Problems Restaurants face using third-party delivery apps.

Many restaurants have said third-party services have helped their business, especially
during the shutdown. However, many restaurants are rejecting third-party delivery because
they feel it hurts their brand and long-term profits. Here are some of the disadvantages of third-party delivery.

1. High Commission Fees and Other Expenses:
   Major concerns are that third party delivery apps commission percentages are affecting
   the profitability of the Restaurants, paying someone else up to 40% of every ticket, including
   sales tax plus credit card processing fees and instrument rentals charges make the Restaurant
   income statement bottom line negative.
   Another concern is that, third party delivery services do not make high delivery fees to
   agents, when deliveries comprise most of a restaurant’s business. After all, you’re paying
   someone else up to 40% of every ticket, which is often higher than if you were handling them
   yourself.
   In addition, your people are losing tips, which are now going to the third-party delivery
   person. If you depend on tips to augment employee salaries, you may need to increase salaries
   accordingly.
2. Vulnerable to Competition:
   While being listed with delivery apps increases your visibility, it does so for your
   competitors too. That means your restaurant may display next to your competitors, giving
   customers a choice which they may make based on location, price, rating on the app, and even
   the photos you use of your food.
3. Lack of Control:
   Lack of control is the second biggest disadvantage of hiring a third-party delivery
   service. It’s important to consider especially when brand reputation is a vital part of your
   marketing, or when you are in an area with a lot of competition.
   Once your food leaves your restaurant, it’s out of your hands. If the driver takes a wrong
   turn or does not secure a bag properly, food could end up cold or damaged. If the driver is rude
   or in this era does what the customer considers unsafe (like not wearing a mask), it reflects on
   you more than the delivery service. An estimated 80% of customers say they blame the
   restaurant. To combat this, you should have a system in place for handling complaints
   concerning third-party deliveries.
   You also have less immediate control over things like your menu or pricing. If you have
   to make fast changes, they may not reflect in the app, resulting in dissatisfied customers who
   can’t get their order.
4. Lack of Customer Loyalty :
   As noted in the advantages, third-party delivery apps have a loyal following. While you
   can take advantage of this by reaching a bigger fan base, there’s no guarantee that those fans
   will transfer to you. Further, you could sacrifice the customer loyalty that comes from people
   getting to know your hostess, waiters, or specific chefs.
   Many times, customers aren’t even looking at your restaurant name, but rather just a
   type of food. Thus, to stand out and promote loyalty, you have to consider adding a little
   something that makes you stand out, like a freebie or a coupon for an in-person visit.
   You also lose communication opportunities with your customer for feedback,
   suggestions, or even kudos for the chefs and staff. It undermines loyalty programs and frequent
   diner programs as well.
5. Reputation and Brand:
   Some restaurants, especially high-ticket dining establishments, have worked hard to
   achieve a specific brand or ambiance. This relies heavily on the in-person experience and is
   hampered by delivery. Some restaurants are working around this by adding extras, such as
   higher-end containers or napkins or supplying a soundtrack for dining to. However, the
   impression your delivery person gives affects the impression your restaurant makes. That’s
   why some restaurants, even during the shutdowns, opted instead for takeout rather than thirdparty delivery.
6. “Tablet Hell”
   Every third-party delivery service has its own platform that you must integrate into your
   POS or have a tablet or kiosk for. If you have multiple services, you could have your cashiers
   juggling several tablets with multiple systems, something restaurants call “tablet hell.”
   Tablet hell can get confusing, with multiple tablets using independent systems vying
   for attention when new orders come in. Your staff needs to be trained in every system, may
   have to transcribe orders into your own POS in order for it to get to the kitchen display, and
   must have a place to organize and hold orders for the delivery people. It can get overwhelming
   in a rush as well.
   More confusion can come when it’s time to track your third-party delivery sales and
   costs. You or your accountant will need the passwords for each system to check on your
   earnings and to keep track of payments coming in.
7. Recent Third-Party Platform Controversies:
   Many third-party apps have been accused of shady practices, from overcharging to
   adding restaurants without permission. While they claim they are working in the best interests
   of their customers, it may not be in your best interest as a restaurant owner. Here are some of
   the most disputed practices by third-party delivery services.

