Amazon signs deal to boost its US restaurant delivery service

Amazon is trying to muscle into the restaurant business. Photo / File

Amazon wants to deliver more burritos and hamburgers to your doorstep.

The e-commerce titan has been working to crack the code on food delivery for at least a decade. Now that Amazon has a major toehold in the grocery industry following its US$13.7 billion (NZ$18.6b) acquisition of Whole Foods Market, it's trying to muscle into the restaurant business.

Amazon has teamed up with a company called Olo, which provides digital order and pay technology to 200 restaurant brands with about 40,000 US locations, potentially giving Amazon access to a slew of delivery orders. Buca di Beppo, which runs about 90 Italian eateries, is the only Olo customer so far to publicly say it will use Amazon Restaurants.

The US$1.5 trillion (NZ$2.04t) US food market is split roughly between groceries and restaurants. Food deliveries appeal to Amazon because of the frequency of orders, putting it in constant contact with shoppers and helping it collect valuable data about their preferences even if they don't make much, if any, money on individual transactions.

Amazon began a one-hour restaurant delivery service in Seattle in 2015 and has been expanding it to other cities around the country.

The service appeals largely to mom-and-pop shops that can benefit from exposure to Amazon customers and its delivery expertise, but it hasn't attracted many chains.

The deal with New York-based Olo, which counts Shake Shack founder Danny Meyer as an investor, could bring fast-food restaurants like Chipotle, Five Guys and Wingstop to the Amazon Restaurants delivery service. Olo provides the technology platform to publish menus and take orders while Amazon arranges the deliveries.

Olo launched a new product called Rails that makes it easier for restaurants to take delivery orders from Amazon and other third-party services, according to Noah Glass, the company's chief executive officer.

"They're obviously looking at new business segments -- this is a big market for Amazon to get access to," Glass said in an interview.

The news weighed on shares of the food-delivery service GrubHub, which fell as much as 7.3 per cent to US$49.60. It was the biggest intraday drop in more than seven months. Amazon shares were little changed, trading at US$962.78 as of 10:38 a.m. in New York.

The deal with Amazon gives Olo customers the option to start offering delivery, an increasingly important service as the restaurant industry grapples with slowing growth. The market for fast-food delivery orders placed through mobile apps was about US$10 billion in 2016 and is expected to surpass US$35b (NZ$47.6) by 2020, according to research from McDonald's after resisting calls to offer delivery for many years, recently teamed up with UberEats in the US and the service is now available at about 3,500 locations.

Partnering with Olo will help Amazon give its customers access to more restaurants and "create a seamless ordering experience that will make it easier for restaurants to make delicious food fast," the Seattle-based company said in a statement.

Olo helped build Shake Shack's mobile order and pay app, and it also developed the technology for Chipotle's catering service. As more people look to order food online, Glass thinks Olo's clients will increasingly sign up to use Amazon Restaurants. "This gives them easy access to Amazon," he said. "A big chunk of business is shifting to those who are good at this."

- additional reporting AP.