Third-Party Delivery Services: Yay or Nay?
Winter can indeed put a bit of a chill on business for bars, restaurants, and service industry spots. While some business owners cross their fingers during the winter slump, the savvy ones adapt their menus and promotions to keep the good times rolling, even if it means serving hot cocoa instead of margaritas! That’s why we are dedicating this month to helping you create a rock-solid marketing strategy that is sure to get customers off their couches and into your business! We’ll cover a variety of ideas, third-party services, and case studies to get your creative juices flowing. We’ll have a new action item for you every Monday this month. Come January, you’ll have a marketing plan better than the competition. Here’s a list of what to expect:
Third-party delivery services
Incorporating and highlighting your talented staff into your content
Marketing ideas to entice customers to brave the elements and walk through your front door
Creating Facebook Events to promote your events and reach a wider audience
Let’s start with a service that you can begin implementing into your offerings right away: Food delivery through third-party services.
Though your primary goal should be getting butts in seats, there is no denying that some third-party delivery services like Uber Eats and Grubhub can dramatically benefit some restaurants. Especially during the cold winter months, this option could provide a boost to revenue until the Springtime when our consumers’ hibernation ends. There are several factors to consider about integrating these services into your offerings, and we’ll try to provide the solutions to the drawbacks in this post. Learn the pros, cons, and how to choose the right partner for your needs.
Third-party delivery is booming like never before. In 2020, third-party delivery exploded because it gave restaurants a vital revenue stream during the pandemic. But even now that guests have long since returned to on-premise dining, demand for delivery remains high and shows no signs of going anywhere. The number of people using meal delivery apps is expected to reach 2.64 billion by 2027. Businesses can’t afford to leave that kind of money on the table, even if they’ve been hesitant to get into the game. The question is no longer whether to deliver but how to make the delivery process work for your restaurant.
What is third-party delivery?
Third-party delivery refers to hiring another business to handle restaurant food delivery services on your behalf. You pay these companies a fee, typically a percentage of the sale, to ferry packaged orders to hungry customers.
The driving (or biking) and hand-off of the order are the third party’s responsibility. The restaurant is still in charge of making and packaging the food.
How does third-party delivery work?
People place their food orders from restaurants online and through third-party apps, such as Uber Eats or Grubhub. The whole transaction, from ordering through payment, happens on the partner’s platform.
Third-party delivery companies earn money by charging commission fees on every order, usually 15% or more. They process payments and then make payouts to the restaurant, typically on a weekly basis. These fees range based on factors like location, volume of sales, and specific tiered plans with the delivery service. Always check with each platform for the most accurate and current fee structures.
What are the main third-party delivery platforms?
Uber Eats
As one of the leading third-party delivery platforms, Uber Eats boasts an extensive customer base and global presence.
The platform charges a commission fee on each order, and restaurants benefit from the exposure to Uber’s vast user network. Uber Eats offers a range of partnership levels, from basic delivery services to integration with marketing campaigns and promotions.
DoorDash
With a strong market share in the U.S., DoorDash is known for its efficient delivery and wide coverage. The platform charges a commission on each order and provides various options for restaurant partners, such as integration with POS systems and menu management tools.
DoorDash also offers a subscription service, DashPass, which can drive customer loyalty and increase order frequency.
Grubhub
Grubhub is a popular food delivery platform, offering a range of partnership options and services to restaurants. The platform charges a commission on each order and provides additional marketing and promotional opportunities for its partners.
Grubhub’s loyalty program, Grubhub Perks, incentivizes customers with rewards and exclusive offers.
Postmates
Acquired by Uber in 2020, Postmates is a third-party delivery service known for delivering not only restaurant meals, but also groceries.
While it shares most of its features with Uber Eats, Postmates offers a strong selling point if you’d like to expand delivery beyond traditional menu items to things like a cookbook, bags of granola, or bottled sauces.
Pros of third-party delivery
There are many reasons why so many restaurants are partnering with third parties to deliver their meals to people. Here are the biggest ones.
Ease. Convenience is the biggest perk of partnering with a third-party delivery service. The partner handles the delivery so you can focus on running a restaurant.
Speed. Provided you choose a partner that integrates with your POS system, you can be up and running quickly.
Fewer Upfront Costs. Third-party delivery platforms also offer upfront savings over creating your own custom digital ordering system.
Staffing. And obviously, you don’t need to find employees to serve as your delivery drivers. During the current labor shortage, you likely need all hands on deck in the restaurant.
Visibility. These platforms can help you reach new diners and grow your business. Often people come to their ordering app with a craving for dumplings or meatballs and will search accordingly. It’s not uncommon for them to find new favorite restaurants this way.
Cons of third-party delivery
Some third-party delivery businesses have been in the news for their high fees and questionable business practices. Here are some reasons restaurants are seeking out alternative options for delivery.
High Fees. This is the biggest con. Fees can account for 15% to 30% of sales by some estimates, cutting painfully into profit margins. Some local legislators have pushed back. San Francisco set a cap on third-party delivery fees in June 2021, though new legislation will once again open the door to higher fees.
Limited Control. You have less control over the customer experience, including delivery times and food quality upon arrival, which can impact your restaurant's reputation.
Impact on In-House Dining. Some customers may choose delivery over dining in, potentially impacting your in-house sales and overall atmosphere.
How to Remedy these cons
While there is no workaround for fees these companies charge, you can still use delivery services to promote your business in the form of flyers and coupons to drive foot traffic. Similar to how pizza restaurants staple coupons to each pie, you can include a flyer with coupons that are valid for in-person use only. This will greatly incentivize customers who enjoy your product to come in and experience everything else that you have to offer. Remember, delivery services are nice to attract new customers, but the ultimate goal should be to put butts in seats!
The continued demand for takeout and delivery is a big opportunity for places that can make delivery work efficiently and profitably. For many, third-party delivery companies provide an additional opportunity to offer their food to at-home diners while also incentivizing future visits into the establishment. Understanding what’s out there is the first step to making the best choice for your restaurant. Run the numbers for yourself and see if this service can work for you!