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How to Get the Upper Hand with Restaurant Delivery
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Delivery is a game-changer. Apply a cohesive strategy to gain the upper hand.

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:

  • Access to technology. VC-backed delivery services update and improve their digital channels regularly. As technology companies, they offer access to tech that your restaurant lacks. At the recent Restaurant Franchising & Innovation Summit, Matt Friedman, CEO and Founder of Wing Zone, concurred that "third-party services have better driver tracking software" than his company.
  • Acquisition of new customers. Younger generations rely on online delivery platforms at a higher rate than their predecessors. A Market Force survey found that 55% of 18 to 24-year-olds ordered from a restaurant using a delivery service. Delivery agents help you reach a broader market.
  • More repeat sales. According to NRN, the majority of Americans "use delivery service to purchase meals from casual dining restaurants." This loyal market includes "26% who order takeout or delivery at least once a week." Delivery aggregators give you access to off-premises diners.  
  • Opportunity for delivery at scale. With labor woes off your hands, you can focus on developing an off-premises strategy that offsets the high fees of third-party services.

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.

  • Reconsider packaging and logistics. Lessen delivery woes with better containers and shelving units. For example, Chipotle reports success with their new pick-up model that incorporates a grab-and-go style for digital to-go orders and courier pick-ups.
  • Take back your data. Restaurateurs who reclaim data lost to third-party aggregates gain a competitive edge. Restaurant Business discusses efforts by Bareburger to “convert customers ordering through third parties’ apps into users of the chain’s own channels” through discounts.
  • Negotiate with delivery agents. Competition between third-parties may tip the scales in favor of restaurants. Fast Casual quotes Matt Friedman as saying, "Negotiate the heck out of everything you do. Just pound them for every percentage possible."
  • Review delivery pricing. Initially, delivery agents forced restaurants to keep pricing identical for in-house and off-premises menus. However, while speaking at the Restaurant Leadership Conference, Sterling Douglass, CEO of Chowly, suggested that third-party aggregates are more “flexible” than they once were.
  • Maximize revenue streams. Offset the cost of delivery by selling on-demand meal kits, promoting delivery-only desserts, and advertising items with the highest markups.
  • Use technology for a smooth omnichannel experience. Starbucks personalizes the customer experience using “My Starbucks Barista” for voice ordering. Help customers develop an emotional connection with your brand by providing a seamless experience.

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.

 

Photo by Brett Jordan on Unsplash

Photo by Drew Beamer on Unsplash

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