Tips to Reduce / Control food costs without compromising quality…

The food cost is one of the biggest operating expenses (25% to 35%) for a restaurant
business. With perishable ingredients and fluctuating sales, controlling food costs in restaurants
can be extremely challenging.
Your food costs and your stock are huge spending plan details. At the point when you
misconstrue requesting or overspending on food costs, it straightforwardly influences your
primary concern. There are numerous systems for controlling food costs that you can apply to
your café business tasks.
How do restaurants control food costs? Here are Five Tips to control the food costs in
your restaurant.

1. Ensure transparency and accuracy in vendor contract price
   Vendor-side changes or errors in ordering and invoicing can be difficult to catch and fix, but
   they can affect your food cost percentage. By verify manually or running automated receiving
   reports, you can keep an eye on vendor pricing. Your restaurant management solution can flag
   items outside of a contracted price for a specified data range, ensuring that you’re being billed
   at the quoted price.
2. Closely Manage Your Inventory, Reduce Waste: purchase inventory at the right Level
   One of the most direct ways to reduce food cost is to avoid purchasing what you don’t
   need. With data-driven suggestive ordering, you and your managers are better able to purchase
   inventory at the right level to reduce order waste.
   Smart ordering and receiving allows you to leverage ordering suggestions, informed by
   historical and forecasted sales and inventory data.
3. Recipe Costing: track usage and yield on each food item
   Lowering your food costs starts with understanding the cost of your food. Recipe
   costing breaks down the cost details of menu items to portion size and individual ingredients,
   calculated to the penny.
   Tracking each menu items’ recipe cost can help you optimize food usage and reduce
   food waste over time. With trends broken down by menu item or location, you can use recipe
   costing to save money by reducing incorrect portions, improper staff training, or employee
   theft.
4. Menu Planning: Proper pricing of Menu.
   Menu engineering helps you control food costs by helping you maximize the
   profitability of your menu items. By collecting sales mix polling from your integrated POS and
   combining it with recipe costing. you can instantly compare menu item popularity versus
   profitability.
   By seeing what items are underpriced or overpriced, you can make food cost decisions
   about revising recipes or ingredients. For instance, if you are selling a large quantity of a low
   margin item, which increases your food cost percentage, you can make adjustments to either
   raise the menu price or adjust portion sizes. Menu engineering also enables you to seize menu
   opportunities, like promoting a menu item that is high margin but low sales. Understanding the
   balance of menu item popularity and profits enables data-driven decisions that lower the cost
   of food.
5. Food Cost Calculations: Track variances between actual vs. theoretical food costs
   Truly understanding your food cost goes beyond a “food cost percentage” calculation.
   Tracking the difference between your theoretical and actual food costs allows you to make
   impactful changes to your food cost and bottom line.
   Theoretical food cost is what your food costs should be, given the current cost of all
   ingredients, over a period of time. Actual food cost is the real amount that a restaurant spent
   on ingredients over the same period of time. The difference between these two numbers
   accounts for imperfect portion sizes, improper invoicing, kitchen waste, or employee theft.
   Tracking the actual vs. theoretical food cost variance shows you critical information
   about leaks in your profit margin. By knowing where to focus to reduce food waste, you are
   able to see where you can save money on food costs. Tracking this variance daily can help you
   spot anomalies and make adjustments before variances become issues that affect your bottom
   line.

What are the best online marketing strategies for the restaurants?

 The ambition of any business owner is to succeed in their field. A functional restaurant,

on the other hand, is not the same as a successful one. Due to the extremely competitive nature

of the restaurant industry, many restaurants are thought to fail within the first few years. In

order to be successful in a highly competitive business, it is important to be different in every

way. The main way to stand out in the digital age is to implement a digital marketing strategy.

This article covers some of the online marketing strategies.

• Social media

Social media has had a huge impact in our era. There are 4.48 billion people actively

using social media in the world and this number is increasing day by day.

Restaurants may use Facebook and Instagram marketing to attract new customers and

keep existing ones coming back for more. You don’t need to be a digital marketing manager to

manage social media accounts. There are many tools that make this process even easier. One

of these internet tools is HootSuite. Via connect to multiple social channels and send a post out

on all of them at one time, monitor your audience, and analyze your results. Also, you can

increase the number of visitors by using the advertising function of Facebook and Instagram

and some artificial marketing strategies.

• Google My Business

It’s a Google tool that’s absolutely free and aimed at encouraging more businesses to

provide accurate information about themselves with individuals conducting searches. People

will get an upgraded search result for your restaurant when you’ve claimed it and filled it out

entirely, which includes information like when you’re open, ratings, locations, images, and a

link to your website.

