How will restaurants deliver after COVID-19?
The coronavirus crisis has challenged restaurants to rethink the way they deal with food delivery for good. Larger franchises have offered free delivery (McDonalds, Applebee’s, IHOP, Panera Bread, Wingstop and Chipotle Mexican Grill, among many others) to accommodate decreasing on-premise sales (1). Meanwhile, smaller restaurants had to turn to third-party delivery services like Doordash, UberEats, Grubhub to deliver food to their customers. The topic of switching to self, or in-house delivery has been a widely-debated issue among independents these past couple of years, and it will most definitely be a hot topic as restaurants begin to open their doors again. So where is food delivery headed post-COVID-19?
In our previous blog article, we briefly touched on the various advantages of third party delivery services, like how outsourcing delivery to a third-party service has an advantage of allowing smaller, local restaurants to get started quickly (2). By partnering up with these big companies, restaurants have been allowed to take advantage of the software and support they offer and use these popular apps as a marketing tool—a way to attract new customers and gain brand recognition (3). Even larger brands, like that of the sub/sandwich franchise Jersey Mikes, relied on third-party delivery as a way of managing within its capacity (4).
However, the main issue with these third-party services have been their exorbitant fees, often ranging from 25 to 30 percent of sales (4). Other complaints have been unreliable delivery time and unsatisfactory food temperatures upon arrival (5). A report by the US Foods even found that 1 in 4 food delivery drivers admit to eating the food they were supposed to deliver (5). These issues collectively have made the shift to self-delivery so appealing.
The food delivery marketplace has exploded in the recent weeks due to the COVID-19 shutdown. Portillo, a Chicago-style comfort food restaurant in Illinois, for example, reported a 90% delivery sales increase through its third-party delivery since shutdown and 60% delivery increase through its website and mobile app (1). But for restaurant owners who had to rely solely on third-party delivery, this jump in food delivery has not entirely been welcome, driving them to look for alternative delivery measures despite some third-delivery services suspending some fees to accommodate for the crisis (6).
Having your own in-house delivery service allows you to have more control over your staff and drivers, reduce transit time and give you options to give better customer service (7). Having the same drivers deliver to your customers also come with perks of building long term driver-customer relationships.
Just as the third-party delivery model has its pros and cons, so does in-house delivery. While in-house delivery models are great in that you get more control and own the transaction from beginning to end, an in-house delivery route would require you to pay upfront costs to hire drivers to deliver your food (7). It also means you’d have to hire, train and pay new staff for this job including paying for insurance and vehicle expenses. For restaurants that have enough volume to keep their drivers busy the expenses will be worthwhile, but for up and coming restaurants that are in the process of building a customer base, self-marketing will be key whether it be by word of mouth, online listings or by keeping an active social media presence.
The good news is that in the long run, restaurants who have self-delivery services can expect higher returns (16, 17). As more restaurants fight back third-party delivery fees and lack of control, we could be seeing a lot more restaurants adopt self-delivery in the near future.
So, in summary:
Third Party Delivery
- Pros:
- Doubles as advertisement that increases exposure of your restaurant.
- Provided drivers/ No training required
- Cons:
- High Fees
- No control over the delivery time
- No control over the condition of the food once it leaves your restaurant
Self/ In-House Delivery
- Pros:
- More control over your profit margin/transaction fees
- More control over your driver
- You can offer faster delivery
- Offer better customer service
- Allows you to build driver-customer relationships
- Cons:
- You’ll need to hire, train and pay your driver
- Not recommended for low volume restaurants
- You have to actively promote on social media to make up for the marketing
Interested in setting up self-delivery?
Goliath Consulting Group with headquarters in Norcross, Georgia offers a dynamic array of business development solutions, tailored to meet the needs of each individual client – in addition to a full suite of knowledge and tools that help make restaurants more profitable, including strategic planning, menu development, project management, new restaurant development, branding, marketing, franchising, equipment, technology, evaluations, outsourcing, and more. The company also has a management division that manages full-service restaurants. Goliath Consulting enjoys a ten-year track record of creating client success among local, regional and multi-unit national restaurant chains.
Goliath Consulting Group is actively involved in the Foodservice Consultants Society International and is an allied partner of the Georgia Restaurant Association.
Contact: getresults@goliathconsulting.com
Reference:
- https://www.restaurantbusinessonline.com/operations/why-coronavirus-shutdown-will-upend-delivery-services-good
- https://www.qsrmagazine.com/sponsored/how-third-party-delivery-helps-brands-drive-sales-growth
- https://www.qsrmagazine.com/restaurant-operations/house-versus-third-party-delivery-debate-rages
- https://www.qsrmagazine.com/reports/delivery-dilemma-rages-restaurants
- https://www.qsrmagazine.com/ordering/delivery-question-whats-happening-my-food
- https://www.restaurant-hospitality.com/delivery-takeout-solutions/what-third-party-delivery-marketplaces-are-doing-and-not-doing
- https://www.qsrmagazine.com/fast-casual/house-or-third-party-delivery-whats-better