Guest Blogger Jerry Harrell, 2018-2019 Board Chairman of NMRA and Owner of Double Eagle de Mesilla in Mesilla, New Mexico, offers some insight on 3rd Party Delivery:
Uber Eats, Waiter, Door Dash, Grub Hub, TuYu, Lodel are some of the delivery businesses knocking on your door or emailing or calling you to allow them to serve you. But, are they really….serving you? Customers seem to love it. Everyone says you MUST do it because everyone else is. You’ve seen these and more in trade magazines and others touting the ease and convenience for the customer and money for you. But, are they really….making money for you?
- Is your restaurant menu appropriate for 3rd Party Delivery?
The Double Eagle Restaurant in Mesilla, NM is a historic adobe home filled with art, antiques, crystal chandeliers and more, maintenance and upkeep for which is figured into the menu prices. Will customers pay those prices without the whoopdeedo décor? Remember: you can construct your delivery menu deleting items on your in-house menu which won’t work for delivery (that ice cream pie may not make it once the driver stops for gas, drives to Chardonnay Place instead of Chardonnay Drive, then can’t find 315 cause the order is for 513 – all of which and more has actually happened). French Fries are likely to steam themselves limp so maybe a bag of chips instead? What on your menu works for delivery? Will dressing make a salad wilt or should dressing be packaged separately? Just offer those items which will make you look good. If your most popular item won’t survive looking fresh and delicious, will you get more complaints about NOT offering it than offering it and then disappointing customers?
2. How much are you going to pay the 3rd Party Delivery Company?
The usual business model for 3rd Party Delivery is you discount your price by 25% to 30%, the customer pays full price plus a flat fee to the 3rd Party. You must do the math and look at the true cost of this option. Also, many 3rd Party Delivery companies will negotiate that percentage discount down to as low as 5% but you need to know that….and now you do!
3. Will you make money selling via 3rd Party Delivery?
There are other costs involved here. Taxes – will you pay the taxes on the full menu price even though you only get 70%? Packaging – will you need different packaging for food needing to survive a 20 to 30 minute or more ride? Tampering – YouTube is full of videos of delivery drivers sipping milkshakes or grabbing a piece of bacon off the burger or doing quality control on the French Fries. Employee Time – do you really have employees with nothing to do that adding this job duty on will not cost you more? Who is liable for foodbourne illness (can the company show a chain of custody), auto accidents by the driver (she was delivering YOUR food).
4. Is your business set up to handle these orders?
Can you walk yourself thru what will happen in your business when you get an order? Literally, walk your order thru your building. How will the order come into your house? Who will be alerted that there IS an order and who will see the order thru step by step to pick up by the delivery driver? You must make sure you understand the delivery company’s process and ensure that their process meshes with your process. Some restaurants call the customer when an order comes in to confirm order details and sometimes offer upsells or additional items.
5. Is this a marketing expense rather than a profit center?
What is the forecast for orders for delivery? 1 a day, 5 a day, 10 a day? Run the numbers and assess if the cost is acceptable for customer satisfaction with your product. That is a decision only you can make. Is getting your food at the customer’s home going to tempt them not to put on pants and come to your store? Are you generating customer satisfaction? Remember most 3rd Party services are in the business of generating sales – for themselves. It is not unusual for a customer to see when signing on to re-order from X Restaurant “We see you enjoyed your last order from X Restaurant, would you like to see a list of all our other restaurants?”
6. What customer contact information (data analytics) will the 3rd Party provide? So, what? What will you do with it?
Almost all 3rd Party providers maintain a customer information base you can access (just your own delivery customers usually but some will offer their other customer’s information for you to solicit at a cost to you) Is this something you can actually do something with? Will you offer reminders of the delivery option or coupons for discounts on in-house visits? Who will do that for you? How much will that cost you? Some offer much more help and information but you have to ask.
7. What about just signing up for everyone who offers delivery?
Just sign up with everyone and, as long as you have identical delivery menus, no one should get confused except the bookkeeper. Remember him/her? If the dedicated delivery order specialists charge it to Door Dash instead of Grub Hub, how long will it take the bookkeeper to figure it out? Scrutinizing each bill is important….sure, mistakes happen but there are a LOT of stories about incorrect percentages or mistaken deductions to your check so reconcile each and every line.
8. What are the 3rd Party’s delivery zones – where will they go and where will they NOT go?
If your customer lives on the west side of town but your 3rd Party delivers mainly to the east side, is it worth it? Make sure you understand exactly where the line is so you don’t go marketing the service to people who can’t use it. Also, ask if they do Hot Spot Delivery – if someone outside the delivery zone will meet them at X address (usually a prominent parking lot) to pick up the food within Y time frame.
9. Who takes on customer complaints?
Did the driver take 50 minutes to get to an address 15 minutes from the restaurant? What kind of hit does your restaurant take when 3rd Party delivery lets you and your customer down? What recompense can go to the customer? Is that enough to make up for the disappointment you will get tagged with? Who makes the decision about what to do?
10. Will the company you choose still be in business next week?
Almost all 3rd party delivery companies are losing money. Some are losing BIG money. A number of prominent companies that made all the big news have disappeared. The business model for most of these companies seems to ensure losing money on each delivery…but they’ll make it up in volume, right? Those that survive will have to increase their charges to actually make some kind of profit. That will leave the customer to decide– is the cost worth it?
It’s a lot to consider and math is hard. Some businesses (usually franchises) seem to make it work for them. Don’t join the herd unless you know you will make money or chalk the cost up to marketing or you are sure the herd is not heading for a cliff.