• To open website

Customers will conduct research before deciding to patronize a new business. This is

particularly true in the case of eateries. According to surveys, more than 80% of people glance

at a restaurant’s website before deciding to visit it. Therefore, it is important to have website

for digital marketing.

• Share video content

Studiesshow that people have become lazier in recent years, preferring 78% more video

content than photo or text content. Video content will give the customer a clear impression of

the product, increase confidence in the brand, and bring more traffic because it is convenient

to watch.

Having a successful restaurant is no longer as easy as it once was. You can operate a

street corner shop and do business for years if you have decent food and service. However,

how you interact with marketing and the community now necessitates a little more thought. In

today’s world, it’s almost impossible to survive without online marketing.

The Impact of food delivery consolidation on restaurants, couriers and customers

The food delivery business model by itself has a lot of questions surrounding it. There is no doubt that there is definitely a gap in the market since restaurants need delivery service to meet the growing need of convenience by customers but the question to ask is if there is a market in that gap?

I have seen so many articles talking about consolidation in the food delivery industry in order to set a path to profitability for food delivery startups, but little have I heard the press talking about what this really means to all the stakeholders involve like the restaurants, couriers and customers.

Is no secret that the market and the majority of the press releases are more interested in the interest of the investors in these tech companies and pay little attention to other stakeholders that are directly impacted.

Just to give a background on the current situation, many restaurants dislike food delivery companies due to high fees on restaurants. Also, most courier drivers feel exploited by food delivery companies for not being able to make a minimum wage and lastly, it is definitely no secret that the customers are not loyal to any specific food delivery company and are always in search of better service at a lower price. What then is the fate for these three stakeholders if food delivery companies consolidate. Will restaurants start paying lower fees, or will couriers be able to make more income or will the customer get better offers? These are questions that the mainstream media should ask most of the CEOs running these companies. However, thanks to the fact that we don’t need financial analysts to answer such questions.

The rise of restaurant dependence on delivery companies is threatening the future of the restaurant industry since most delivery companies charge restaurants up to 30% commission on each order. The commission charge has a devastating impact on restaurants being an industry with very small profit margins of an average of 0-15% and has forced many to shut down. Some Restaurant doesn’t include some of their menu items on delivery apps while some increase the price charged for their menu item on the delivery app in order to compensate for the high commission hence making them less competitive.

If every one of these delivery companies is making losses right now, how will consolidation help them and what will the impact be to local restaurants. It is safe to say that consolidation means taking away the leverage restaurants, couriers, and customers have. At the moment many restaurants can negotiate with food delivery companies for lower fees since they can always choose to go to the next competing food delivery company, the same case goes for courier drivers and to the customers. However, with consolidation, this leverage is taken away. The big question now is, what will prevent these food delivery companies not to increase commissions for restaurants and further cut down courier delivery fees per order? Already most restaurants still feel like they are currently in captivity due to the high fees some of the food delivery companies are charging them, what then will be the fate of these stakeholders when their leverage no longer exists when the market is only served by a handful of players. Already, food delivery companies are reportedly using data collected from restaurants to increase profitability by reproducing some of the restaurant’s top-selling items on their ghost kitchen at cheaper prices. What will prevent them to further suppress restaurants, couriers and customers in search of profitability?

It is true to say that consolidation in the food delivery industry will also benefit restaurants in aspects like having single or much fewer devices and systems to work with due to limited suppliers. Are these benefits worth the risk local restaurants, courier drivers and customers face in case of consolidation of food delivery companies?

There is definitely a gap in the market for food delivery startups but is there a market in that gap?

Why is the state of food delivery startups so fucked up? The only innovation today from food delivery companies is how much capital they have raised. You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It’s used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labour expenses. The companies unload their capital cannons on customer acquisition.

You are capturing restaurant data of the top-selling dishes and now creating your own ghost kitchen producing and selling these dishes to customers at lower prices directly competing with the very restaurant you claim to service and help. Charging up to 45% of the commission to local restaurants when you know very well that restaurant profit margin only ranges between 5 – 15%. How do you expect these local restaurants operated by these lovely passionate people to survive not to talk or even thrive? How will they support their families, employees and create jobs in the economy?  

Food Delivery Platform Existentialism

Which brings us to the question – what is the point of all this? These platforms are all losing money. Just think of all the meetings and lines of code and phone calls to make all of these nefarious things happen which just continue to bleed money. Why go through all this trouble?

