If you own a restaurant there are lots of reasons why you don’t want to work with a third party delivery service. Consider these factors before you offer delivery through a third-party delivery service.
Extra Costs
For starters, it can be pricey. According to the restaurant industry publication Heavy Table, restaurants can pay anywhere between 22%-32% of the menu price for items in order to use a third-party delivery service.
“If a restaurant sells a cheeseburger for $12 on their menu, under these contracts and arrangements, the restaurant receives only $8 of that,” Matty O’Reilly writes. “If you ordered the same cheeseburger and picked it up yourself, you’d pay $12 and the restaurant would get $12.”
There are countless reports of delivery services making mistakes on orders and the restaurant has to suffer the consequences. For example, the owner of a delicatessen in Seattle shared how one customer got angry with him over a wrong order and demanded a refund, which he couldn’t provide because payment was made to the delivery service. What’s even worse is that the deli was listed on third-party delivery service apps without their knowledge. They had no control over the quality of the delivery services provided by third-parties. In the end, the deli had to stop the services altogether.
There are other problems to consider…
Less Control Over Quality
Once food is out the door a restaurant can’t control its fate and sometimes quality suffers. Delivery times are up to the driver and if a driver’s late both the food and the customer’s mood can be spoiled. Communications sometimes break down. The prices charged by the delivery services have been known to not match up to the actual prices charged by the restaurant. The fees charged by the delivery services have become onerous, to the extent that some cities – like Philadelphia – have capped what they can charge. And who shoulders the customer’s complaint? Yeah, you guessed it – the restaurant owner.
Given all these potential problems, should you still consider using a third party delivery service for your restaurant? The answer is yes. Why? Because you have to.
Thanks in good part to the pandemic, today’s customer expects that a restaurant provides delivery options. The use of delivery services – like Grubhub – peaked in 2022 and many customers have been driven away by the fees and tips they’re required to pay, which in some cases adds 20-30 percent to the order cost.
But, like people who read newspapers, carry hardcover books and subscribe to cable TV, there are always a percentage of customers who rely on third party delivery services for their favorite restaurant because it’s their preference. About 1.5 billion people used food delivery apps in 2023, with close to 35 percent of users coming from China. If you’re running a restaurant every dollar and every customer counts. You have to provide this option if you’re going to be competitive. Period.
So, How Do I Minimize Problems With Delivery Services?
Invest In Your Own Delivery Service
One way is to create your own delivery service. Google and other search engines now provide restaurants the ability to list their website under online ordering options and state whether or not it’s your “preferred” method for customers. Users get directed to your website. You control everything from the pricing and the products offered, to the quality of the delivery service you provide.
But keep in mind that with this control comes a cost. You have to hire, manage and maintain a delivery staff. That means finding and paying people enough to have them commit to your schedule. It also means paying taxes, worker’s compensation benefits, business insurance (The Hartford offers insurance for both restaurant owners and delivery drivers, takeout restaurants and “ghost’ kitchens). Depending on what state you’re in, you may also need to have commercial auto insurance too. But in the end, you’re in control and for many small business owners that’s crucial.
In lieu of, or in addition to your own delivery service you can elect to go all in with one or two well known platforms like UberEats, DoorDash or GrubHub. Given the amount of criticism received during the height of the pandemic activity, you’ll find that many of these services have improved their communications and customer service with their partner restaurants.
Doing this will require you to adjust your pricing to pay their costs. You’ll lose control over who’s delivering your product and when. You’ll inevitably have communications issues or an irate customer or two that gets stuck between the delivery services’ customer service group and your team.
But if you limit these services to a handful and you are willing to invest the additional time (and money) to devote to keeping a close eye on their operations, reviews and your listings, then you have the opportunity to expand your customer base and provide better service to your customers.
Which brings me to my final piece of advice: you’re going to need a delivery service coordinator.
Assign a Delivery Service Coordinator
A third party delivery service is no different than a third party marketplace like Amazon or Alibaba or Etsy. My clients who work best with these platforms have someone dedicated to managing these platforms. They make inventory available. They write descriptions. They oversee pricing. They react to customer reviews. They leverage the marketing tools made available to better position their products. They go back and forth with the platform providers when there are problems. They are tasked with growing sales on these platforms. They monitor all activities and they report using metrics to determine what’s selling and what’s not.
Maybe it’s a just a few hours a week, or maybe a day or two, but – like any outside party that your business relies on to make products or deliver services – in order to really maximize the effectiveness and the quality of working with a third party delivery service you need to invest in a person who is your go-to coordinator with this service. Yes, there’s a cost. But if done the right way, that person can grow your revenues and identify new customers that can make this a worthwhile investment.
Yes, if you’re in the restaurant business you need to use a third party delivery service. But no, it doesn’t have to be a disaster. With the right person in control, and the right investment, a third party delivery service can add value, more revenues and higher profits to your restaurant business.
Next steps: Sign up for the Small Biz Ahead newsletter for more tips on growing your small business.
