Food take-out and delivery services are two of the fastest growing segments of the restaurant industry. In fact, foodservice delivery sales have grown by 20% over the past five years and according to the 2018 Takeout, Delivery and Catering Study conducted by CHD Expert, off-premise sales overall are estimated to account for 37% of total restaurant sales, or $209 billion – a number that is expected to jump to nearly 50% by 2023.
Many have come to believe that third party delivery has become a need-to-have and no longer a nice-to-have in the restaurant industry in order to gain and maintain share. There are even several studies that show as third-party delivery continues to grow, it will have a positive impact on the sales and profits of businesses that adopt it – which sounds like it makes sense. But for those who refuse to incorporate delivery, the warning is that they will negatively affect their foodservice business.
With figures and scare mongering statements like these it’s little wonder that many quick-service and fast casual brands feel under pressure to find a way to make third party delivery part of their game plan. However, a recent article featured on Diginomica.com highlights that while it’s tempting to believe that the third party delivery concept is essentially de rigeur in the QSR space – not everyone is convinced.
So, before jumping onto the delivery bandwagon, here are 3 things to consider that can help your restaurant company decide if third party food delivery is right for your business. The last thing you want to do is turn your customers off by providing them with sub-par delivery food.
Delivery Cost: Consider Your Customer’s Price Sensitivity Limit: When considering a third party as a delivery option you need to decide how you are going to handle the service fee and recognize if offering delivery is profitable for your business. Some operators look for ways to recoup the cost while others decide to pass on the additional cost on to the customer. While a delivery charge might be as little as adding $2 extra, you need to keep in mind that the customer focuses only on the total cost of the order. So, for example, customers might be happy to place an order for one person that totals $10.99, but they might get turned off if that total starts to approach closer to $15.
So, while third party delivery has the potential to increase orders and their values, you first need to understand the true cost of delivery and know your customer’s price sensitivity limit as you might inadvertently take a bite out of your earnings by reaching a price level that turns them off.
Delivery Speed: It’s paramount: It’s not really surprising that customers tend to choose fast food for its ability to deliver in a hurry. According to a 2016 worldwide research study by McKinsey & Company, an average of 60% of consumers cite speed as the biggest variable in their satisfaction – as soon as the customer hangs up the phone or hits the order button in their delivery app, the pressure is on. Not only that but another study by Boston Consulting commission by Jimmy John’s showed that speedy and accurate delivery times are essential with 92% of customers wanting their food within 15-30 minutes of placing an order, well short of the average 49-minute service offered by the larger third-party delivery providers.
This means it’s critical to analyze every step of the delivery process, from how quickly the kitchen turns orders into items ready for delivery, to how fast the delivery partner can get to the customer to ensure delivery times match your customer expectations.
Delivery Relationship: Avoid Long Term Commitments: While hiring a third-party delivery service is intended to increase your business’s profits, should anything go wrong with the order or delivery once it’s left your premises, chances are that the majority of your customers (around 76% according to studies) will hold your business responsible for issues with their orders.
It’s important to remember that a third-party delivery company is responsible for representing your brand and should act accordingly; the service they provide should be polished, professional, and virtually error free, and their mission and goals should be in line with your own in order to present a unified image. In the case where a provider isn’t performing well or as expected, don’t be afraid to drop a service if the delivery doesn’t mirror the quality experience you deliver and one your customers expect. Every day with a sub-par delivery provider will cost you repeat business and hurt your reputation.
Ordering delivery is a convenient meal solution diners love. It’s also nothing new – having pizza delivered has been the norm for decades. However, what has changed is the digital transformation of food delivery. With the rise of delivery aggregators and an increased appetite from customers for off premises dining, quick-service and fast-casual brands of all shapes and sizes will be forced to consider a foray into delivery. Whether you should use a third-party company, build your own in-house team or do both, only you can decide what is right for you and your customers.