Grubhub just lost $33 million on $360 million of revenue in Q1.

Doordash reportedly lost an insane $450 million off $900 million in revenue in 2019. Uber Eats is Uber’s “most profitable division” 😂😂. Uber Eats lost $461 million in Q4 2019 off of revenue of $734 million. Sometimes I need to write this out to remind myself. Uber Eats spent $1.2 billion to make $734 million. In one quarter. Amazon just bailed on restaurant delivery in the U.S. What is it about the food delivery platform business? Restaurants are hurt. The primary labour is treated poorly. And the businesses themselves are terrible. As this conflict comes to a boil, one thing is becoming clear: there are no winners in this fight. Restaurant owners are losing money. Diners are seeing their costs raised, either by delivery companies that need to pay delivery drivers or by the restaurant owners who raise prices to offset delivery fees. And delivery drivers still make low, unpredictable wages frequently with no benefits. 

The space of Food delivery (or food-tech, as the entrepreneurs describe) — at one time — managed to make the investors salivate at a rate that would have put the world’s best pizza to shame. Now? Not so much. Why? What was so great about them? And if it was, then all of a sudden what changed?

Did people stop eating food?

Did the restaurants not need the delivery support infrastructure anymore? That seems unlikely. It’s not like the concept of ‘home delivery’ is new. The local eateries have been doing it for the longest — even before your local grocer or medical store started delivering your orders to your doorsteps.

Neither the VCs, nor the entrepreneurs were wrong in seeing value in food-tech. It is a space where there is a lot of potentials, highly disorganised, exceptional repeat rates (hello dear bachelors), quite localised and customised. It has everything that makes any business drool at the prospect of success. And yet, somehow it is not working out so well for these guys. Why?

How did we get to a place where billions of dollars are exchanged in millions of business transactions but there are no winners? But I don’t think that’s sufficient here. Delivery can work. Just look at a Domino’s stock chart. But, the delivery has been carefully built as part of a holistic business model and infrastructure. Maybe that’s the viable model.

Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing, failing, and evolving, they’ve been subsidized into market dominance. Maybe the right model is a wholly-owned supply chain like Domino’s. Maybe it’s some ghost kitchen/delivery platform hybrid. Maybe it’s just small networks of restaurants with out-of-the-box software. Whatever it is, we’ve been delayed in finding out thanks to this bizarrely bankrolled competition that sometimes feels like financial engineering. The more I learn about food delivery platforms, as they exist today, I wonder if we’ve managed to watch an entire industry evolve artificially and incorrectly.

Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing, failing, and evolving, they’ve been subsidized into market dominance. Maybe the right model is a wholly-owned supply chain like Domino’s. Maybe it’s some ghost kitchen/delivery platform hybrid. Maybe it’s just small networks of restaurants with out-of-the-box software. Whatever it is, we’ve been delayed in finding out thanks to this bizarrely bankrolled competition that sometimes feels like financial engineering. The more I learn about food delivery platforms, as they exist today, I wonder if we’ve managed to watch an entire industry evolve artificially and incorrectly.

Food Delivery Statistics Every Restaurant Should Know About

2020 has been quite a year for food delivery from restaurants. Off-premise dining has surged in popularity due to COVID-19 restrictions on on-premise dining. The success of food delivery has proven that demand is here to stay.

We’ve compiled food delivery statistics to help you better understand the importance of the channel and key trends surrounding this revenue stream for restaurants. You’ll find these facts and figures organized into the following categories:

• Stats about the rise of food delivery
• Food delivery statistics about consumer habits
• Direct ordering versus third-party food delivery statistics
• Stats about COVID-19 and food delivery
• Food delivery statistics about customer service

THE RISE OF FOOD DELIVERY

1. In 1994 Pizza Hut launched the first online ordering service. 
2. Customers spend $11 billion on pizza delivery per year.
3. One in three Americans uses a food delivery service at least weekly.
4. Every year, the U.S. food delivery market grows 20%. 
5. By the end of 2021, the online food delivery market is expected to reach $26 billion in revenue.
6. Currently, there are 45.6 million people who use mobile food delivery apps. That number is expected to reach 53.9 million by 2023. 
7. In 2030, China will have the largest market for online food ordering. Its local industry currently creates $51 billion in revenue. 
8. The United States is the second-largest consumer of online food ordering. 
9. 60% of restaurateurs report that offering delivery has led to an increase in revenue. 

