It’s no secret that the largest growth sector in the foodservice industry is delivery service and operators who sell pizza have long known this. In fact, restaurant delivery (not including pizza) is up 33% over the past three years. The mobile economy has created an on-demand culture where you can have anything you want delivered to your door in under an hour and dozens of third-party companies have popped up to grab their market share.
This is the new normal and showing no signs of slowing down. A recent consumer survey shows 96% of customers rate their experience with delivery services such as Postmates, DoorDash, and GrubHub, as good to excellent. In addition, 42% say they intend to use these services more in the coming year and 93% of UberEats users say they are likely to promote the service to their friends. The most frequent users are families with two children between the ages of 12 and 17. The number one reason for using these services is convenience, research shows that 36% of orders are from restaurants within walking distance and the average wait time is 30 minutes or less.
Restaurant operators with strong online reviews are seeing the biggest gains and surprisingly, these reviews often have nothing to do with service, but the integrity of the product itself. The cost of delivery is usually around five to six dollars, but this had no significance compared to the quality of the food. Even breakfast delivery is gaining momentum, as these services are being used across all meal periods.
From an operations standpoint it sounds like a no-brainer, a way to increase revenue is with less labor. While there is less front of house service involved and you don’t need vehicles, drivers or insurance of your own, there are still expenses and liabilities that should be considered. Each third party is different and their fees and contractual obligations are not uniform. It is very important that any relationship you are entering into with these delivery services include a contractual agreement that protects you from being considered a mutual employer, but what you really need to pay attention to is the payment terms and delivery fees. These fees, which are negotiable no matter what they tell you, fall between 15-25% of revenue. For most operators that is the margin for the food cost and while we look at these fees as expenses, it is still something to think about. Most companies will deposit your revenue share into your bank account weekly, and it’s up to you to look at your statements and reconcile those deposits against sales, minus the fees. This can add up to a lot of work if you are dealing with multiple third-party delivery companies.
The final piece to consider is culture, is delivery a fit for yours? With the recent recession and economic uncertainty, many upscale, full-service restaurants have opted into these services. But, you can’t put a thirty dollar restaurant plate into a Styrofoam container and hope for the best. It’s important to consider which menu items are going to travel well while maintaining their integrity. Keep in mind that you don’t have to make your entire menu available for delivery. Show the same consideration when choosing your packaging, as it says more about your culture than you think.
Operationally, it is also important to consider how these orders are going to be processed. The majority of these services rely on a tablet pre-loaded with software to receive the orders. These are then rung into your point of sale system and tendered to a corresponding AR account to be reconciled, all of which is time-consuming; however, we are starting to see some of these third parties integrate with POS platforms to automate this process. This is absolutely the way to go and should weigh heavily on the decision of who to partner with. Do you really want seven tablets sitting behind your front desk?
If delivery service is a fit for your culture and operation, now is the time to consider taking advantage if you haven’t already, as your competitors most certainly have.