Sponsored by Rakuten Ready
There’s no denying delivery is a convenience embraced by customers eager to consume more meals at home. Restaurant operators also like delivery — the incremental sales it brings and the ease of letting a third-party handle meals to customers. With restaurants and consumers each getting what they want, it’s not surprising that analysts at William Blair predict delivery will account for 10% of all restaurant sales by 2020.
But with delivery’s blessings come some curses, the worst is slashed profits on all transactions. According to Pentallect Food Industry Consultants, the gross margin on a $30 restaurant meal shrinks by half when delivered because of third-party commissions paid by operators.
And that’s not the only drawback. There are equally significant longer-term consequences:
- Third-party delivery aggregators keep all the customer data — invaluable information restaurants could use to market to customers.
- Restaurants lose the last mile connection to their customers.
- They also forfeit control of the brand experience. If customers receive poor service or food, it reflects badly on the restaurant.
“Delivery presents a real quandary for restaurant operators who see significant sales opportunities in it, but who also understand the cost of it,” says Jaron Waldman, co-founder and CEO at Rakuten Ready. “The solution lies in putting control of the customer experience back into the hands of operators and offering an order-ahead service that’s both attractive to customers and profitable for restaurants.”
Giving customers the ability to order online for pickup at their convenience, he adds, creates an ideal option at both ends of the transaction. Customers can order exactly what they want, pay for it using their mobile device and pick it up at their convenience. Restaurants benefit from increased loyalty and better profits.
With predictive arrival technology from Rakuten Ready, customers and operators gain incredibly valuable information. When customers place orders, they’re told how long it will take to complete and are given the opportunity to confirm the order. Once the order is confirmed, the power of predictive arrival kicks in, letting the restaurant staff know the customer’s location status and how long it will take them to arrive, allowing cooks to fire the order at the perfect time.
“The customer arrives at the exact time that their food is at its best, which increasingly isn’t happening in delivery,” Waldman says. “There’s no shortage of news stories about dissatisfied delivery customers reporting long waits for their orders, not to mention food quality that’s not great when it gets there. No one likes soggy fries.”
Added benefits of order ahead
Bringing customers back to the restaurant produces multiple benefits, says Waldman. When customers pick up their orders inside the restaurant, they re-engage with the brand, feel empowered by their immediate gratification fix and save money on delivery fees. The restaurant can build customer loyalty and upsell promotional items while improving margins.
Since the order originated using the restaurant’s own mobile app, the operator captures all the data tied to that customer. Based on those preferences, operators now have the ability to market specifically to those customers. That encourages repeat business and allows operators to promote loyalty programs and track rewards.
With predictive arrival technology powering orders prepared just in time, customers don’t have to wait. Once the customer has arrived, staffers know exactly where that order is located without searching to find it. And since customers have paid online, the handoff is seamless. Pickup also gives guests a chance to check their orders for accuracy and to make changes if needed.
“You lose the opportunity to do much about mistakes in a third-party delivery transaction,” Waldman says. “But if you find a problem at pickup, it’s easy to find and the fix is quick. Customers leave happy.”
The elimination of delivery fees for customers and commissions averaging 30% for restaurants is huge.
“It’s not a stretch to say restaurant operators deliver the best experience possible when their food is at its best and they can engage a guest directly,” Waldman says. “And when that experience costs everyone less, it’s hard to beat.”