Third-Party Delivery & Take Out Apps vs. In-House Systems: Pros & Cons for a Decision Making.
The importance of Delivery and Take out specially since Covid 19 outbreak, is undeniable. We have discussed very relevant issues related to Delivery and Take out services every Restaurant owner should consider when designing or implementing this kind of service to grow and succeed or just to survive in such difficult times as the one we have been going through. Issues that go from choosing and designing the Menu as a customizable communication tool, to thinking of the packaging as a sales representative, and to the Customer experience as the center and engine of our businesses, one that should last far beyond the last “click” and be memorable enough to generate engagement. The subject to discuss today is related to the options Restaurants have when making a decision on the kind of App to choose when implementing Delivery and Take out services.
Once upon a time, not that far ago and when nobody was so aware of the importance of social distance or using masks, there were some almost “pioneer” Restaurants that already offered Delivery Service but no smartphones nor Apps were available, yet!... How was it possible?! Whether you remember or not, customers used to spend time looking through the Yellow pages the phone number of a Restaurant because they had to make a call to the closest known place, which used its own hand built system, probably taking notes on post-its or a notebook for the orders to be delivered by the on staff driver(s). In the meantime, people were starving at home, long waiting (at least 1hr or so) before the driver could almost miraculously get to the customer’s address -after going round and around looking for the house/office. If it was Friday night, we all knew everything turned much worse!
Fortunately for the customers, time has made Delivery evolve… a lot!! Today, options of restaurants and food are endless and are just a “click” away from the customer. But, from your business too! Knowing the different Apps play such a key role in Delivery and Take-out Services, and therefore in today’s Restaurants’ success as well, we think it is mandatory to mention some aspects to be considered at least until dining rooms are back at full capacity so you are not left behind. Once again, we do not pretend to tell you what to do, but to point out important issues and perhaps help you give some insights so you may make more informed decisions, hopefully in true benefit of your business success.
Difference between third-party Takeout and Delivery Apps.
First of all, let’s say that both kinds of third-party Apps, related to Food Service function like marketplaces. They are just like halls in a mall, where customers can discover new places, look around and decide where to eat that day according to their whims or needs or budgets at that moment. So, in that sense, they both are ideal online places to get the eyes of new customers on your Restaurant!
Now, we are going to take a look at what makes the difference between the various types of Apps regarding this matter. When we talk about “Apps” we refer to either mobile or desktop “applications” (program or set of programs that allows end users to perform particular functions).
Takeout Apps: these Apps accept to-go orders, letting customers skip lines completely and only arrive when their order is ready. They walk in and let the restaurant or business know they’ve arrived, get the food, and leave. First, the customer scans through a list of diverse restaurants within walking distance and chooses a menu item. Using geo-location and estimated travel time, he/she is prompted when it’s time to leave, so they’ll arrive at the Restaurant right when their order is up.
Delivery Apps: these Apps accept delivery orders and connect with an available driver to drop off a customer’s food at the requested location. They offer diverse alternatives for customers to choose from, organized by type of cuisine, location, etc. Customers conveniently receive their orders usually within 35min since order was placed and confirmed without going anywhere, or doing lines, or having to follow strict and unpleasant -though necessary- covid protocols, etc. Examples: DoorDash, GrubHub, UberEats, etc.
Why should I (or should not) become an associated Restaurant in an App Service? Advantages & Disadvantages of third-party Apps.
As you may have inferred already, there are both advantages and disadvantages of using these Apps in your Restaurant, as usually happens, every coin has two faces. The important thing is to balance both and see what side gets more importance according to your Restaurant’s momentum and needs right now.
Advantages:
Customers have different options to choose from and save a lot of time, either they get to the restaurant when everything is ready or they receive it without going anywhere.
Using these Apps is much more than a trend. It is already a customer’s behavior that came to stay. Being part of an App will bring your business more customers. Think of it as an investment on marketing.
Cash flow improvement, derived from the issue just mentioned before.
When customers go to pick-up their orders, they get a glance of your place and service. This is a great opportunity! If you give them a memorable 1st impression, they might want to go back, but next time perhaps even to spend time there and get to know you better.
Since Apps can often be integrated into your POS, customers orders are streamlined into your system with no need for your staff to manually enter them (less work for the staff, more efficient process).
Less work for you and less worries or “pains” related to:
Long lines and crowds -especially important in Pandemic times-
Customer disappointment (waiting time prior or post dining, out-of-stock menu items, orders missed or incorrectly entered by staff, etc).
You can keep focused on the core of your business, while outsourcing delivery and all complexity involved to someone who has that expertise (less employees, less problems regarding logistics, etc).
Disadvantages:
With a third-party Delivery App the whole experience is led by that company: from the order experience to the driver to the delivery – you will just receive the order from them, make it, and package it. Unless… you do something about it!! There will be a 3rd party between you and the customers. So, you won’t be in control of either the relationship or the situations that might take place. Loyalty and engagement will be harder to be achieved.
