How a Delivery App Can Benefit Your Restaurant
Restaurant closures and pandemic-related restrictions have brought delivery apps to the forefront of recent thought. But delivery as an additional service to restaurants isn’t new. Delivery apps have been working towards growing off-premise dining at a rapid pace. In Canada, prior to the pandemic, nearly a third of the population had ordered from delivery apps. That number has grown exponentially since transitioning to our new normal. Now, apps such as SkipTheDishes dominate the industry as they have become one of the main sources for easy, convenient, and delicious food.
Why a Delivery App?
Delivery is a great channel to target new consumers and expand your reach. It’s your chance to expose potential consumers to your amazing food. Because of the COVID-19 pandemic, many customers may feel uncomfortable walking to your location and ordering food. Patron fear is a significant and unexpected challenge for the restaurant industry, which has historically relied on visible locations with high foot traffic. The added friction from the pandemic has ground sales to a halt in all aspects except one: delivery.
Delivery has proved to be essential for the survival of many restaurants. Deliverable food makes it possible to continue serving clients and bypassing the consumer tension that has formed since the start of the pandemic. Restaurants can also charge more for food in a “delivery menu” because of the added convenience that the service offers. It is encouraged to do so, as this will help significantly with offsetting costs. While customers are charged more than in-store via delivery fees and service charges from the delivery provider, they are mostly willing to pay a small online price increase on menu items to support the restaurant. Many customers do not bat an eye despite paying a premium on their orders.
The commissions charged by delivery apps are based on revenue rather than profit. In most scenarios, the restaurant covers the cost of promotions. From removing the delivery fee to offering free items on an order, these marketing efforts are an additional expense for restaurant owners. However, some delivery services, such as Uber Eats, provide discounts each month to new and existing customers, bearing the cost themselves. This is part of Uber Eats’ market penetration strategy in multiple Canadian cities to increase its market share as compared to other competitors that are still dominating the industry.
Canadian Delivery Statistics
According to Statista, SkipTheDishes is the most popular delivery platform amongst Canadians, followed closely by Uber Eats. When asked, 55 percent of Canadian respondents had used SkipTheDishes at least once in the past month, while 46 percent had used Uber Eats. Leveraging this data to decide which apps to include for your business and marketing strategy can be essential in reaching your target audience. It is also important to remember that many customers have more than one of these apps on their phones. While they may favour one over the others, they do occasionally switch, especially with attractive discounts enticing them on other platforms.
Costs associated with marketing on delivery apps can erode your profit per item. Consolidating costs where possible, such as labour and overhead, will be key to your success. Many people now perceive dining in restaurants adversely, which explains why full-service restaurants have seen so many losses relative to quick-service restaurants, even in Provinces with shorter lockdown periods.
Delivery App Alternatives
An alternative to using a delivery app is to institute your own “in-house” delivery. This, of course, is also a cost that the business must bear. In most instances, a driver is hired and paid for the time they work. It may be possible to hire labour that fulfills both kitchen work and delivery, but that may cause strains on output quality, consistency, and accuracy. In certain instances, one delivery driver may not be enough. Two orders could be placed on opposite sides of town, and as a result, the delivery will take longer. Delays in delivery are harmful to brand perception, especially if the delivery is fulfilled in-house. Third-party delivery services deliver more efficiently due to the large fleet of drivers they have available. Furthermore, most people are conditioned to look at apps more and more as the network effect between the app and restaurant takes hold.
For these reasons, outsourcing delivery to a delivery app is a simple decision. Based on your size and scale, it may not be worth building your own delivery system. Apps like Uber Eats make delivery simple by outsourcing their services. The downside, of course, is that delivery can sometimes be more of an expense than an opportunity. On top of using these well-known delivery services, NextGen Kitchens provides a white-label mobile app that allows your restaurant brand to create a fully customizable online food ordering app fully branded to your restaurant. This app provides its own unique benefits as you can connect with your customers on a more personal level and also instead of commission-based sales that other third-delivery apps possess such as UberEats and SkipTheDishes, you only have to pay a fixed membership fee.
Recently Uber Eats and SkipTheDishes have created a program that allows restaurants to showcase their menu on these apps, while fulfilling their own delivery orders. While the third-party providers still charge a commission for this service, this option may be worth considering based on factors such as your average tickets size, delivery radius, and the minimum wage in the Province where you are located.
How Businesses Have Responded to COVID – 19
The foodservice industry continues to be strongly impacted by the pandemic in much of Canada, and on a global scale, too. Nonetheless, restaurants will rebound and see the normalcy of eating behaviours return. If, as a restaurant, you have survived the pandemic, now is your opportunity to flourish. In fact, we have already seen this happen. When restrictions on restaurants were lifted, the industry rapidly rebounded. However, when restrictions were imposed again, the industry re-witnessed a significant decline. According to CNBC, another reason behind the rapid rebound is the adaptability of people and their businesses. Many businesses affected by the pandemic have quickly pivoted to ghost kitchens or have onboarded their restaurant on at least one delivery app.
The industry is the emptiest it has been, with several restaurant businesses for sale and commercial kitchens sitting dark and empty. While it may be the time for you to open a second location at a reduced price, current trends point to the continued growth of delivery. To succeed, delivery should be a primary consideration. The key to capitalizing on this trend is to open a small restaurant, with little, if any dine-in space. Companies such as Domino’s Pizza, and Wendy’s have exploited the small footprint trend. They started focusing on delivery to connect with previously unreachable consumers and are seeing higher profits because of it.
