Is Third-Party Restaurant Delivery Right For You?
Your off-premise restaurant orders comprise a substantial portion of total sales in the industry, accounting for a reported 60% of all foodservice occasions. Even before the coronavirus upended the sector, off-premise dining was a fertile market that promised a bright future. In 2019, third-party restaurant delivery services earned $10.2 billion in revenue spread between several tech-giants. While this is good for customers hungry for delivery options, it can be very costly to restaurateurs. There are plenty of benefits to employing a third-party restaurant delivery service, namely in reaching the broadest possible audience without having to fund your off-premise solution. Still, with the industry facing uncertain times and unprecedented challenges, are third-party restaurant delivery services the right fit for your operation?
There are a lot of costs that go into running a restaurant, from finding the right location to hiring the right people. In the best of times, running a restaurant is a costly venture with razor-thin margins. Since the pandemic, the restaurant industry has lost around $120B, so keeping costs down is imperative. It’s understandable then why some many restaurateurs take any opportunity to reduce business costs wherever possible, including relying on third-party delivery partners to enhance their off-premise potential.
Business owners know that you get what you pay for and that sometimes a good investment takes the appropriate capital to realize. While those third-party vendors can enrich or even create your off-premise strategy, those services come with a steep fee. In early May, a Chicago pizzeria posted a receipt of their transactions with one delivery service that went viral, showing a 63.9% take from a $1042 bill. Those fees are more than excessive, although abnormally higher than typical, which has led to lawsuits and mass shifts in how restaurants partner with third-party deliveries.
Where Are You Listed?
Knowing the potential costs involved in working with a third-party restaurant delivery service, it stands to logic that you might use that knowledge to make an informed decision on whether or not to collaborate. Unfortunately, there have been multiple instances now of third-party delivery services listing restaurants without or despite their permission. This frivolity presents a host of problems for restaurateurs, from throttling your orders to removing quality from your hands. The good news is that there is currently litigation in motion to protect owners and operators from these types of unapproved partnerships. Until then, let’s examine a few steps you can take to mitigate this situation.
What Can You Do?
Taking legal action against a third-party is likely an untenable venture against a profitable company. Even if you win, you will probably have to spend a lot to protect your image. Still, there are two practical efforts to protect your business affairs that anyone can do.
- Check to see if you’re listed.
- Promote your off-premise options publicly.
There are many third-party vendors, but if you suspect that your orders are going off-premise without your consent, it’s worth it to check out the most common in your area. Whether you suspect anything or not, make it crystal clear in every way how (or if) off-premise orders are delivered.
You can accomplish this by posting that information on any social media that you use. Consider pinning your delivery options on Twitter or Facebook, and including them in your Instagram bio. Make it clear on your web pages, too, and while guests aren’t likely to place a delivery order on-premise, a small sign somewhere may help minimize any confusion.
As of the time of this writing, more and more of the third-party restaurant delivery competition are becoming subsumed by GrubHub. While company mergers do not a monopoly make, the more this happens, the less control that restaurateurs have over their options. Losing control creates the potential for price gouging, a point of contention at the beginning of the coronavirus pandemic. Third-party delivery opportunities are essential to a lot of business models, but decreasing your options is detrimental to the long term viability of any partnership.
Arbitrage describes the process of buying things at cost and selling them for profit. In the case of third-party delivery services, one enterprising entrepreneur saw an opportunity to employ this tactic, purchasing their own pizzas sold at a discount and then “selling” them back to themselves for profit. Beyond the humor in the story, the fact that there are pricing disparities between different third-party delivery services indicates a lack of attention to the finer details that others can exploit. Are third-party delivery services discounting your food? If so, where does that difference come from, and who pays for it? It’s worth learning the answer to these questions to avoid losing out on precious revenue, especially during lean economic times.
Who Controls the Data?
Restaurant data security is imperative in an increasingly digitized and interconnected world. In the context of your day-to-day operations, any data collected by your restaurant is useful for your marketing efforts. You can gain a lot from data analytics, from how to engineer your menu, to optimizing your staff. Currently, third-party delivery services can collect and keep that same customer data, and they can do so in perpetuity. This ownership gives them an advantage in obtaining customers before the restaurateur can. The issue is at the heart of a legal battle right now, to cede control back to the restaurants, and essential to note when deciding on if (or with whom) you might consider partnering.
If it’s feasible, there are a lot of opportunities to do your own delivery. Ask yourself the following questions:
- What is the potential cost of working with a third-party delivery service versus the cost of funding your own?
- Do you have the proper insurances or permits?
- What kind of quality control do you want on food items that leave your restaurant?
Convenience is King, which is why 31% of guests order through a delivery service twice per week. What these services are doing right is providing an avenue to make these experiences quick and easy. From kitchen automation to off-premise order aggregators, there are a variety of ways to optimize your deliveries. Implementing your delivery service is a great way to futureproof your restaurant by cutting out the middle-man.
There are a lot of reasonable concerns over working with third-party restaurant delivery services. In the short-term, it may be just the fix you need to get over the hump, be that as a new business or one trying to endure the hardships of economic turmoil. Planning for the long term can help you protect yourself and keep the control where it belongs, in the hands of the restaurateurs feeding a public hungry for off-premise.
How has the pandemic altered your course? Click the link below for our page containing helpful restaurant resources for the COVID-19 outbreak.
About the Author
Syd is a content marketing specialist, which are fancy words for writing pretty to tell a good story. He likes writing things about food, drinks, and music. He’s a musician himself, a father of two, and loves his wife a whole lot. At home, like the rest of the world right now, he’s finding time to play with the kids and create art.