Pros & Cons of Third-Party Food Delivery Services

Third-party food delivery services have been a hot topic for many years now. Consumers love finding restaurants that are out of their way or just don’t offer the service, and in turn these companies give them this convenience without having to leave their home. Though some critics cite ethical concerns with third-p

The “pros and cons” of third-party food delivery services are the pros and cons of using a third-party service. The advantages are that it can be cheaper, but there is also more risk involved.

Customer demand for meal delivery has risen dramatically with the advent of COVID-19. Some eateries have only managed to stay afloat by switching to a delivery service. Independent delivery workers and an online ordering platform provided by third-party delivery businesses have played a major role. This eliminates the need for restaurants to recruit additional personnel, deal with vehicle upkeep and driver insurance, and acquire food-delivery-specific supplies.

While having an outside firm manage deliveries might be beneficial to certain establishments, it is not for everyone. Third-party food delivery services may cost up to $400 to set up, take a commission of 10% to 40% every order, and may or may not interface with your POS system. We weighed the benefits and drawbacks of using third-party delivery services in your restaurant software strategy so you can make the best option for your business.

Using Third-Party Delivery Services Has Its Advantages

Grubhub, Uber Eats, and Doordash are all third-party delivery services that work in a similar fashion. Customers may order meals from your business using an app provided by them. The program links you with local delivery drivers and transmits these orders to your restaurant through a mobile device or a direct interface with your point-of-sale (POS). The costs of commissions and marketing campaigns differ every app, but the rewards to restaurants are comparable.

Promotional Opportunities

Postmates and DoorDash, for example, have done a fantastic job of promoting themselves with websites and applications that make ordering meals simple, even if you don’t know which restaurant you want. Many services have devoted customers who prefer to use the delivery service instead of going to the restaurant’s website.

Users may search for restaurants by name, cuisine, or particular dishes using third-party delivery services. As a result, being a member of the network may enhance your exposure, drawing new clients who may not have heard of you but are interested in the sort of cuisine you produce, or capturing consumers who just order via the app. It may also help you get traction with millennials, Generation Z, and busy families, who are more inclined to utilize the app.

You may also pay extra for priority placement, boosted listings, and special items to help market your business. These come at an additional fee. The marketing commission on Grubhub, for example, which influences your visibility on the app, may be as high as 20%.

You might also collaborate with a third-party delivery provider to broaden your audience by changing your menu. Uber Eats in Chicago found that clients in one of its locations were looking for chicken but couldn’t locate any nearby. They collaborated with a local pizza to extend its menu, using Uber Eats algorithms to identify the most popular chicken varieties (such as wings or nuggets). This allowed Uber Eats to better serve its customers while while providing additional service to the pizza.

Payroll and Liability Savings

Choosing to arrange your own delivery services might be expensive. These fees may be reduced by using a third-party program.

You may need to budget for the following items, depending on the breadth of your delivery goals:

• Wages: According to Glassdoor, a delivery person’s typical basic salary is $27,113 per year.
• Supplies: Depending on the size, insulated bags for keeping the food cost $7 or more.
• Cars: You may need to invest in a vehicle ($15,000-$35,000), as well as car wraps and/or tops for private delivery vehicles ($1,500-$3,000).
• You’ll need a comprehensive business car coverage if your delivery drivers use work vehicles. You’ll need to add a “hired not owned car” insurance if they drive personal automobiles.

If you offer the automobiles, you must consider responsibility, vehicle insurance, and upkeep. If not, you’ll need procedures in place to verify that your drivers have the proper commercial insurance and that their cars are kept in good working order. You’ll also need to locate excellent, dependable drivers that can navigate the city while also following correct food handling practices and promoting your business.

Contracts that aren’t exclusive

You do not have to stick to just one delivery provider. You may even have a third-party delivery or takeout business in addition to your own. You will not only be able to reach a larger audience and attract more consumers, but you will also be able to manage more deliveries during peak periods.

Each service you add complicates your ordering and accounting procedures, or requires you to add additional tablets to your service station. You may be able to link directly with third-party delivery providers, so third-party orders display immediately in your order stream, depending on which POS you use. This simplifies the process of entering, processing, and tracking orders.

Consider the following scenario:

• To feed numerous third-party services into their POS, Square for Restaurants interacts with intermediary applications Chowly and Deliverect. These middlemen applications also interface directly with Caviar, a Square company.
• TouchBistro works with ItsaCheckmate, a middleman service that gathers orders similarly to Chowly and Deliverect.
• Toast may be used in conjunction with Chowly and ItsaCheckmate.
• Chowly and ItsaCheckmate are both integrated with Revel.