Restaurants are known for being high-risk investments, and this is relevant now more than ever. An alternative to owning your own establishment is to lease a ghost kitchen. Many owners have already switched to this option. This solution could be the perfect next step for expanding or starting your food business with lower upfront capital requirements and flexible lease terms. This article outlines several of the important considerations about opening a restaurant.
Online Food Delivery Apps Key Players
From the Canadian SkipTheDishes to companies that only exist abroad such as Postmates, there are plenty of delivery services rising and entering the industry. Each of these competitors has its own advantages and disadvantages. Outlined below are some delivery services local to British Columbia:
Just Eat! This is the simple but elegant slogan of SkipTheDishes, as well as the name of the company that recently acquired it. Based in Winnipeg and founded in 2012, SkipTheDishes has the largest customer base in the country. This will most likely be the brand that you start with if you decide to include third-party delivery into your restaurant offerings. Like most delivery apps, this company can charge between 15 percent and 30 percent of your gross order. However, provincial governments have used their power to place a 20 percent cap on the fees that delivery services charge given current conditions. A common trend, to compensate for the commission charges, is to slightly increase your menu prices. Customers have proven to be willing to pay slightly higher fees for the added convenience value.
DoorDash brands itself as a technology company that “connects people with the best in their cities“, and features over 300,000 local and national favorites on their platform. According to Doordash’s most recent economic report, 67 percent of restaurants found Doordash to be crucial to their business during the pandemic. Doordash also charges similar commissions to SkipTheDishes. The ranges are roughly from 15 percent to 30 percent, subject to negotiations.
MealoBox is a Vancouver-based delivery company that differentiates itself by acting as a virtual food court where customers can select food from multiple restaurants in a single order. This company specializes in delivering larger catering orders to local businesses and charges restaurants a lower commission as compared to larger competitors within the delivery industry.
Uber Eats is an addition to the classic Uber Ride Share system. Rather than transport customers to food, the app has begun transporting food to customers. The Uber Eats function is very effective because it connects to the Uber app. The attachment to the app means that Uber Eats is easily accessible for the consumer from multiple online locations. Uber Eats has been aggressively trying to break into the market by offering deep discounts on its services to consumers. Currently, it is at roughly the same market share as DoorDash. It also charges the standard 15-30 percent commission rate.
Fantuan holds itself out as an alternative to the big three delivery apps. This company is also a homegrown Canadian delivery provider and is currently operating out of Vancouver, Edmonton, Montreal, and more. According to their website, they charge no additional costs leading to more profits in your pockets, however, they do charge a commission. The app prides itself on offering the “best Asian food delivery”. If you specialize in Asian cuisine, we would highly recommend looking into listing your restaurant on this third-party delivery app.
Ritual is a company that operates predominantly in areas with a high volume of office workers, such as downtown Vancouver. The app started by offering online ordering for pick-up to save consumers time rather than wait in-store to place an order. Their value proposition includes allowing a group of customers to place and pay for their orders separately, but send a single individual to collect the order. This feature is particularly appealing to office workers and businesses looking for lunch options. In 2020, Ritual expanded its offerings to include delivery as many began working from home.
Which Delivery App to Choose?
The short answer is every app. Choosing every delivery app can benefit your restaurant by increasing visibility. Multiple delivery apps also provide a multichannel approach to food delivery. It may be that certain consumers prefer one app over the other. Your restaurant can reach as many eyes (and stomachs) as possible by accessing all possible channels.
There are, however, instances in which you may not want to use a particular delivery app. Because the commissions are negotiable, it may be more optimal for your establishment to favour a certain delivery app over others. Large restaurant franchises often partner with a single delivery app in exchange for better terms.
Delivery apps also differ in the way that they report revenue. Some apps are very thorough and clear, while others can feel a little bit overwhelming. Regularly checking each channel will help with keeping track of sales and identifying areas for improvement.
Marketing on a Delivery App
Delivery apps are not just limited to being a third-party food delivery system. While it is true that it is their primary purpose, delivery apps also provide virtual real-estate that drives significant traffic. Making use of in-app promotions can be a very good way of leveraging your presence to increase sales even further. The audience of a delivery app consists of customers ready to make a purchase. At this moment, an appealing offer from your restaurant could sway them to your establishment. Delivery apps are continuing to expand marketing options and adding new promotions that you could experiment with to achieve your business goals. For instance, DoorDash has an “Offers” tab where restaurants with promotions are highlighted. Removing a delivery fee, or offering a percentage discount off the order are great ways of attracting consideration from “in the market” customers.
The restaurant industry is highly competitive and has become more so with the introduction of third-party delivery services. However, delivery is not a solved puzzle in the restaurant industry yet. Many tactics for overcoming the competition are still being discovered in this innovative environment. Dynamic changes are continuing to happen daily to third-party delivery. As an example, legislation may be coming from the government on continuing to provide a cap on certain commission fees post-pandemic. Ghost kitchens are springing up to facilitate the rapid expansion of new and existing brands. Celebrities are finding a food-based niche with their fans. All this is extremely exciting and exists because of the benefit the third-party delivery apps bring to consumers.
There are many delivery apps that can help establish that value-added service as an addition to your establishment. Delivery apps like Uber Eats and SkipTheDishes are well known, while smaller competitors such as MealoBox and NextGen Kitchens white-label mobile app provide an excellent cost-effective alternative. Many of these apps have certain advantages and disadvantages, so it is important to prudently select the apps that are the best fit for your concept. Delivery apps may also contain space for advertising your business to increase overall revenue. With all of these merits, it is really worth considering delivery as part of your sales strategy.