Cost of Delivery Platforms Can Outweigh Revenue
Many restaurants are rushing to acquire online delivery technology out of fear that they’ll miss potential sales, and for good reason. Morgan Stanley predicted that in the next few years, online delivery will generate up to 40% of U.S. restaurant sales. However, online delivery hurt restaurant revenue. Between the growing demand for delivery convenience and the rising costs associated with delivery platforms, restaurants need to compare the costs of services to their benefits. Before investing in online delivery services for your restaurant, consider these factors:
More Customers are Choosing Delivery
While most online delivery platforms claim to create additional revenue for restaurants, this may not be the case. More and more, customers are opting to order in through apps like Grubhub and UberEats instead of dining at restaurants. It’s hard to compete with the convenience of delivery. Online orders could potentially replace some of your restaurants’ core business, which affects the bottom line. However, the popularity of online delivery cannot be ignored. Businesses may not have the luxury of missing out on this revenue channel and its many marketing benefits.
Delivery Platforms Can be Pricey
To start, restaurants must agree to a revenue share when partnering with most online delivery platforms. Aside from credit and processing fees, most platforms take a cut from every processed order. In markets that are more densely populated, this cut can be 16 percent. Rates are even higher for restaurants paying for sponsored listings. New York City restaurant owners have reported sponsored listing commission rates as high as 30 percent!
Sponsored Listings are a Necessary Expense
One benefit of online orders: free marketing. If used correctly, restaurants can use delivery platforms to reach new customers. By doing so, business owners hope that exposure to a great first experience will lead to reorders and in-person restaurant visits. Unfortunately, restaurants looking for more visibility on delivery platforms often need to pay for the privilege. In more crowded markets, sponsored listings are the solution, but at a price. Such high commissions may not be palatable for restaurants struggling with small profit margins.
DIY for Online Delivery (if You Have the Staff)
Not every restaurant can accommodate its own delivery system. But, if a restaurant has its own delivery staff, then it can likely save money. Restaurants with their delivery employees can avoid fees for online orders. What’s more, some restaurants can even avoid delivery platforms altogether by offering online ordering directly through their own website. However, the costs of delivery personnel and delivery technology are high. The only businesses able to afford such services tend to be larger restaurants and corporate chains.
While online orders may be costly, the pressure is on restaurants in dense urban markets to use online delivery platforms to access new customers. Unless your business can hire its own delivery staff or create its own online ordering system, delivery platforms are practically unavoidable. An easy way to begin working with delivery services is at the lowest non-sponsored level. Over time, you’ll be able to assess how the cost of sponsored posts compares to the benefits. To learn about reservation apps for your patrons, read more here.