Nearly anything is available at your fingertips now.
The on-demand economy sparked by Uber, Netflix, and Amazon Prime has spread to the restaurant industry. Consumers want convenience in all aspects of their lives, including dining.
With new third-party food delivery service providers constantly popping up, it’s easier than ever for restaurants to give customers the convenience they expect. But is offering a delivery service worth the investment of time and resources?
There’s no one-size-fits-all answer.
We’re laying out all of the factors for you so that you can decide whether or not becoming a restaurant with delivery service is the right decision for your business.
In this food delivery guide, you’ll learn:
- The latest food delivery trends
- The pros and cons of offering food delivery service
- What to consider before making the decision, including location, venue type, and customers
- How to decide whether to take delivery in-house or use a third-party service to distribute orders
- What you’ll need to implement a restaurant delivery service, including logistics and tools
By the end of this article, you’ll be able to make an informed decision about delivery at your restaurant.
Food Delivery Trends
According to the New Yorker, food delivery orders made up 7% of restaurant sales in the U.S. in 2016. And, since this trend is growing rapidly, it’s predicted that delivery orders will make up 40% of revenue for restaurants very soon.
According to our State of Full Service Restaurants report for 2019, restaurants that offer online ordering conduct between six and 20% of their business this way and see a 16% increase in sales on average.
If your restaurant isn’t offering online ordering and delivery, you could be missing out on significant profits.
The Rise of Ghost Restaurants
Food delivery has already made a major impact on the restaurant industry. In fact, it’s even inspired a whole new category of restaurant: ghost restaurants.
Ghost restaurants are restaurants that only offer food via delivery. Unlike traditional restaurants, they don’t have brick-and-mortar locations where you can dine-in or pick up from. They are typically run out of commercial kitchens, so the focus is on food preparation and order fulfillment, rather than a dine-in experience.
Ghost restaurants benefit from lower operational costs than traditional restaurants for a few reasons:
- They need less space and therefore have lower rent.
- They don’t require front-of-house staff so they save on labor.
- They don’t offer a dine-in experience so they save on furniture, place settings, and decor.
Only time will tell whether ghost restaurants are just a food delivery trend or a sustainable restaurant business model. But you don’t have to run a ghost restaurant to profit from the benefits of delivery.
The Pros and Cons of Implementing a Food Delivery Service
So is offering food delivery service at your restaurant worth it?
Here are the pros and cons of restaurant delivery services.
Pros of Offering a Food Delivery Service
These are some compelling reasons to offer delivery.
- Increased check sizes. Restaurants see a 20% increase in check sizes from online and delivery orders versus dine-in orders.
- More business opportunities. Sometimes customers want your food paired with the comfort of their own home. By offering delivery, you’ll be able to serve a wider range of customers.
- Less overhead. If delivery becomes the bulk of your business, you could eventually downsize to a smaller space or require fewer front-of-house staff.
- Exposure to new customers. Third-party online ordering and delivery platforms double as marketing platforms. When you sign up for Caviar, DoorDash, or Ritual, you’re putting your restaurant in front of their collective millions of customers.
Cons of Offering Food Delivery Service at Your Restaurant
What are the downsides of offering food delivery?
- Less control. You have less control over a customer’s experience with takeout and delivery. Customers could have a bad impression of your restaurant due to traffic that delays delivery, which has nothing to do with you. If food arrives cold or in poor presentation after the trip from your restaurant, it could negatively impact a customer’s opinion of your restaurant. You also have fewer opportunities to turn a bad experience around because you aren’t around when customers eat your food.
- More work to implement. If you choose to fulfill deliveries in-house, you have to deal with the hassle of looking for new staff and vehicles while creating a process for a successful service.
- Smaller profit margins. Since third-party delivery services take deep cuts of each meal delivered, online ordering can cut into your profits. For example, New York-based healthy fast casual restaurant Mulberry & Vine spends between 20% and 40% of their revenue per order on delivery and couriers.
What to Consider Before Deciding Whether or Not to Offer Delivery Service
Food delivery isn’t a one-size-fits-all solution for restaurants. Consider your venue, location, and customers before determining whether or not to offer delivery.
1) Venue Type
Delivery is best for restaurants where the food stands apart from the experience. If a big part of the experience at your restaurant is the ambiance or plating, you risk losing this important aspect of your brand with the delivery experience.
Delivery can also be tricky for traditional fast food venues. Fast food was meant to be consumed quickly after being made, so quality could diminish by the time the consumer gets the delivery. No one likes soggy fries!
Fine dining is about so much more than how the food tastes – it’s about the combined experience of the service, ambiance, and presentation of the food. Through delivery, fine dining establishments lose the ability to control most aspects of the customer experience.
Before implementing a delivery service at your restaurant, talk to your current customers to see if they would use it. Would they visit your restaurant more or less often if delivery was an option? Would they dine-in less and order delivery more?
Also think about the new customers you could reach by offering food delivery, especially through a third party site. Millennials are leading the demand for food delivery and are three times more likely to order in than older generations.
Are millennials part of your target demographic? If they aren’t now, should they be? You could open yourself up to new clientele by implementing delivery.
