John Oakes is CEO of Revenue Management Solutions. This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.
It’s no secret that consumers are seeking convenience, resulting in a drive towards on-demand delivery. Most restaurant owners see the trend as a good thing for business: In fact, some are even moving to a delivery-only model.
And this trend is here to stay. Investment banking firm Cowen & Co. predicts the U.S. food delivery market will grow from $43 billion to $76 billion by 2022, mainly driven by the rapid expansion of delivery companies like UberEats, Grubhub, DoorDash, Bite Squad and new players continuously entering the market.
Indeed, ordering restaurant meals for delivery is becoming an everyday part of life for many. According to Cowen & Co., the average U.S. consumer places 48 such orders per year, with that number spiking to 66 orders a year for 18- to 24-year-olds.
While this trend is great for customer convenience, how should you as a restaurant owner pick the right delivery partner, and how do you make sure these services will help both your customers and your bottom line?
Certainly, it makes sense to broaden your customer base beyond the people who walk into your restaurant. But as you weigh the various services out there, be sure to choose those that will help your business, in addition to theirs.
This should all tie to a deep understanding of your restaurant’s profitability, and to knowing that customer satisfaction, smooth operations and the quality of your brand are all critical for your long-term success.
With this in mind, here are five things to consider before partnering with third-party delivery services:
1. Choose a delivery company that delivers a customer experience that matches your brand.
Much like your sit-down customers, it’s doubtful that you’ll get a second chance with delivery customers if the food or service is subpar.
First, find out about the delivery company’s reliability and customer service, and ask for statistics on customer satisfaction and average delivery times. Take the time to get information about how the company trains its team to deliver orders, how it handles complaints, if it conducts background checks on drivers and how it sets its own benchmarks.
2. More business isn’t better if it doesn’t make you money.
The order value per check will vary depending on whether your restaurant is located in a densely populated area versus a lower-density area. Once you have deducted the commission percentage, which can be anything from 15-30 percent, deduct other additional costs of the new service from the net revenue per order so you can understand potential profit margins in terms of dollars.
If you are planning to offset some of the commission you pay to the delivery partner by adding a delivery charge, keep in mind that your customers will focus on what they pay in total. Even though a $3.99 delivery charge might not seem exorbitant in your city when compared with other area services, you still need to consider your customers’ price sensitivity. For example, will they decide not to order if the cost is $15.99 versus $11.99?
Use your transaction data to analyze price sensitivity before you set delivery prices. This should be a natural extension of how you determine menu prices for walk-in and drive-thru customers.
3. Time is critical: Get your restaurant ready to handle deliveries efficiently.
A worldwide six-month research project conducted in 2016 by global consulting firm McKinsey & Company revealed that speed of delivery is the biggest variable in customer satisfaction, with an average 60 percent of consumers citing it as a key factor. The optimal wait time is no more than 60 minutes.
For your restaurant, the menu, packaging and onsite processes all need to be designed with speed in mind.
Are your products easily prepared and assembled? Is the delivery technology integrated with your in-house electronic point-of-sale system to help the cooking flow in the kitchen? And have you made sure the food is picked up by delivery partners in a way that doesn’t negatively impact your in-store processes?
4. Know the return on investment for offering delivery.
To analyze the return on investment, it’s important that the delivery data is tracked properly and integrated into your point-of-sale data.
This will give you an informed understanding of how your customers use the various channels, such as eat-in, drive-thru, pick-up and delivery, and how they purchase. These insights will also allow you to develop channel-specific communication and pricing strategies to ensure that you won’t lose your customers on that all-important customer journey, and they will use your restaurants again and again.
5. Avoid long-term commitments with delivery companies. Check on their performance constantly and be sure you clearly relay your expectations.
Delivery times should match what your company has told the customer to expect, and customer satisfaction should constantly be at high levels.
Many restaurants use multiple delivery providers, partly to cover their risk in case a provider fails to perform or goes out of business.
Don’t be afraid to drop a service if the delivery doesn’t mirror the quality experience your customers have when visiting your restaurant.
As you consider your options, know that many delivery companies are doing an excellent job. And the payoff – broadening your base of customers and building brand loyalty on days when the customer doesn’t traditionally come into your restaurant – can be the incentive for you to do your homework on the front end.
John Oakes is CEO of Revenue Management Solutions, which provides a data-based approach to pricing and menu optimization for restaurants, delivering solutions for many leading global restaurant brands.