you use delivery? Source: The NPD Group/Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 21

Needs Satisfied by Delivery The NPD Group, Inc. Proprietary and confidential 22

Restaurant Delivery by Daypart Although dinner is the most popular time to order delivery; over the past 5 years, all other meal occasions have grown 5% 28% 61% 6% Morning Meal Lunch Dinner PM Snack Source: The NPD Group/CREST, year ending Dec 16 CAGR-compound annual growth rate The NPD Group, Inc. Proprietary and confidential 23

Restaurant Delivery by Daypart/Weekpart Lunch holds a larger share during the week with more people working from home, but also the ability to order delivery to the office. 38% 50% Lunch Weekday (Monday-Friday Lunch) Dinner Weekend (Friday Dinner-Sunday) 15% 75% Lunch Dinner Source: The NPD Group/CREST, year ending Dec 16 The NPD Group, Inc. Proprietary and confidential 24

Considerations for Making Dinner Decision WHAT TIME WHERE COST OTHERS Source: The NPD Group /Dinner MealScape Study The NPD Group, Inc. Proprietary and confidential 25

Dinner Decision Process Delivery fits into the decision process of what to have, available time, and where to get it Dinner Decided 1st What Time available Where to get it Cost Preferences of others Source: The NPD Group /Dinner MealScape Study The NPD Group, Inc. Proprietary and confidential 26

Satisfaction With Delivered Meals The NPD Group, Inc. Proprietary and confidential 27

Satisfaction With Delivery Services Across the board, consumers using delivery services are very satisfied with the service they receive Very Satisfied Somewhat Satisfied Total Users 52% 34% Gen Z 53% 40% Millennials 52% 35% Gen X 49% 34% Boomers+ 55% 29% Q: How satisfied are you with delivery service? Source: The NPD Group/Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 28

Food Delivery Ratings While delivery users generally rate key food attributes high, food temperature remains more of an issue 40% Food is always tasty 37% Food is always good quality 34% Food always meets my expectations 34% Food is always the right temperature Top Box (completely agree) scores shown Q: How much do you agree or disagree with the following statements? Source: The NPD Group/Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 29

The main reasons that consumers do not use delivery to obtain a meal is that they think it is too expensive or is not available in their area particularly food beyond pizza Q: Why have you not used any of these deliver services: Source: The NPD Group /Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 30

Type of Restaurants Would Use for Delivery Non-users say they would be more likely to order delivery from Casual Dining and Fast Casual concepts Among Non-Users 52% 43% 38% 26% Casual Dining Fast Casual Fast Food Family Dining Q: From which kinds of restaurants (have you or would you order) items using a delivery service? Source: The NPD Group/Delivery Custom Survey, June 2016 The NPD Group, Inc. Proprietary and confidential 31

Average Eater Check With the exception of Casual Dining, delivery leads to a higher average check Delivery Avg. Eater Check Total Avg. Eater Check QSR excl. Pizza Big 3 Pizza QSR Pizza excl. Big 3 Midscale Casual Dining $8.46 $8.94 $9.20 $12.00 $13.59 $5.58 $8.04 $7.25 $10.58 $14.70 *Check amount is per person Source: The NPD Group/CREST, year ending Dec 16 The NPD Group, Inc. Proprietary and confidential 32

GROWING IMPORTANCE OF DIGITAL The NPD Group, Inc. Proprietary and confidential

How Ordered: NPD Definition of Digital CREST survey question: Where was your meal/snack ordered yesterday? Digital Ordering 1 Mobile App for Delivery 2 Mobile App for Pick-up 3 Text Message for Delivery 4 Text Message for Pick-up 5 Internet for Delivery 6 Internet for Pick-up 7 Cafeteria Line (pay per item) 8 Buffet (one set price) 9 From Food Truck 10 At a walk up counter 11 From a table/sit down counter 12 From a car or through drive-thru 13 Telephone for pick-up 14 Telephone for delivery 15 Other (specify) Source: The NPD Group/CREST The NPD Group, Inc. Proprietary and confidential 34

Total Digital Ordering Trend Digital ordering has posted rapid growth in the past 5 years, and now represents a large share of delivery orders. 25% of delivery was digital ordered Digital Traffic 2.3 Billion 898 Million 50% of delivery was digital ordered 2013 2017 Source: The NPD Group/CREST, year ending Dec 2016 *Digital Orders = Internet, Mobile App and Text Message Mobile App was added in 2013 The NPD Group, Inc. Proprietary and confidential 35

Delivery Site/Mobile App Influence Delivery traffic among Millennials and Gen Z is likely to be influenced by a website or mobile app % of Visits Influenced by Website/App 37% 28% 30% 28% 16% 8% Total Gen Z Millennials Gen X Boomers Silent / GI Source: The NPD Group/CREST, year ending Dec 16 The NPD Group, Inc. Proprietary and confidential 36

Delivery Site/Mobile App Influence Restaurant s website/mobile app is the largest influencer across generations, followed by several social media sites Gen Z Millennials Other Adults Restaurant website/ mobile app Facebook Restaurant website/mobile app Facebook Restaurant website/mobile app GrubHub GrubHub GrubHub Email/text from restaurant Email/text from restaurant Instagram Facebook Instagram Twitter Yelp Yelp YouTube Instagram Source: The NPD Group/CREST, year ending Dec 16 The NPD Group, Inc. Proprietary and confidential 37

Delivery Site/App Influence Type Operators need to keep sites up-to-date and focus promotional info on key customers 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Menu Details Deal/Special Offer % of Site/App Influenced Visits by Type Pre-Order Online General Info Loyalty Program Reviews Restaurant Locator Nutritional Information Source: The NPD Group/CREST, year ending Dec 16 The NPD Group, Inc. Proprietary and confidential 38

QSR Mobile Phone Apps 21% of QSR buyers have Fast Food apps on their mobile phone, half of these buyers have more than one Fast Food mobile app 58% of app users pay for QSR purchases with their mobile phone apps Source: The NPD Group/QSR Market Monitor, month of Dec 16 The NPD Group, Inc. Proprietary and confidential 39

Key Takeawayse Takeaways Foodservice online delivery only in its second inning, it will continue to grow Dinner dominates delivery - opportunity to grow business during other dayparts, especially weekday lunch Delivery and digital ordering attract visits from younger generations Consideration must be given to maintaining temperature of food Price is a barrier to growth among older generations Digital also plays a role in payment, speeding up service The NPD Group, Inc. Proprietary and confidential 40

Bottom Line Bottom LineeyTakeaways Delivery and digital build loyalty and drive sales growth in a declining market The NPD Group, Inc. Proprietary and confidential 41

Thank you Q & A The NPD Group, Inc. Proprietary and confidential 42

Contacts Bonnie Riggs The NPD Group Bonnie.Riggs@npd.com Ed Burcher Vice President, FriendShip Food Stores Principle, Burcher Consulting edburcher@beckoil.com The NPD Group, Inc. Proprietary and confidential