Integrations with third-party delivery applications or intermediary apps are available in a growing number of POS systems. It’s a good idea to verify what integrations are accessible on your POS system if you intend to work with third-party systems.

You’ll have more time to concentrate on your core business.

You may focus your attention and resources on your in-house operations by outsourcing delivery. Trying with third-party delivery applications might be a good match for you if you prefer to spend your time training employees, creating new recipes, or working to provide a memorable customer experience for your in-restaurant customers.

Using Third-Party Delivery Services Has Its Drawbacks

Many restaurants have said that third-party services have aided their operations, particularly during the closure. Many restaurants, on the other hand, are refusing third-party delivery because they believe it harms their reputation and profitability in the long run. The following are some of the drawbacks of third-party distribution.

Other Expenses and High Commission Fees

Many restaurants argue that the benefits of using a third-party delivery service outweigh the hefty delivery costs they charge. This is particularly problematic right now, since deliveries account for the majority of a restaurant’s revenue. After all, you’re handing over up to 30% of each ticket to someone else, including sales tax and credit card processing costs, which are often more than if you handled them yourself.

Furthermore, your employees are losing gratuities, which are now being given to a third-party delivery person. If you rely on gratuities to supplement staff pay, such as bus drivers, you may need to raise pay correspondingly.

Commission limitations on delivery services have been established in some cities, including Portland, San Francisco, and New York. Many providers may agree to cut rates if you bargain with them. This might be determined by what you bring to the table in terms of distinctive cuisine, consumer volume, or geographic location.

Competitors Pose a Threat

While having your business listed on a delivery service like DoorDash raises your exposure, it also raises the visibility of your rivals. That means your business may appear alongside rivals, providing clients an option based on factors like as proximity, pricing, app rating, and even the food photographs you use.

Even if you search for your restaurant by name, your rivals’ names may appear in the results.

Control Issues

Control Issues is the second biggest disadvantage of hiring a third-party delivery service. It’s important to consider especially when brand reputation is a vital part of your marketing, or when you are in an area with a lot of competition.

Your food is out of your control once it leaves your establishment. Food may get cold or ruined if the driver makes a mistake turn or fails to fasten a bag securely. If the driver is impolite or does anything that the client thinks risky in this day and age (such as not wearing a mask), it reflects on you rather than the delivery service. Approximately 80% of clients feel the establishment is to fault. You should have a procedure in place to handle complaints about third-party delivery to counteract this.

You also have less control over things like your menu and pricing right now. If you have to make a quick modification, it’s possible that it won’t show up in the app, resulting in unhappy customers who can’t obtain their order.

Customer Dissatisfaction

Third-party delivery applications like Grubhub, as mentioned in the benefits, have a devoted following. While you may benefit from this by expanding your fan base, there’s no assurance that those admirers will switch to you. Furthermore, you risk losing client loyalty as a result of individuals getting to know your hostess, waitstaff, or individual chefs.

Many times, guests are seeking for a certain sort of cuisine rather than your restaurant’s name. As a result, if you want to stand out and create loyalty, try including a little bit extra, such as a freebie or a voucher for an in-person visit.

You also miss out on chances to communicate with your customers about criticism, recommendations, and even compliments for the chefs and staff. It also jeopardizes frequent diner programs and loyalty programs.

Brand and Reputation

Some restaurants, particularly those with a high-ticket price tag, have worked hard to develop a distinct brand or ambience. This is primarily reliant on in-person interaction and is impeded by delivery issues. Some businesses get around this by providing extras like higher-end containers or napkins, or by providing a soundtrack for diners to listen to. The impression your delivery person creates, on the other hand, has an impact on the impression your restaurant makes. That’s why, even during the shutdowns, several eateries preferred takeaway over third-party delivery.

“Death on a Tablet”

Every third-party delivery service has its own platform, which you must either connect into your POS or have a tablet or kiosk for. If you have various services, your cashiers may be handling many tablets with different systems, a situation known as “tablet hell” in restaurants.

When fresh orders come in, tablet hell may become a little complicated, with many tablets utilizing different systems fighting for attention. Every system requires training, and you may need to type orders into your own POS to get them to the kitchen display. You’ll also need a location to arrange and retain orders for the delivery folks. In a hurry, it may also be overpowering.

When it comes to tracking your third-party delivery sales and expenditures, there might be even more complexity. To verify your profits and maintain track of payments coming in, you or your accountant will need the passwords for each system.

Controversies about Third-Party Platforms in the Recent Past

Many third-party applications have been accused of unethical tactics, such as overcharging users and adding eateries without their consent. While they profess to be serving their customers’ best interests, it may not be in your best interests as a restaurant owner. Here are some of the most contentious third-party delivery service practices.

