Delivery isn’t about to fade away. Rather, it signifies a lasting shift in consumer habits. With increased pressure to provide delivery, restaurant owners find themselves walking the line between higher customer expectations and lower profit margins.
A tight labor market and minimum wage increases make in-house delivery operations impracticable for many operators. Third-party delivery aggregators remove traditional barriers to entry, but come at a steep price. Entering the delivery fray isn't for the faint of heart. However, industry experts agree that it's essential for future growth.
Warren Solochek, senior vice-president of industry relations for the NPD Group, said that “Restaurants need delivery in today’s environment in order to gain and maintain share.”
Tilt the scale in your favor by understanding the benefits and pitfalls of delivery. Then, consider how it'll affect your operations and customer experience. A successful delivery program offsets the negative impact of delivery agents with a cohesive strategy.
Restaurants face the so-called bullies of the food industry.
Restaurants suffer under crippling third-party delivery fees. The complete loss of customer data doesn't help matters. Nick Vojnovic, company president of Little Greek Fresh Grill, told QSR that “It’s kind of a margin killer,” echoing the sentiment of restaurant owners nationwide. Regardless of which third-party delivery services you use, it’s difficult to ignore the downsides.
Each delivery agent charges a substantial revenue share on every digitally enabled food delivery.
Third-party delivery apps dominate customer data.
Restaurant owners lose control over the final mile in food delivery.
Customer service and food quality concerns pose a threat to brand reputation.
Is it possible to profit from delivery or are the odds stacked against your restaurant? That depends on your needs.
The undeniable benefits of third-party delivery aggregators.
Franchises like Jimmy Johns rebuff third-party delivery agents. However, that’s not an option for the majority of restaurants. A TD Bank poll found that “60% of respondents rely on third-party delivery services, while 18% use an in-house delivery service.”
Labor issues make in-house delivery programs tough to scale. Instead, restaurant operators turn to third-party delivery agents, which can help with the following:
Critical considerations for restaurant owners
There is no one-size-fits-all solution for handling delivery. Assess long-term viability using data that balances operations and expectations. Look for improvements that give you the advantage.
How will delivery orders affect operational flow? Are back-of-house modifications necessary to account for increased off-premises sales? Do you need to alter your restaurant’s layout for seamless delivery pickups?
With delivery comes increased pressure to provide a customizable menu. Will you update your restaurant’s menu to enhance the mobile ordering experience? Will pricing changes flow automatically to all of your delivery partner channels, or will this process be manual?
Should you upgrade your packaging for food quality and safety? For example, tamper-proof packaging may help avoid delivery dissatisfaction.
Delivery customers may never set foot in your store. How can you strengthen your brand proposition while using third-party services? Consider placing your own marketing materials including promotions on your direct orders. Also place order discounts on and in your food packaging delivered by third parties. Besides these ideas, sit down with your staff to brainstorm unique ways to improve the customer experience and increase brand recognition.
Can you integrate delivery with your POS system for ease of use? In QSR, Justin McCoy, vice president of marketing for Wisconsin-based Cousins Subs says that “One way to realize savings is by working with only those systems that integrate into a restaurant’s existing POS system.”
How many third-party aggregators will you work with? Which delivery app has the most active users and potential for growth in your area?
Offset the negative impact of delivery agents.
According to the BCG Henderson Group, “The restaurant value chain is up for grabs. The restaurant brands—or third parties—that provide the easiest, most transparent experience across a range of needs or demands will likely own the consumer.”
It’s crucial for restaurants to account for the customer’s need for convenience. Ensure a smooth transition by integrating delivery into your POS, website, and social platforms while improving your in-house operations.
Navigate the delivery market with agility.
Restaurants can't afford to ignore delivery. Jennifer Crawford, director of off-premises sales at Fazoli’s, told Forbes that “Brands have to make off-premises a part of their plan to survive in this ever-changing consumer landscape.”
While foodservice and restaurant operators can’t entirely avoid the inherent risks of using third-party digital delivery agents, they can mitigate issues with a responsive plan of action. Increase your odds of success by integrating delivery service with your POS system, website, and other digital channels while optimizing operations to support the new normal.