Navigating the Evolution of Restaurant Delivery
Incorporating delivery for restaurants has become an essential component of doing business. Delivery exploded during the pandemic, and some operators are even exploring designing their buildings for off-premise sales. But simply offering delivery isn’t enough, and there are still plenty of kinks to work out. For example, off-premise sales are associated with lower food quality. Getting the pricing, menu, and logistics right so your customers feel like they’re getting their money’s worth can be tricky.
The rise of restaurant delivery is probably one of the most sweeping changes brought about by the pandemic. Pre-COVID, delivery sales grew each year, outpacing overall restaurant sales. During the pandemic, delivery sales growth doubled. For full-service restaurants, it was a lifesaver, since they didn’t have the drive-thru or to-go setups that limited-service tends to have. However, it hasn’t necessarily been an easy road, especially for operators who were trying out delivery for the first time.
Challenges of food delivery for restaurants
Here are some of the challenges of restaurant delivery, and what you can do to address them
Implementing or expanding delivery services uncovers challenges, some of them surprising, that each operator must address to maintain a profitable delivery operation.
Perhaps the biggest challenge for delivery operations, and restaurants in general, is staffing. If servers are tasked with handling delivery orders, that can cut into their tips. If bartenders are tasked with handling delivery orders, that can cause drink service to slip. Both scenarios can lead to a decline in satisfaction with on-premise dining. For that reason, some restaurants have hired dedicated workers to handle to-go or delivery orders.
With staffing being such a major cost center for restaurants, it’s important to monitor whether the cost of having workers dedicated to delivery is yielding a return. Our Workforce Intelligence solution now allows you to track the turnover, compensation, demographics, and other key metrics for dedicated to-go workers.
Packaging is another challenge in delivery for restaurants. It needs to be durable, with strong lids to protect the product from spilling. Restaurants that offer varied menu items – such as soups, flatbreads, and pasta bowls – will require varied packaging. Sustainability is also an important consideration, particularly for brands that are known to be eco-conscious. Identifying the right packaging is even more challenging right now, as supply chain issues are driving up costs.
Packaging can play a role in which menu items are offered for delivery. All food doesn’t travel well. And if the delivery menu is shorter than the regular menu, it’s important to be consistent across platforms to reduce customer frustrations.
Setting the right pricing and timing for orders can make all the difference in whether your restaurant delivery operations are a success. With third-party delivery services, the restaurant must pay a commission for every order. Operators are either raising prices for delivery items or spreading those costs across all of their customers. Properly timing orders is important so customers can know what to expect. It also plays an important role in maintaining food quality, so food isn’t sitting for long periods. For more tips on navigating these issues, read our blog which covers how to make third-party delivery successful.
Third-party delivery vs. self-delivery
After trying out third-party delivery services, many restaurant operators are experimenting with their delivery services. Each approach has its pros and cons.
Benefits and challenges of third-party food delivery for restaurants
Third-party food delivery services offer consumers convenience. It’s easy to go to a single app, where they only have to enter their payment data and address once for all of their food delivery needs. For restaurants, third-party food delivery services can help get the word out to new customers.
On the other hand, the fees associated with third-party delivery eat into already tight profit margins. Managing third-party delivery providers adds complexity to your day-to-day operations. And since you don’t know the drivers, you have no control over how they deliver service. At the same time, it’s important to manage relationships with drivers because they post online reviews, just like customers.
Benefits and challenges of self-delivery for restaurants
With self-delivery, when something goes wrong, you have greater control over resolving it. And without the commissions, you can take greater control of costs.
On the flip side, you have to hire and train the drivers. That adds a burden to an already difficult labor market. You’re also responsible for developing and identifying the technology and processes needed to support delivery services, which can easily become a time-consuming process.
Choosing the Right 3rd Party Delivery Service for Your Restaurant
The third-party food delivery landscape is still evolving, leaving most operators to consider which delivery service is best. Here’s a breakdown of the top three services offering delivery for restaurants:
With three million drivers, DoorDash is one of the main players with 53% of the market share as of Q3 of 2021 according to Black Box Consumer Intelligence™ data. Commission fees vary but are typically 20%. Uber Eats comes in second with 27% of the market share. Because of Uber’s core ridesharing business and because it acquired Postmates, Uber Eats has a massive reach. But commissions are also high – roughly 30% on the pre-tax order. Known as the innovator in the market, Grubhub has a network of roughly 100,000 drivers. Commissions range from 15-30%.
All of these major platforms have announced a self-delivery option, giving operators even more flexibility with their delivery operations.
Ghost kitchens and delivery for restaurants
Increased interest in food delivery has led to the emergence of virtual restaurants. For some brands, it can be a way to try out new concepts at a lower cost. And customers don’t seem to care if the order was made in a ghost kitchen or a traditional location. But there’s still a lot to learn about the best operational approach and what exactly they will evolve into. Download The Emergence of Ghost Kitchens and their Rising Impact to get up to speed on the trend.
Monitor delivery performance to maximize its value
Delivery operations will continue to grow and evolve. With the right data, you can optimize delivery to drive revenue without taxing your staff too much. BBI offers data intelligence to help you monitor your performance, as well as that of your competitors, and the overall market.
With Financial Intelligence you can compare off-premise vs. dine-in performance against other brands, segments, the local market, etc. With Guest Intelligence you can monitor and manage customer feedback specifically for delivery, to-go, and curbside.
Interested in seeing our products in action? Request a demo here.
What do I get with my Black Box Financial Intelligence subscription?
- 2-year growth rate metrics published weekly during coronavirus recovery for more accurate performance benchmarking
- Measure performance across four interactive dashboards to create endless possibilities for drilling down into the data.
- Track sales and traffic performance at the industry level down to the unit level to identify outliers
- Benchmark your brand against six segments and the entire industry through weekly interactive reports with drill-down capability
- View your metrics and compare with competitors down to the daypart to understand where your brand has a sales gap
- Metrics include sales, traffic, sales per labor hour, PPA, food, beverage, dine-in, to-go, catering, banquet, drive-thru, delivery & daypart
- Access to the Market Share Report, the largest data set available for the restaurant industry, including market share, total sales growth, unit growth, and average weekly sales at the national, regional, state, and DMA level