The restaurant industry is changing, and the notion of delivery stretches beyond pizza and Chinese segments, notes Alicia Kelso of Restaurant Dive. Since 2012, delivery visits have risen 10% in non-pizza restaurants, and overall sales have climbed 20%. Ironically, the off-premise channel, including delivery, still only comprises 3% of restaurant orders, but third-party aggregators, such as UberEats, Favor, DoorDash and GrubHub, are expected to revolutionize the industry. Restaurateurs need to understand why third-party restaurant delivery is potentially big business for the non-pizza food industry (and an opportunity for operators to stand out).
Before We Begin, Eye Third-Party Restaurant Delivery Investments with Risk in Mind
The idea of third-party restaurant delivery is simple. A third-party handles routing of orders, management of drivers and collection of funds. Unfortunately, outsourcing delivery and online ordering to a third-party can be challenging. The biggest challenge is the high costs associated with third-party delivery. Third-party delivery service providers may have huge commission charges, ranging from 30% through 40%, reports Chow Now. The problem exists across all third-party aggregators, and if third-party aggregators do charge a commission with this high price tag, restaurateurs have a single option. Restaurateurs must keep costs under control and avoid added expenses in allowing and offering third-party delivery service.
And if Operators Keep the Above in Mind…Third-Party Delivery Is Definitely Big Business
As explained by McKinsey and Company, “by logging in to the site or the app, consumers can quickly compare menus, prices, and reviews from peers. The aggregators collect a fixed margin of the order, which is paid by the restaurant, and then the aggregator (or third party delivery company) handles the actual delivery. There is no additional cost to the consumer. With their asset-light model, aggregators post earnings before interest, taxes, depreciation, and amortization (EBITDA) margins of 40 to 50 percent.”
Moreover, experts disagree on exactly how much third-party delivery service providers will grow in popularity in value over the next few years, but the results and expectations are staggering.
Restaurant sales through third-party delivery apps grew 76% in the first half of 2019, reports QSR Web. Customers expect third-party delivery service options. These delivery platforms have a proven record of increasing sales and retaining customers. Globally, third-party delivery service providers have an average of 77% of customers who never switch or rarely switch delivery platforms. In other words, customers are incredibly loyal to third-party delivery service providers, and restaurants that do not take advantage of third-party delivery will face the consequences and blowback.
How to Overcome the Obstacles and Make Third-Party Delivery Successful, Profitable
With the rise of third-party delivery service providers, any restaurant could implement delivery services. The major platforms created tablet-based, apps systems that allowed any restaurant to manually enter orders and even connect the platform to existing point-of-sale systems. Unfortunately, the ease of implementation, just turning on the device, created an ironic situation. Restaurateurs were faced with managing a dozen tablets, handling orders, hoping orders were entered into the POS correctly from the third-party app and more. As a result, errors occur, costs soar, and restaurateurs struggle to maintain profitability. However, restaurateurs can make third-party delivery successful and profitable by following a few tips, including:
- Evaluate the state of your third-party delivery service provider partnerships. Restaurateurs should know the costs associated which each platform and commissions charged.
- Determine whether the third-party service provider can integrate with your existing POS. If not, it is time to upgrade your POS.
- Integrate third-party service providers’ platforms with your POS. Of course, this can require some advanced training and know-how, so more restaurateurs should turn to third-party service providers, such as Tacit, to handle the integration.
- Consider white-label solutions that allow your organization to leverage both a branded delivery service that connects with third-party services. For example, a business could use third-party delivery as a means of offering branded delivery.
- Track and analyze data. With today’s technology, this is a no-brainer, and all restaurateurs should collect and track data to ensure their restaurants perform as expected. If a problem does arise, the data will reveal how to fix it.
Put the Power of Third-Party Delivery Services to Work in Your Restaurant
Third-party restaurant delivery will continue to grow, and restaurateurs must embrace it. Become the latest and greatest restaurant to offer delivery, regardless of your cuisine, by enabling third-party restaurant delivery now. Find out what you need to get started by visiting Tacit online now.