Online Delivery Orders Are Eating into Core Business at Restaurants - Here’s Why It’s a Problem
March 12, 2019 // Franchising.com // There’s something to be said for convenience, but it always comes at a cost, doesn’t it? This holds true for the growing food trend of consumers wanting the convenience of restaurant-quality meals delivered to their door. When it comes to restaurant delivery services - specifically online third-party providers such as Grubhub, Uber Eats and DoorDash - many restaurants are struggling to find the balance of increasing business without taking a hit to their bottom line. We look at the downside of delivery services, and how effective marketing can help restaurants secure their core business.
Restaurant Delivery Is Increasing at a Staggering Rate - But at What Cost?
In the U.S., more than 78 million people use delivery services, either directly from the restaurants, through third-party apps or other services. Busy households are feeding the $13 billion food delivery market, and with demand increasing, it’s projected to grow 13.5% annually. In fact, 40% of total restaurant sales ($220 billion) could be consumed by delivery transactions by 2020 (compared to just 7% of total sales in 2016).
One of the biggest downsides to restaurant delivery services is cost. And the more consumers use these services, the more restaurants will have to cope with already thin profit margins. In addition to consumers paying delivery and service fees, restaurants also pay fees ranging from 15% to 30% for each order.
Restaurants Are Losing Profitable Sit-Down Business to Delivery Orders
While using a third-party delivery service can increase accessibility to and business for a restaurant, restaurants run the risk of replacing more profitable sit-down sales with delivery orders. In fact, 43% of consumers who ordered food for delivery said it replaced a meal from a restaurant, up from 38% in 2016. When customers dine-in at restaurants, they tend to bring a larger party and purchase items with a higher profit margin, such as soda and alcohol.
Other Issues with Restaurant Delivery Services
Delivery services can put restaurants in a lose-lose situation. According to this CNN Business article, customer loyalty is starting to move from the restaurant to the delivery service when third-party services are involved. But when food arrives cold or drivers are not professional, the brand of the restaurant is negatively impacted. In the Off-Premise Insights' 2018 Takeout, Delivery and Catering study, 82% of consumers will blame the restaurant for bad experiences, not the delivery service.
Effective Restaurant Marketing to Bring the Dine-In Business
While delivery services appear to be here to stay, restaurants can help counterbalance its negative effects. Effective marketing and advertising is key to driving new dine-in business and developing relationships with loyal customers. BirthdayPak understands the challenges of the restaurant business and has developed a multi-channel marketing platform that gets results. It’s why nearly 1,200 businesses (with two-thirds being restaurants) have partnered with BirthdayPak nationwide.
Your customers deserve the full dining experience at your restaurant, and BirthdayPak can help get them there! For more information, please call 1-888-544-3872. BirthdayPak is growing exponentially with a successful franchise model, and locations are available in thriving foodie towns. To learn about this exciting opportunity, please call 1-888-206-0083 or connect with us.