Food delivery is now more common and convenient than ever, and modern technology has made it easier for people to access food no matter where they are. Many restaurants stumble because they do not have their restaurants properly set up for delivery. Restaurants operators who have a sound delivery strategy realize 20+% of sales towards this revenue stream, however, are they truly making money?
You’ve seen their names just about everywhere now–GrubHub, Doordash, Postmates, Uber Eats—3rd party food delivery services are a big deal. Estimates show that the delivery market is a $13 billion industry! As a restaurant owner, these companies have probably approached you. These 3rd-party services make a delivery option possible for you, but charge approximately 15% to 30% in commission.
Wait a second, 15% to 30%? That’s quite a figure! There has been much contention around the high costs associated with such delivery services. McDonald’s has recently begun negotiating with its franchisees, and Uber Eats to reduce commissions and provide some rent and royalty relief. Beyond the cost factor, Domino’s CEO Rich Allison has rejected the idea of using 3rd party delivery stating he would like to keep the quality and safety in their own hands. Jimmy John’s also does not rely on 3rd-party delivery services and instead delivers food to customers in “sandwich delivery zones” that are no more than a 5-minute drive or bike ride away.
It appears chains are taking a not-so-novel approach to control the costs for food delivery–they’re simply charging more. This strategy of charging more for delivery orders does not seem to negatively affect business as customers are willing to pay for this type of convenience. Consumers want convenient delivery options — you cannot ignore this truth. If you haven’t considered adding delivery as an option for your guests, be it 3rd-party or in-house, you’re falling behind! If you need help trying to make real profits by tapping into this growing delivery industry, give us a call. The Synergy team are experts on this subject!