Costs involved. It is expected that such an amazing thing cannot be for free. These costs are related to the fees or rates the Apps charge to their associated Restaurants for their services of Marketing, delivery, maintenance of platforms, among others. Fees and rates vary from one App to another and benefits do as well. Even though some consider these costs have always been excessive, the issue has become more relevant in Covid-19 times, when our industry has suffered so much and dependence on Delivery services has increased as well. In fact, some states like California, New York, and Georgia, have ruled over the maximum rates the Apps can charge to restaurants, but these are not necessarily permanent policies and differ from one state to another. So, it is important to find out the current rules in your State and keep up to date.
Communication to Customers -like the Menu in the App- is not as customizable as we wished it was. Therefore, you will have to have your own website, IG, and to be more creative as well to communicate with them through your packaging, for example.
Dealing with another service provider. There must always be a win-win relationship. Otherwise, the deal won’t last long enough to see the results on both sides.
If after analyzing pros and cons, the balance tells you must go into an App, then, think of the following when comparing and finally selecting your partner. Keep in mind that the leading company in your city’s ranking or in your neighborhood is not necessarily the best that suits your business and there are several reasons:
You are delegating very important touch points of the “journey” of your customers with your Restaurant, your Brand. So, you have to be careful!… is your “baby” going to be in good hands? Is that Delivery Service company you’re thinking of as caring about customers as you expect them to be? Do they really care about customers' experience?
Some Apps are stronger in certain cities or areas than others. Check how the App works around your Restaurant community and try to find out why.
According to the strategy of the Company, you might find an opportunity. For example, an App that is trying to get new associates to gain market share in a specific city might offer better conditions than the one that is leading that same market. Or perhaps, the leader in order to keep its leadership offers more “aggressive” conditions. So, research and comparing conditions is fundamental.
Costs or fees charged for their service. Some charge fixed rates, others a percentage over sales (10% up to 40% per order) or a combination of both.
Direct and indirect Benefits. In addition to the advantages we have pointed out, Apps have special Programs to reward their Associates and/or Customers, take a look at them.
In-House or Direct online Ordering Systems for Restaurants.
A direct or in-house restaurant online ordering system is a solution that lives on your website and lets customers order takeout and delivery food directly from your restaurant.
Here, customers will explore your online menu (see our blog on Menu for Delivery Service) then, and after scanning through it, will order and pay right on your site. And, depending on the solution you acquire, such orders flow into your POS in real-time. You get notified that a new order’s been placed and can get to work preparing it.
As mentioned above, third-party App commissions are a key issue to think about and are commonly the main reason why Restaurant owners decide to take the in-house or direct online ordering systems for their delivery services. Fees used to be more manageable when this cost represented a smaller share of the revenue because delivery represented incremental business. But the pandemic definitely changed that. Today, due to lockdowns, delivery and take out are not incremental businesses anymore, but business itself for many Restaurants.
Therefore, third-party Apps are not always the most cost-effective alternative to solve this "pain" -especially during the pandemic- and many businesses are making the decision to take the control over this part of the customer's journey and set up their own online ordering system. This option also has its pros and cons, which are:
Advantages:
Restaurants keep control of the whole journey and the experience for their customers. So, they can implement and supervise what was designed from the beginning to the end.
Restaurants keep more profit in their pocket (They still have to discount the costs involved in this alternative).
Direct or in-house software, gives the restaurants the opportunity to take orders directly on their different channels (website, phone, etc).
Restaurants can provide employment doing something different to staff that would be unemployed otherwise.
Disadvantages:
Restaurants will have to assume the costs, complexity and responsibilities of logistics and people involved in Delivery and take-out services.
What about Marketing? When opting for a Direct online system, you have to make a Marketing Plan to make your customers aware of the channels they have available to contact your Restaurant and place an order. Moreover, you have to make non-customers to know you as well, and try your value proposal instead of any other.
Restaurants have to take in charge of organizing their own team of drivers; hiring, training, providing the necessary equipment (vehicle and/or gas, insurance, insulated bags to keep food’s temperature, smartphone for both navigation and communication).
Nobody can deny that demand for Delivery and Take-out services has increased and many studies and reports support this idea. This demand was increasing already prior to Covid outbreak because “convenience” services were in a growing trend.
Due to shelter-in-place orders and change of customers behavior as a consequence of the Pandemic, the trend has kept exponentially growing. It’s important to keep in mind that experts in the industry expect that although dinners are allowed to reopen and even when they go back to receive dinners to full capacity in a post-pandemic (or post-vaccine) reality -and delivery demand might be affected-, there will be no return, Delivery and Take-out will stay.
So, the question is... How to make Delivery or Take-out Services available to customers? We hope you found some ideas or guidelines to think about and make a better analysis that leads you to decide what works best for your business; there is no exact recipe and you have to keep eyes on the kind of customers you have and of course on your Restaurant’s needs, resources and reality. Have you made up your mind? What kind of App for Delivery and/or Take-out did you choose? Any advice for your colleagues?