Food delivery services like Uber Eats and SkipTheDishes are taking off like a rocket. While many restaurants are joining forces with 3rd party delivery services, some restaurants aren't on board.
If you aren't clear on what third-party delivery service does, here is a quick rundown. A third-party service like Uber EATS lets customers order food through an app. It then contracts drivers who use their own cars or other transportation to make the deliveries. The services earn money through restaurant commissions, delivery fees, or both.
There's a lot for restaurants not to like.
Domino's CEO Ritch Allison reject the idea that the pizza chain should outsource its delivery. "We've got a loyalty program with 20 million-plus active members. So, it's just not clear to me why I would want to give up our franchisees' margin or give up the data in our business to some third party who will ultimately use it against us."
Restaurant chains like McDonald's, Starbucks, Chipotle Mexican Grill, and Pizza Hut have partnered with third-party delivery services to attract consumers who are looking for more convenient choices. McDonald's claimed that 70 percent of the orders it gets through its partnership with Uber Eats are customers it might not have obtained otherwise, particularly late at night. While the restaurants benefit by seeing a pop in sales, high commission fees usually between 15% and 30% are the cost to pay.
Delivery services eat into their profits. Grubhub charges restaurants a commission of 12 to 18 percentper order; Uber Eats charges as much as 30 percent. Grubhub reported $5.1 billion in food sales in 2018, a 34 percent increase from the prior years, and said it has grown to 17.7 million diners.
Service can be haphazard; some drivers have coolers to keep food chilled, but others may not. Using a third-party means a restaurant can't guarantee the quality of the food by the time it gets to the customer. If the delivery person gets lost and the food arrives cold, for example, the quality will be impacted. This can negatively affect a franchise restaurant's brand perception, even if it's not their fault.
Domino's CEO Ritch Allison also mentioned, "at our company, we place a high level of importance on quality and safety. What happens when you have a service failure, or a product quality problem?”
A lot of restaurants put a lot of effort into creating delicious, high-quality food, and have little faith a delivery app can guarantee the food will arrive hot and fresh, the way it was intended to be served. In the consumer's eye, they will not blame the delivery service but rather the restaurant for taking a long time to get their food to their door.
Apps can also affect employees. If more people are ordering online instead of visiting a restaurant, it can affect tips. Certain staff may be responsible for fulfilling the orders, but not receiving a percentage of the tips that go to the driver. Also, employees may need to deal with technical problems that can occur with apps — resulting in a significant amount of time speaking to customer support to try to deal with these issues.
Many restaurants aren't step up for delivery workers to come and go. They may be at the front of the house, hovering near the host or hostess, which employees and customers may find frustrating. The restaurant layout may need to reconfigure if a third-party delivery service starts to make up a large percentage of a business's sales.
The threat remains if delivery platforms such as UberEATS, DoorDash, GrubHub, and SkiptheDishes allow consumers to order delivery from thousands of restaurants that serve more than just your menu options. These are just some of the concerns that restaurateurs are voicing about third-party delivery.
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