The dish on third-party delivery for restaurants

Exploring the impact and considerations of third-party delivery services in the restaurant industry

February 14, 2022
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The dish on third-party delivery for restaurants
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The dish on third-party delivery for restaurants

As a restaurant operator, you and your staff spend a lot of time preparing and serving dishes to local diners. Now it’s our turn to dish some piping hot intel to you

At Upside, we spend a lot of our time thinking about the restaurant industry and how we can help solve the challenges restaurant operators are facing. We recently spoke with hundreds of full-service and fast-casual restaurant operators and asked them:

  • What are your biggest priorities for your business right now and looking ahead into 2022?
  • What are the biggest challenges facing your business right now?
  • What are you doing to address those challenges?

In this article, we share their feedback, as well as our recommendations on how to approach some of the most commonly-mentioned challenges.

So…want the dish? Read on to hear what they’ve got to say!

It’s tough for restaurants: supply chain…hiring…Covid…oh my!

As a restaurant operator, there’s a lot going on right now that’s out of your control. Supply chain issues are leading to rising food costs; labor shortages are making it tough to hire and even manage day-to-day operations; and Covid continues to cause a lot of uncertainty as we enter the third year of the pandemic.

% of survey respondents listing each of the following as one of their “biggest challenges”

Perhaps unsurprisingly, restaurants’ top priorities reflect a lot of the solutions needed to solve these challenges. Here’s what they said they’re focused on this year:

% of survey respondents listing each of the following as one of their “top priorities”

And now, the $64,000 question. How to go about tackling these challenges & priorities? Operators have a number of different ideas.

Hiring: Restaurants are getting creative with filling labor shortages, trying everything from sign-on bonuses and other incentives, to higher wages, to advertising in new places and with third-party vendors. And, of course, when necessary, operators are picking up the slack themselves.

Addressing food / supply chain challenges: Operators are becoming ninjas at menu optimization - switching out items that may be unavailable or are too expensive, and subbing in new specials or ingredients depending on what’s on hand. Restaurants are also looking for new ways to reduce waste and conserve cooking supplies. And, on a lot of menus, prices are simply going up to account for rising costs.

Bringing in more customers: Restaurants are looking at all sorts of new strategies for finding new customers and bringing them inside - everything from opening their restaurants up more to the community for live music events and other programming, to running new promotions or discounting strategies, to finding new advertising channels. 

However, when it comes to bringing in more business, the tactic we seem to be hearing about the most in the headlines is third-party delivery - working with vendors like GrubHub, DoorDash, and Uber Eats to reach more potential diners. 

This makes sense. On average, restaurants say that 15-20% of sales these days are coming from orders through third-party delivery apps. But is this an effective solution? And what about those fees? Some of the answers may be surprising.

How do you solve a problem like customer acquisition?

Today’s restaurant operators are in desperate need of attracting new customers, and third-party delivery apps feel like the safest bet. 

It makes sense, then, to hear that use of third-party delivery apps among local restaurants is quite common. In fact, 64% of restaurants we spoke to use third-party delivery services, like:

It’s also unsurprising to hear that reliance on third-party delivery increased a lot during the pandemic - on average, the percent of sales coming from third-party delivery apps went up by 10-20% in 2021, helping these services account for 15-20% of sales at the restaurants we spoke with.

And the growth is unlikely to stop there - most local restaurants (62%) expect that they’ll use third-party delivery even more in 2022. Why? It’s easy to turn on and convenient for customers.

So what’s the catch?

The reality is that third-party delivery services offer a number of fantastic benefits to struggling restaurants, but they also can have some less obvious downsides. 

For one, these services charge fees that amount to an average of 10-15% of revenue on transactions through their apps. There’s also a loss of control of some of the aspects of the customer experience - which can have negative brand impacts (for example, if food arrives late / cold). And, by putting a service in between your restaurant and the customer, you’re creating some barriers to the merchant-customer relationship

All that being said, restaurants generally feel neutral-to-positive overall about third-party delivery, and the majority of operators said they are either “extremely” or “very” likely to recommend these services to a peer.

Is it worth paying for third party delivery?

Third-party delivery services clearly bring a lot of benefits to restaurants, but it can be tough to evaluate the true impact.

We’ve established that third-party delivery services are pretty good. But what would a great customer acquisition tool do? Here’s a few things to be on the lookout for:

  1. Increasing purchase frequency (and proving it!): A great customer acquisition tool will not only bring you a lot of new customers, it will keep them coming back - and also get your existing loyal customers to start coming even more! It should also be able to show you just how much more customers are coming as a result of the service.
  2. Bringing customers inside: When you have the labor to support it, bringing customers in for dine-in gives you a lot of opportunities that takeout through third-party delivery doesn’t - you have a chance to upsell them, collect tips for staff, and build a personal relationship that will keep them coming back. 
  3. Protecting your profit: Running a successful business means protecting - and growing - your bottom line. Services that take a cut of your revenue can pretty quickly eat into your profit (or even eliminate it completely). Look for a service that operates on a profit-sharing model - ensuring they only make money when you do!

And because we operate on a profit-sharing model, we guarantee you’ll always make more money than you spend. In fact, the average restaurant on Upside earns a 63% ROI - that means that for every dollar invested in Upside, they earn back $1.63. 

So there you have it - that’s the dish on third-party delivery! To learn more about any of these themes, or to discuss how Upside can help you bring in more new customers and earn proven profit, contact us.

Get started with Upside.

The dish on third-party delivery for restaurants

The Upside Team

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The Upside team is made up of data scientists and industry experts who are passionate about delivering empowering content to our readers. With a focus on providing practical insights and meaningful perspectives, we create engaging materials across a wide range of topics. From exploring industry trends and offering expert analysis to sharing useful tips and inspiring ideas, our team works diligently to provide you with the information you need to thrive.

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