FOOD DELIVERY STATISTICS ABOUT CONSUMER HABITS

10. One in three food delivery consumers is a millennial. 
11. People feel comfortable waiting up to 40 minutes for food delivery. 
12. The minimum distance people would choose delivery over takeout is 1.5 miles. 
13. People don’t want to pay more than $8.50 total for delivery fees, service fees, and gratuities. 
14. 48% of customers feel comfortable sharing their data with restaurants in order to receive a discount on off-premise dining. 

DIRECT VERSUS THIRD-PARTY FOOD DELIVERY STATISTICS

15. The online food delivery market’s largest segment is direct-to-consumer ordering (as opposed to third-party ordering). In the United States, this segment will have generated almost $16 billion in revenue by the end of 2020. 
16. On average, people have two delivery apps on their phones and use them three times per month. 
17. 78% of off-premise orders are placed directly, while 22% are placed through third-party platforms.
18. On average, third-party online ordering platforms take a 30% commission from each order. 
19. 30% of American diners who don’t use third-party online ordering apps avoid them specifically because they want to support restaurants directly. 

COVID-19 FOOD DELIVERY STATISTICS

20. 23% of people say they will only order for pickup or delivery for the rest of 2020, rather than dining on-premise. 
21. 51% of Americans feel comfortable ordering for pick-up during the pandemic. 
22. 43% of Americans feel comfortable ordering delivery during the COVID-19 pandemic. 
23. More than one in four consumers don’t feel comfortable dining out until there is a COVID-19 vaccine.
24. In 2020, more than 45 million Americans used a food delivery app, which is a 25% increase since the previous year. 
25. Grubhub grew its customer base by 35% between 2019 and 2020. 
26. Research predicts that there will be a 3.3% dip in online ordering in 2021 after indoor dining picks back up at full capacity.
27. In 2020, two in five restaurants began offering food delivery services because of pandemic-related closures. 
28. Three in 10 restaurateurs predict that off-premise demand will remain at pandemic levels even after the pandemic ends. 
29. Order sizes on third-party delivery platforms increased during the pandemic. Grubhub saw a 20% rise in average order size compared to 2019. 
30. DoorDash saw its average order size increase from $33 in January 2020 to $36 in June 2020.

FOOD DELIVERY STATISTICS ABOUT CUSTOMER SERVICE

31. The most common complaint that customers have about food delivery is their food not being warm enough or fresh enough when it arrives. 
32. 85% of people want restaurants to use tamper-evident labels to reduce instances of drivers taking food from their orders. 
33. 63% of people are more likely to tip digitally through a delivery app, rather than in-person with cash. 
34. 60% of deliverers say a low or no tip as their biggest gripe about the job. 
35. 53% of people tip more in inclement weather.
36. If an order goes wrong, four in five people point blame at the restaurants instead of at the delivery services. 
37. One in three delivery customers says that they’ve had delivery drivers pass them food through a car window rather than bringing the food to their front doors.
38. Almost three in 10 customers say they’ve had delivery drivers object to delivering orders to their front doors. 
39. 17% of people have had delivery drivers place their food outside of their doors and leave. 
40. Consumers think that delivery drivers (54%) are more deserving of tips than servers (47%). 
41. Customers and delivery drivers think that $4 is a suitable tip for deliveries.

WRAPPING UP: THESE FOOD DELIVERY STATISTICS SHOW THAT DELIVERY IS HERE TO STAY

Trends show that food delivery was on the rise before the COVID-19 pandemic. When the pandemic struck in early 2020, it accelerated the growth of the off-premise dining market. With consumer habits changing, delivery is here to stay even after the pandemic becomes a distant memory.

Get started with a direct online ordering platform that lets you keep your profits. Learn more about TravelTube today.

Sources:

1 – “Online Food Delivery” by Statistia

2 – “2020 Food Delivery Service Statistics You Need to Know” by Beambox

3 – “How to Get Started with Restaurant Delivery and Take-Out” by SevenRooms

4 – “New Study Shows What Consumers Crave in a Food Delivery Service” by US Foods

5 – “More Consumers Are Turning to Food Delivery Apps amid Indoor Dining Restrictions” by eMarketer

6 – “4 Trends Defining Delivery During COVID-19” by Restaurant Business Online