Is Meal Delivery Right for Your Restaurant?Here are 4 facts about meal delivery to consider before making it a part of your restaurant’s business plan.
Diners aren’t just relegated to pizza and Chinese food delivery these days. Thanks to online ordering companies such as Seamless, GrubHub, DoorDash and Eat24, restaurant delivery is a growing part of the industry as more diners seek convenience.
According to the market research firm NPD Group, non-pizza delivery traffic has increased 33 percent since 2012. Soon, online orders will trump phone orders as
customers’ preferred way to get delivery. As more delivery options – such as Amazon Prime Now, UberEats, Caviar and Munchery – roll out nationally, food delivery traffic will continue to climb.
“Food delivery is no longer seen as a luxury,” said Rafi Cohen, co-founder of Orders2Me, an online food delivery platform.
“Three in five consumers order delivery or takeout at least once a week, and the number is even higher with millennials.”
If you’re thinking of adding a delivery business to your restaurant, consider these factors first.
Delivery does not equal ‘easy money’
One of the biggest misconceptions about delivery is that it is easy extra money, said Arthur Li, head of business finance at Altamarea Group, a New York City-based company of 11 restaurants, four of which offer delivery.
Delivery needs careful thought on execution, menu, service, quality assurance and logistics, all of which can cost a restaurant additional money.
“You need to exert extra effort to make sure your product is properly represented by the delivery service,” he said. “Risks include delays in ordering and delivery, improper care and transport of dishes, and not having the proper equipment to transport hot and cold food.”
While adding a delivery service at your restaurant can give you a new source of revenue, especially if you set your prices at a point that provides a decent profit margin, you may also have to worry about liability insurance and legal considerations. It is not simply about cooking the food and getting it out the door.
“People are hesitant to revisit a restaurant that makes order mistakes or delivers sub-par food, so you’ll want to be sure that your process is accurate and efficient, so you don’t lose money on correcting mistakes or losing customers,” Cohen said.
Beware of staffing issues
One of the most challenging aspects of food delivery is staffing. Putting your delivery drivers on the payroll requires research into whether you’ll pay them hourly or as
independent contractors, which may depend on your local labor laws and how much you’ll use them. In either case, it is important to train your drivers, since they act as the face of your restaurant at someone’s door, Cohen said.
Many restaurants don’t have the necessary resources staffing and training-wise to start a delivery business, so they rely on third-party services such as UberEats and Postmates to pick up the food and get it to the customer’s door.
But many times the fees charged by such services outweigh profits. Delivery checks tend to be lower than in-house checks because customers aren’t typically ordering drinks, desserts and appetizers.
“Restaurants don’t have a high profit margin to start with, so any new venture or investment should be well-researched and thought out first to avoid any big losses of both time and money,” Cohen said.
How will your food travel?
You might not be able to offer every item on your menu when you start a delivery business, Cohen said. Some dishes simply won’t deliver well, putting your restaurant at risk for bad reviews and lost customers if what they ordered arrives cold, misshapen or soggy.
Cohen advised considering a limited delivery menu of dishes that can make the trek in one piece, which will also ensure more accuracy, better quality and a simpler process.
It’s also crucial to think about your packaging. You may need to get new supplies to deliver food optimally, such as leak-proof and insulated containers to keep food warm and cold.
“Food safety is a big concern for delivery, so food needs to be kept at safe temperature while en route,” Cohen said.
Plan your logistics
To get your delivery business running, you’ll need to implement a system to track orders and get them out the door.
If your restaurant’s point-of-sale system doesn’t have a delivery option, you may need to invest in software that can track deliveries and customer data, or help drivers find optimal routes for getting to customers (especially helpful in large cities).
Telephone and online platforms are the most common ways to order delivery (though some restaurants now use text messages), and every restaurant needs to pick the means of taking in orders that is most convenient for customers and the restaurant.
According to Li, if you decide to use a third-party service for delivery, be sure to shop around for the one that has the best fees for your business. You’ll also want to make sure the service has a solid customer-service reputation and provides real-time updates on delivery.
“All delivery services should proactively take responsibility for any issues related to transport of food, including delays and food arriving to consumers in substandard form,” Li said.
Though delivery has many logistical considerations and isn’t right for every restaurant, Li said his restaurant group has built a large delivery client base that has translated into profit and exposure.
“Delivery extends the reach of our brand and awareness to new clients,” he said. “It allows existing clients to experience our menu more frequently without coming into the restaurant.”