From Trend to Mainstream
Navigating the Third-Party Delivery Boom
It’s time to stop asking if third-party delivery (3PD) is a fad. It’s here to stay and it’s growing at unprecedented rates. In the last twelve months alone, sales on 3PD apps increased 76 percent.
Back in 2016, 3PD was still a relatively new technology primarily used by millennials in Silicon Valley. Fast forward to 2019 where 1 out of every 10 consumers in the US ordered food on either UberEats, DoorDash, Grubhub, Postmates, or Caviar at least once in the last 12 months according to the new Consumer Intelligence tool from Black Box Intelligence (formerly TDn2K).
According to Rogers Adoption Curve, an innovative product has adoption milestones before it becomes a ubiquitous technology. The categories of adopters are innovators, early adopters, early majority, late majority, and laggards.
Once 2.5 percent of the population starts using a technology, it moves into an early adoption stage. That happened for 3PD services in late 2015. Three percent of the population used a 3PD app in 2016. Since 2016, 13 percent of the US population has used a 3PD app to order food.
3PD is inching closer to gaining critical mass where it will no longer be a trendy app used by millennials, but adopted by a majority of consumers. We are already noticing significant adoption rates across all age demographics.
Financial Intelligence (formerly Black Box Intelligence) reported that delivery sales for the restaurant industry increased 37 percent in 2018, while dine-in sales for the industry declined -1.9 percent. In a climate that has seen a consistent decline in foot traffic, the surge of 3PD is only likely to make it harder to drive guests into your restaurants. What strategies can restaurants implement to take advantage of this changing environment?
Adapting to the Delivery Era: Tips for Staying Competitive in Third-Party Delivery
Prepare for High Volumes of Delivery Orders
Ghost kitchens have become increasingly popular during the last several years due to the growing demand for delivery. Similarly, some chain restaurants have chosen to dedicate a portion of the restaurant entirely to delivery operations. This separation between in-house food prep and delivery food prep has the potential to allow for efficiency gains while maintaining a high quality of service and attention to the guests who choose to dine in.
Customize Your Delivery Offerings
Some food items just don’t travel well. No customer will be pleased with a soggy meatball sub or leaking soup. No rule requires a restaurant to offer the same items for delivery that they do in the restaurants. Restaurants have an opportunity to deliver a unique experience to consumers by offering different entrees for delivery than in the restaurant.
Charge a Convenience Premium on Delivery
One of the challenges for restaurants is that the 3PD companies charge hefty fees to keep your restaurants in the game. Users of 3PD services are willing to pay a premium for the convenience. Some restaurant chains have opted to list the same items available in their restaurants at a higher price than on the 3PD apps.
What Staffing Changes are Necessary to Implement 3PD?
Additional costs must be considered with implementing 3PD, including staffing. Consider whether your current staff load can handle additional orders. In 2018, 28 percent of limited-service brands and 46 percent of full-service brands said they made staffing changes as a result of implementing 3PD. This includes staff members who can interface with delivery drivers, as well as back-of-house members to cook incremental orders.
We need to accept that 3PD isn’t going anywhere. Operators have an opportunity to stay ahead of the curve. Implementing internal delivery isn’t a viable option for everyone. The profit margins (or lack thereof) of using 3PD aren’t necessarily that enticing either. 50 percent of limited-service restaurants are absorbing the costs of 3PD, and 77 percent of full service are taking the hit according to Black Box Intelligence (formerly TDn2K)’s Financial Intelligence (formerly Black Box Intelligence). But the good news is that there are changes you can make today to make 3PD work for your restaurant.
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