Without Permission, Restaurants Are Listed

Consider receiving a call from a disappointed client who placed a purchase via an app with which you are not affiliated. Some third-party delivery businesses have been chastised for adding eateries to their delivery zones without first obtaining contracts or even informing the establishment. In principle, the delivery person then prepares and delivers the order, but restaurants have no control over the food quality, delivery times, or even the menu that appears on the app.

Payment Delays and Overcharging

Even after the city enforced a 15% restriction, establishments in San Francisco were still being charged up to 30% fees by DoorDash. DoorDash has apologized and is reimbursing the companies. Other establishments, however, have complained about payment delays from third-party agencies. While these things happen, the timing could not be more inconvenient, since so many eateries rely on even the slightest amount of revenue to stay afloat.

Promotions That Cost Restaurant Owners “We Care” Promotions That Cost Restaurant Owners

Customers may appreciate third-party applications that provide discounts, particularly during difficult economic times. Participating restaurants may be able to take advantage of promotional possibilities as a result of this. However, these deals come at a price, and some third-party delivery providers pass that cost on to eateries who already pay exorbitant commissions.

Grubhub’s “Supper for Support” deal, for example, gives substantial discounts on supper orders. It claims to be doing this to assist eateries increase their revenue. Restaurants must sign a contract agreeing to pay the complete cost of the discount plus a pre-discount processing charge for orders in order to participate in the campaign, according to FSR Magazine.

Alternatives to Third-Party Delivery

If the location and ambience are important to your company, providing delivery, particularly via a third-party service, may cause greater long-term damage. Alternatively, with restricted takeaway menus and additional additions, you may attempt to reproduce the mood at home. Having your own delivery service allows you to maintain control over your brand in these situations.

You may wish to restrict takeaway or delivery options if you value the on-premise eating experience. If cheap pricing are important to your business, adding a 30% extra to cover delivery costs may be counterproductive.

To reach your stay-at-home consumers, you don’t need to use a third-party delivery service. Here are a few options:

• Gather resources: Collaborate with other eateries to pool delivery resources or recruit a local network of drivers.
• Offer curbside pickup: Use a mobile app to provide curbside pickup service.
• Offer restricted delivery options, such as only for purchases above a particular amount or only during specific hours of the day.
• Work with your POS: Speak with your POS provider about the options for setting up an in-house delivery system. Customers of brands like Toast and Revel regularly get discounts on their online ordering and delivery modules.

Take the time to research each firm as well as your own POS software alternatives if you want to create an end-to-end in-house delivery solution, with or without collaborating with third-party platforms. For more information, see our post 7 Best Online Ordering Systems for Restaurants.

Services Provided by a Third-Party Most Commonly Asked Questions (FAQ)

Third-party delivery services are what they sound like.

These are services that link companies with independent delivery drivers, most often for restaurants, although drivers may also deliver groceries or other items. The company charges you a fee, which is usually a percentage of the order, and provides the equipment, drivers, and cars, as well as wages, insurance, liabilities, and other costs. Grubhub, Seamless, DoorDash, Postmates, Uber Eats, and Caviar are among the most popular.

How can I locate the finest third-party restaurant delivery service?

Consider the following when choosing a third-party delivery service:

• Do they provide service in your area? What is the size and demographics of its local consumer base?
• What do they get paid in commissions? How are they determined?
• Is it compatible with your point-of-sale system?
• How simple is it to modify their system (menus, prices)?
• What is the nature of your competitors in that service?

How much do restaurants pay for meal delivery services?

Commissions range from 10% to 40%, plus a 3-percentage-point fee for credit card processing. The commission % varies, with busier regions sometimes requesting greater charges. Some localities have put a cap on commissions, and some delivery businesses will work out a deal.

Furthermore, some meal delivery services charge one-time setup costs, which include establishing up your business on the app and providing you with the necessary gear and software. The price may be as much as $400, while some do not charge this.

Conclusion

Restaurants see an average 20% increase in check sizes from online and delivery orders versus dine-in orders. Combined with greater visibility with a customer population that continues to be concerned with social distancing, adding a delivery option to your restaurant may be a good idea. The third-party services can take the logistics off your hands in return for a commission. However, you also pay in Control Issues over the food, any negative impression the driver makes, and increased complexity for your cashiers, waitstaff, and managers.

The “pros & cons of third-party food delivery services” is a blog post that discusses the pros and cons of using third-party food delivery services. The article provides examples for each point. Reference: pros examples.

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