By Ed Avis
There’s no question that today’s customers love placing their food delivery orders online. And that means restaurants that don’t offer the option stand to lose business.
How much business is at risk?
A 2019 report from NPD Group estimated that restaurants rang up $26.8 billion in digital orders in the previous 12 months, and predicted that figure would grow by double digits through 2020.
While some restaurants manage their own online ordering and delivery, the majority of them rely on third-party delivery companies such as UberEats, GrubHub and DoorDash. Those companies can help restaurants tap that market, but they also create problems.
“We use all them,” says Cory Lucas, director of Rancho de Tia Rosa Restaurant in Mesa, Arizona. “The problem is the cost outweighs the service. On the flip side we don’t want to be the one restaurant that doesn’t use them.”
High Costs
As Lucas notes, a key problem with third-party delivery services is the cost. Customers pay a fee to have their orders delivered, and the delivery services nick the restaurants anywhere from 10 to 35 percent of the order. That means if you have a delivery order for $20, you’re paying the service up to $7.
Many restaurants control that cost by handling their own online ordering and delivery, but the delivery service companies market themselves so heavily that they now dominate the digital ordering business. The NPD report notes that 60 percent of digital orders come via mobile apps, and few small restaurants can manage their own app.
Quality Control
Another issue with third-party delivery is that it’s much harder to ensure that the product is delivered in good shape. And if customers are unhappy with the food when it arrives, they’re more likely to blame the restaurant than the delivery service.
“There is a loss of control over final product, which can cause reputational damage,” notes Tim Powell, managing principal of consulting firm Foodservice IP.
And, as many owners know, occasionally the apps allow customers to place orders even if the restaurant hasn’t established a formal relationship with that particular service. Those orders are called in like regular take-out orders, but the person picking them up is really a delivery driver who takes the order to a customer. The restaurant may never realize what’s happening, unless they get a call from an unsatisfied customer.
Data Loss
Another problem with third-party services is that, for the most part, they control the customer data. If someone places an order from your restaurant, the service knows their email, home address, food preferences, and other valuable info—but in most cases, you don’t.
“Your customer data helps you understand who your guests are and what they want. The fact that your restaurant data is so valuable for developing marketing strategy is exactly why third-party marketplaces want it for themselves,” notes Chris Webb, CEO of ChowNow, a technology provider that builds restaurants their own commission-free online ordering systems.
All of these issues make third-party delivery a real conundrum for restaurant owners.
“There are a number of issues with third-party delivery for foodservice operators, though the skyrocketing patron demand for delivery makes it very difficult for restaurants not to participate,” Powell says. “It is really a Catch 22.”
What Can You Do?
You know you need to offer delivery, but you want to manage costs and keep control. What can you do? Here, industry pros weigh in with some tips:
- Consider handling your own online ordering and delivery. A number of companies offer off-the-shelf online ordering systems, so setting that up is not difficult. Hiring and managing delivery staff can definitely be challenging but managing your reputation may warrant it.
- Develop a delivery-only menu. This should include dishes that travel well and that have a higher profit margin. If possible, set a higher price for delivery items than in-restaurant dining.
- Set up space to properly assemble to-go and delivery orders. Also make sure you stock the right containers. Regardless of which service you use, this will make things go more smoothly.
- Review third-party service agreements carefully. If you decide to go with a third-party service, read the agreements carefully and choose one that offers you the best deal. With so much competition among services, you should find that some rise above the others.
Ed Avis is the publisher of el Restaurante. Contact him at edavis@restmex.com