Are apps delivering for restaurant owners?
Right across the world, food delivery apps have become a trusted and reliable onestop shop for hungry, but indecisive customers. The ease and convenience - and huge commercial success - of food delivery apps means they’re undoubtedly here to stay, but at
Restaurant owners often feel powerless when it comes to delivery apps, since they have no control over them, but are being charged almost 20-30 percent of their profits. Unfortunately, for restaurant owners (but fortunately for delivery apps) there is no turning back, since millions of customers have already switched to ordering online through third-party apps.
Food delivery platforms
In simple terms, there are four types of food delivery platforms:
1. Aggregators
• Users have access to multiple restaurants
• Users can compare menus, prices and reviews
• Aggregators collect a fixed margin of the order
• Restaurant handles the delivery
• No additional cost to consumer
2. New delivery
• Users have access to multiple restaurants, even those that don’t deliver
• Users can compare menus, prices and reviews
• New delivery collects a fixed margin and charges a delivery fee to the customer, making the meal more expensive New delivery-service provider handles the delivery
3. Restaurant controlled •
Users have access to one restaurant and its menu. This works for delivery-only and physical restaurants No cost for restaurant, other than delivery resources, and no additional cost for customer, except maybe for delivery
4. Cloud/satellite kitchens
• Allows food producers to start, test and launch a delivery-only restaurant concept in a short period of time, with minimal financial commitment. Now being rolled out by Deliveroo, Ubereats and Zomato.
• Food producers, chefs and entrepreneurs can enter the market and keep costs down by leasing existing infrastructure, without fixed costs. Deliveroo UK and Ireland managing director, Dan Warne, believes that a bespoke, delivery-only kitchen is a perfect example of innovation. “It lets our restaurant partners scale to new sites at low risk, whilst creating amazing new choices for customers,” he says.
Eating profits
In the US, companies such as Grubhub and Postmates are charging restaurants roughly 12 percent to 24 percent of the final check, but newcomers, such as Ubereats and Amazon Restaurants, are stepping it up. Amazon charges 27.5 percent, while it’s rumored that Ubereats is soon to ramp up prices to 30 percent. And of course, better late than never, Facebook has now also entered the game, with its 2016 acquisition of Delivery.com and Slice.
Some of these companies simply collect a fixed margin of the order, whilst other ‘new delivery’ ventures also charge a delivery fee, making it even more expensive for the customer. This leaves restaurant owners faced with the dilemma of either creating their own app to avoid the fee and save their profits, which means possibly losing market share, or biting the bullet by signing up and paying whatever charges delivery apps have chosen to apply.
Will delivery profits disappear?
The impact of high commission rates on a restaurant’s profits can at first seem daunting. This is why, as in the case of travel apps, businesses need to start thinking about the app experience as an opportunity to market directly to consumers and to think creatively of how to save money.
It’s about changing your attitude; basically, restaurant owners need to use the platforms they pay to use to increase market share and mitigate the dent in profits. Restaurants are free to sell through multiple app service providers, unleashing the potential for thousands of new customers. And, with a powerful visual brand, restaurants can transform their identity and appeal to a wider range of consumers.
Only a decade ago, local restaurants didn’t view owning their own website as important. However, today this is recognized as a necessity for a business, which is why it has to be better than just good. Whether we like it or not, if we want to maintain and grow market share, a restaurant needs to build a fantastic, engaging online presence loved by customers. And, if it can get that right, it stands a chance of increasing market share and gaining customer loyalty. Then the commission fee will start to pay dividends.
In a fiercely competitive environment, creative agencies, like Wondereight, can help restaurants make that transition, handling everything from a slick new website, modern brand identity and search engine optimization (SEO) tools that will help land them at the top of search engine results. And, of course, we shouldn’t underestimate the most important ingredient for success in the brave new world of delivery apps – great food!