Americans love to eat out. So much so that food takeout and delivery is a $70 billion industry in the United States. It’s a boon for restaurateurs, who can maximize profits without taking up valuable table space, but it’s also a bit of a headache because of the inherent liability of an employee navigating around town. In-house delivery takes a lot of time and effort to manage, which might be better spent in other ways.
There are definite positives to working with a delivery service, not the least of which is not having to worry about the liability of directly employing delivery drivers. Grub Hub claims that restaurants who partner with them grow their business by 30 percent (on average) in the first year.
This may or may not be true, but it is true that a third party delivery service allows restaurants to function more efficiently because servers are not being diverted by phone orders. Instead, they can focus on the customers on-site, and the takeout orders can be processed from a computer screen, rather than a noisy phone line.
There are a lot of choices when it comes to delivery services. Grub Hub is one of the most well known, but there are plenty of up and coming names like Uber Fresh, Postmates, Munchery, Sprig, Caviar, and Maple.
Even Amazon is trying to get in on the action, with trials of Amazon Local, which allows users in select areas to order from a list of restaurants, and even charge the orders to their Amazon accounts. The key for all of these ventures is convenience for the customers and a focus on local cuisine, some of it high end.
It doesn’t take much to see that working with third-party delivery services is a tempting prospect. So, what do you need to be aware of to make sure that you’re partnering with the right one for you?
1. Don’t expect it to fix your problems.
It will only grow your brand by so much if you don’t already have market presence. But, you will be available to customers who may not have tried your restaurant before. It makes your restaurant more visible and more accessible. On the flip side, you are relying on someone not associated with your brand to deliver something that quintessentially is.
It can be nerve-wracking to lose that element of control. To compensate, you will still need to be on point with every takeout and delivery order. Remember, it costs you money for every delivery, so you don’t want your drivers to have to make two trips because something got forgotten or wasn’t right.
2. It’s important to negotiate your rate with your delivery service.
You don’t want your profit margins to go right out the window. Yes, you’re paying for convenience, but make sure you’re not biting off something sour. If you are a small margin business, you will need to make sure that you are triple checking all outgoing orders. You want repeat business to make the margin work, and you don’t want to pay for delivery drivers to make two trips for forgotten items.
Another major point with this, and if affects the next point, is that the big guys take up to 14 percent and require exclusive contracts. So, your distribution will need to be wide enough to offset that cost. A bigger company like Grub Hub and Seamless (which recently merged), will likely have the chutzpah to accomplish this, but may not have a low enough rate to protect that profit margin.
3. Remember that millennials are the biggest users of takeout delivery services, and they may not be loyal to a particular service.
So you may want to look into the practicality of more than one delivery service, or hedge your bets by choosing one with a wider base, rather than that startup you’ve been hearing so much about. Then again, that start up may be more willing to negotiate. Be careful of exclusivity clauses, if you are considering diversifying your delivery avenue. Most restaurants operate on a small margin of profit, so you will need to balance distribution with cost. Look for companies that charge based on a per delivery rate, so you’re not paying for delivery driver downtime.
4. Competition can work for you.
With all of these companies competing for a foothold, there are more opportunities than ever. And as customers get used to the convenience of easy ordering and delivery, most of these companies aren’t going anywhere anytime soon. Research what’s best for you, and see how competition between these companies can work in your favor.
If you are considering working with a third party delivery service, there are both pros and cons, but one thing is for sure, they know how to deliver what customers want. Do you?
Rafi Cohen, a graduate of Baruch College & Brooklyn native is the Co-Founder @ Orders2me, an online ordering platform that gives restaurant owners all the features they need to grow their business in the digital age.
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