Restaurants and Delivery Platforms Actually Can Prosper Happily Ever After Delivery platforms are basically the advent of ecommerce in one of the last bastions of local business.
By Landon Ledford Edited by Jessica Thomas
Opinions expressed by Entrepreneur contributors are their own.
At first blush, the growth of the food delivery industry would seem like the best thing that ever happened to restaurants. The problem is, that would assume that every meal being delivered to a home or business is piping hot out of the oven and aesthetically pleasing to the eye.
Fact is such businesses, or delivery platforms, can be inconsistent, based on the level of professionalism exhibited by their employees and their own business objectives. However, restaurants need them in order to grow their own business, or in some cases simply to maintain market share.
The prepared food delivery industry is in a period similar to where ecommerce was in the mid-2000's. Technology was rapidly increasing shopper convenience, and brands were (or should have been) scrambling to figure it out. In addition to other things, that period led to the demise of numerous brands, the creation of a whole new ecommerce world of brands, and the continuing decline of sales in shopping malls. With restaurant delivery, this is happening more rapidly, since we have experience now with such a transition.
So, how can restaurants capitalize on the benefits associated with increased revenues, while minimizing the risk to their all-important brand? And how about the platforms, which need satisfied restaurant partners to grow their own businesses? Neither a local restaurant nor a national chain can survive paying 30 percent per order to a delivery firm. For a restaurant getting into delivery, these are the top four items to focus on:
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1. Research the options
Larger cities have the options of GrubHub, Doordash, Uber Eats and Postmates, while Amazon Restaurants also continues to grab market share. The differences between them are not overt, but options include delivery fees, network size, customer service, and whether they'll provide any training or hardware like a kiosk or tablet to take orders. For more rural cities, options are more limited, but a few Google searches will show you the way. For example, when launching delivery in rural Midwest cities, I found the MyTown2Go network to be a decent partner.
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2. Negotiate properly
Restaurants can't pay 30 percent. It just doesn't work. To combat this, they should make sure delivery partners know they have other options, and a solid goal would be to work them down 18- 23%. This still hurts the bottom line, but if the delivery partner exposes the restaurant to a new audience, and if they have the right menu items in place, it can be worth it.
Pro Tip: What I mean by "exposes the restaurant to a new audience" is the restaurant should consider this in the broader scope. There are immediate sales to this "new audience" but restaurants should also consider the brand awareness they're getting in terms of exposure to a new audience.
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3. Craft a delivery menu.
Let's assume the restaurant chose the right partner, and has negotiated to an 18-23% fee structure. Now they need to craft a delivery-only menu – only seen by people ordering through the delivery partner – that makes sense in terms of profit margins, and in terms of delivery execution (travel, presentation, freshness, etc.). This may involve slight changes or additions to the kitchen and prep processes, but if done well, it's worth it.
Pro Tip: Increase prices on this new delivery menu by 10 percent to cover the margins lost to the delivery tech partners.
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4. Track results
It's easy to see an increase in top-line delivery revenue, but that alone doesn't mean the initiative is successful. Restaurants must keep an eye on monthly delivery sales as they relate to profit margins in general. I recommend having tactics in place to track "first time customers" as well. In addition to those things, restaurants need to closely manage online reviews and feedback. People don't often leave reviews directly on restaurants' review sites when they order delivery, so be sure to tap into any and all feedback through the delivery platforms themselves – it is imperative to know how customers feel about new offerings and delivered food.
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Restaurants aren't the only ones that benefit from these partnerships. So, too, do the delivery platforms, especially those like GrubHub, Uber Eats, Doordash and Postmates, which control more than 90 percent of the U.S. delivery market. With a projected annual growth rate for the industry of 10-12 percent through 2022, it is tempting for these companies to primarily focus efforts on building sales teams. If they really want to live in harmony with restaurants, they should find ways to drop fees under 30 percent, although I realize that model may not work. Here are a few things that will work in the short and long term, things I believe will ensure everybody wins.
Menu and packaging consulting.
After analyzing years of deliveries, complaints and order volume, the successful tech platforms should be able to offer menu and packaging consultation as part of the client onboarding process. Deep-pocketed Uber Eats claims to have done this recently in Chicago, where it found people were searching for suddenly popular Hawaiian poke but not finding many options. They reportedly reached out to neighborhood sushi spots, which would already have some of the same ingredients, and asked them to try making the dish for the app.
Once an onboarding specialist has familiarized themselves with a new clients' menu, he or she should help the restaurant focus on three areas:
Help build the menus.
They should help restaurants select the items to be included on the delivery menu based on functionality and demand. Sure, this guidance will be based in part on historical platform sales. But more importantly, this should be based on expertise with the delivery process – customer experience. Restaurants can apply their common sense to determine which dishes transport best, and what tweaks might make a dish arrive in better condidtion.
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Provide pricing guidance.
Delivery partners know they're cutting into margins, so combat that by ensuring the restaurants are selling in-demand items and subtly marking up prices accordingly, all driven by the plethora of data they're collecting.
Delivery logistical best practices.
Restaurants that are new to delivery need training on packaging to ensure their food travels well. For example, IHOP recently patented new packaging made specifically to help their pancakes travel. I have talked to IHOP operators about this, and it's not a perfect solve. That said, we know there will be potholes in this evolution (pun intended), and we know drivers will get caught in traffic on occasion – help them plan for this as best they can.
Tracking, auditing and customer service.
A big part of running a restaurant is fielding complaints, learning from them and doing better in the future. Tech delivery partners should provide the tools to help restaurants avoid issues, the ability to hear the complaints, and also be able to sufficiently address them and recover the guest for the future. To end that, here are some additional ideas.
Tracking: A few platforms do provide "real-time tracking", at least in their sales pitch to restaurants. We can't, however, expect a restaurant operator in the middle of a busy lunch to manage this. This is something tech platforms are currently working on, which will be extremely important if they want to "get it right".
Customer service: There is no silver bullet here yet, either. A server or manager in a restaurant learns what to do to "make it right" through experience. Can tech platforms figure that out on their behalf? Should they?
Amazon Restaurants has an interesting value proposition here by having their army of customer service reps available to field complaints. This is still pretty generic in nature, though. It will take more time and more of a consultative relationship, but it's worth the effort to get it right.
While the ideal relationship between all parties may still be in the oven, there is every reason to believe that with a little help, what emerges here is something we can all enjoy.
