The Restaurant Delivery Dilemma: Third Party or DIY?
Restaurant delivery has become a vital part of the foodservice landscape, and adding delivery offers a huge potential for new customers and new revenue. According to Upserve, 60 percent of U.S. consumers order delivery or takeout once a week1 and 70 percent of those prefer to order directly from the restaurant, rather than pay fees to a third-party delivery service. Some estimates predict that online delivery orders will rise to 40 percent of total restaurant sales by 2025.2
Even if reality doesn't quite hit those expected heights, it's clear that offering delivery can have a huge impact on your bottom line; delivery comes with a lot of associated costs and risks, though. We'll address several of the major hurdles, as well as the benefits of surmounting them, here.
Adding Restaurant Delivery: Table of Contents
Should Restaurants Allow Third-party Delivery?
As demand for delivery grows faster than restaurants can individually respond to it, third-party delivery companies have stepped in, often to the dismay of the restaurants they deliver from. These services, such as GrubHub, DoorDash, and Postmates will place an order and pick it up on behalf of the customer, then deliver it to the customer, all without the restaurant ever knowing that they're serving a middleman as opposed to the actual customer. Some restaurateurs have made a purposeful decision to not offer delivery to lessen the strain on their kitchen or because their food wouldn't hold up well under delivery conditions. Even for operators that don't want to offer delivery, third-party delivery services may well offer delivery for them, placing pickup orders for customers without the restaurant's knowledge or consent.3 We cover this problem in our third-party delivery backlash article.
The lack of quality control between restaurant and delivery means that some meals show up cold or soggy, some show up with missing items, and some simply don't show up at all.4 This could lead to upset customers choosing to go elsewhere next time or posting poor reviews for the restaurant instead of the delivery service. We address some of these concerns in our food delivery safety article.
Even if everything goes perfectly, you'll still end up paying the delivery service a 15 to 30 percent fee.5 All of these downsides have led many restaurateurs to do their best to cut out third-party delivery altogether, but for others, the increased revenue is impossible to pass up.
Restaurants that have embraced the trend by partnering with delivery services have seen a marked increase in sales. Of customers who order delivery once a week, 31 percent will order more than once;1 59 percent of restaurant orders from millennials are takeout or delivery. Adding third-party delivery greatly increases the reach of your restaurant without increasing your marketing budget.
Third-party delivery services generally raise restaurant sales volume by 10 to 20 percent, which is enough to put a struggling business in the black or enable a successful one to expand. The trick is balancing the detriments and extra costs against the massive potential increase in business. It's also worth keeping in mind that the third-party fees and drawbacks scale alongside the increase in business; if your guests don't use them very often, you won't be paying much in fees.
Pros
- Potential for massive increase in sales
- Someone else handles the logistics
- Opens up a new customer base
Cons
- Quality control is somewhat out of your hands
- Significant fees on third-party orders
- Lack of communication between delivery service and restaurant can lead to errors
Should Restaurants Offer In-house Delivery Programs?
There are some definite benefits to developing a delivery program yourself, the biggest one being that you get to keep all the profits instead of cutting some out to pay a company acting as the middleman. Doing your own delivery also means you can control which menu items are available for delivery, as well as how they're packaged and transported. This helps ensure that food arrives in a timely manner and in a way that maintains the integrity and safety of the meal.
However, setting up your own delivery program will require a significant initial investment of both capital and time. You'll need to hire delivery employees, designate space for delivery orders, add holding equipment to keep food at safe temperatures until it can be picked up, ensure your website can accommodate online orders, and potentially increase your cooking power to keep up with an influx of new orders. Potential customers have become accustomed to paying delivery fees and are willing to pay more for faster delivery, so you can recoup some of your expenditures through delivery fees.
You'll also want to make sure you have all the delivery supplies you need before your program goes live. This can include delivery bags or insulated food carriers to help maintain food-safe temperatures. You'll also need to set a delivery radius; the further away your customers are, the harder it'll be to get safe, satisfactory food to them. Cold food or an episode of food poisoning could undo all the gains a delivery service brings you, so be certain that your food will get to the customer in a timely fashion.
Depending on where you are, you may need to invest in restaurant-owned vehicles, driver's insurance, and other specifics that we cover in depth in our analysis of restaurant delivery benefits.
References
- 26 Online Ordering Statistics Every Restaurateur Should Know in 2021. Upserve. Accessed January 2022.
- The Growth of Online Ordering and Food Delivery. Lavu. Accessed September 2023.
- Delivery Apps Keep Adding Restaurants Without Their Consent. Eater. Accessed January 2022.
- More Than 20% of Food Delivery Customers Claim They Encounter a Problem With Their Order. Fox Business. Accessed January 2022.
- Delivery Apps Like GrubHub and DoorDash Charge Restaurants Huge Commission Fees. Are Delivery Co-ops the Solution?. The Counter. Accessed January 2022.