Delivery is more popular in cities than in suburban or rural areas where people already have cars and can drive to pick up food. Opt for delivery where people seek convenience over an experience.
DIY vs. Outsourcing Your Restaurant’s Food Delivery Service
If you decide to deliver food to your customers, will you take on delivery yourself by hiring someone to perform the deliveries or will you outsource delivery to a third party service?
Here are some things to consider for both scenarios.
DIY Food Delivery Considerations
If you opt for in-house delivery, you’ll need to find and train a delivery driver. Look for someone who has prior delivery experience and a vehicle. Pay for the driver’s gas and contribute to the upkeep of their vehicle, because you wouldn’t be able to offer delivery without it. You’ll also have to check with your insurance and make sure you can properly insure your driver.
The delivery fee and business gained by offering delivery will help offset the cost of hiring a new person, but a lot of work goes into hiring and training the right person for the job.
Using a Third-Party Delivery Service
If you use a third-party delivery service to fulfill your online orders, it’ll be less work for you, but you’ll have to share your profits with the delivery company.
The costs you’ll have to put towards your third-party delivery service include:
- Set-up: The set up fee costs between $0-$400, and is a one time-cost to add your menu, find hardware and software for your restaurant, and get on the map.
- Transaction: With most apps, you can expect a per transaction fee, which is a percentage of each other. Depending where you are, the percentage varies – busier areas typically have higher fees. Typically you’re looking at 10% – 40% of each transaction.
- Marketing: This can cost as little or as much as you’re willing to put into it. Most apps offer priority placement, promoted listings, and featured offerings – for a price. The prices range depending on which third-party app you use.
Keep in mind that customers may blame your restaurant if something goes wrong with delivery, even if it’s the delivery service’s fault.
This means you’ll want to have a system in place before a customer is coming to you. Do you have somebody dedicated to answering customer feedback? Prepare them with what to say if something goes wrong with a delivery order. It may be worth having an offer in place that encourages customers to come back, like 20% off their next order.
What You Need to Implement Food Delivery Service at Your Restaurant
If your restaurant doesn’t already offer delivery service, there’s a lot you’ll need to know to successfully implement food delivery.
Here are some of the top resources you’ll need:
Food delivery requires staff. If you decide to handle deliveries in-house, you’ll need:
- A dedicated employee or two who can deliver orders to customers (if you’re doing delivery in-house)
- A front-of-house employee to oversee and process orders, coordinate with your drivers or third-party delivery folks, and update online menus when an item is 86’d
- Additional back-of-house staff to accommodate the extra order volume (cook and/or expeditor)
A lot of tech goes into running a successful food delivery service.
Here’s exactly what you’ll need for the various stages of the order and delivery process.
- Receiving orders – You can let customers place orders in two ways: over the phone or online. We recommend opting for online orders that integrate right into your POS, since mistakes in manually entered orders can cost you up to $4,000 each year.* The simplest way to accept online orders is through delivery services like GrubHub, Postmates, or Uber Eats. Add your menu to the most popular platforms in your area and then link to these third-party platforms on your website.
- Fulfilling orders – Instead of having one iPad per online ordering service on your counter (too much clutter!), opt for a POS that integrates with all of your online ordering apps. Those orders then appear automatically on your POS, so you can just hit accept.
- Delivering orders – If you decide to fulfill delivery in-house, you’ll need to equip your delivery driver with a vehicle, insulated bags to keep food warm during delivery, and a smartphone for communication and navigation. If you opt for third-party delivery services, they’ll take care of these logistics for you.
*based on TouchBistro’s estimate of a restaurant’s average annual online ordering revenue
These are some of the costs you can expect to face if you choose to implement an in-house food delivery service at your restaurant. If you choose to go with a third-party delivery option, each provider offers unique rates.
- Labor – For in-house delivery, you’ll need to pay your drivers.
- Cost: Approximately $2,333/month, according to Glassdoor
- POS Tech – If your POS doesn’t integrate with an online ordering platforms, you’ll need to get one that does. Most POS online ordering integrations range from $30 to $100 per month.
- Cost: Starting at $30 to $100/month
- Delivery packaging – You may already have takeout containers for doggy bags and pick up orders, but you’ll need to stock up when you begin offering delivery. You may also need to upgrade to containers that ensure that items don’t spill during delivery and food temperature stays even.
- Cost: Approximately $960 to $2,160/year. (Delivery-focused restaurants spend approximately $0.63 to $1.45 on takeout packaging per order. Our range was calculated based on 50 delivery orders per day).
Total approximate cost: $3,323 to $4,593/month
Offering food delivery is definitelya long-term investment, which is why it’s important to do your research before deciding if it’s right for your business.
Delivery is on the rise due to the popularity of the on-demand economy. Deciding whether or not to become a restaurant with delivery service is a personal choice that you should make based on your business’ needs, resources, venue type, customer base, and location.
One thing is certain: the food delivery trend is here to stay.
Get hot restaurant tips. Delivered.
Top Challenges Facing Restaurants Now
Finance & Operations
Restaurant Groups 101: How to Turn One Venue into an Empire
Opening a restaurant is challenging Striking the right combination of location, concept,... more