5 ways to ensure your restaurant takes a bite out of the food delivery boom
Editor's note: This is part 6 in a multi-part series of commentaries and blogs called "Delivering on Delivery." Click here for part 1-5.
By John Oakes, CEO, Revenue Management Solutions
Food delivery is certainly here to stay: It's now a $100 billion-plus industry, with restaurant companies large and small embracing the concept. But are restaurant operators really getting ahead by making more and more deliveries? Fortunately, the answer is yes.
Many smart companies are using delivery to enhance their bottom lines, by attracting more customers and experiencing higher check values per order received.
With services like UberEats, Postmates and Grubhub working with restaurants to get restaurant customers' attention, foodservice delivery sales have grown by 20 percent over the past five years, according to the NPD Group.
Certainly, this constitutes a significant opportunity to grow the customer base by reaching new and regular customers who prefer to stay in. Getting delivery right will deepen your customers' brand loyalty, the ultimate goal of every restaurant company.
So how do you embrace delivery and grow your bottom line?
The first step is to have a deep understanding of your restaurant's profitability, tied to the ability to extrapolate trends from customer transaction data. Then, as you consider all the facets of a quality delivery experience, know that everything from overall speed of delivery to the friendliness of service providers impacts how well you make good on your brand promise.
With this in mind, here are five tips that can help as your restaurant company makes sure delivery works for your organization:
- Keep your customers' price sensitivity in mind as you determine delivery costs and strategy. Yes, it's important to know the true cost, and in turn the profitability of offering delivery service. Operators can calculate this by subtracting the additional commission costs of the delivery service from the net revenue, which can be more than 20 percent of the bill. Some operators decide not to pass those additional costs on to the customer as they benefit from more customers and higher check order values. Others might look for ways to recoup some of these costs by adding their own delivery charges, but they need to keep in mind that the customer focuses on the total cost of the order.
Don't only think about whether the delivery service is tacking on $2 or $4; instead, make sure the total price of an order won't reach a level that turns off the customer. As an example, customers might be happy to place an order for one person that totals $10.99, but they might get turned off if that total starts to approach, say, $15. A deep dive into the transaction data on deliveries will show the price sensitivity being shown in your customers' purchases, so you can make an informed and smart pricing decision.
- Pick delivery partners that fit your restaurant's brand.The delivery partner will be an extension of your restaurant, therefore it's important that they maintain the image and service your loyal customers love and cherish about your brand. Just as a customer will react negatively or positively based on the first visit to a restaurant, the delivery service is also making a critical first impression of your restaurant on new customers.Do your homework as you consider various providers. Ask them to provide information on customer service, customer satisfaction, and the speed of their deliveries to neighborhoods you are targeting. Other important questions: How does the service train its drivers? Does it do thorough background checks? And what benchmarks does it use to gauge the quality of its service? In addition, also check third-party sources such as social media and rating services like Yelp and Trustpilot.
- Speed is paramount in the delivery process, both for the restaurant and the delivery provider. Analyze every step of the delivery process, from how well delivery orders are integrated into the restaurant's POS system, to how quickly the kitchen turns orders into items ready for delivery, to how fast the delivery partner gets to the customer. Timeliness is critical in customers' decisions on whether they will pick your restaurant for delivery again. An average of 60 percent of consumers cite speed as the biggest variable in their satisfaction with delivery, according to a 2016 worldwide research study by McKinsey & Company.
- Avoid long-term commitments and quickly make a change if the service doesn't improve. There's a reason restaurants use multiple delivery providers — this gives them options and alternatives to make changes in providers if needed. Don't wait if a provider isn't performing well. Put them on notice and make a switch quickly if things don't improve. Every day with a subpar delivery provider is costing you repeat business and hurting your reputation.
- Constantly evaluate opportunities to further boost profitability on deliveries. This ties into having a good overall understanding of the profitability tied to all your channels — eat-in, carryout and delivery — through insights gained from your POS system. The benefit of having this extensive knowledge is that you can use it to create impactful promotions and messaging for each type of customer, designed to get them to order or visit more often.
In summary, it's important to make sure delivery is boosting your restaurant's performance, not hurting it. As delivery only gets more popular, understanding how to do this is more and more important to a restaurant's overall success.