Blog
Are you doing delivery right?
As restaurant brands rush into delivery, they must lay the foundation with a best-of-breed digital ordering platform and choose a delivery fleet strategy that provides both a consistently good guest experience and a profitable business model.
May 7, 2015 by Noah Glass — CEO, Olo
Delivery. Delivery. Delivery. It’s been impossible to escape the headlines in the past several weeks’ worth of restaurant newsletters — Starbucks, Chipotle, Panera and McDonald’s. It seems like everybody’s jumping into the delivery game. Delivery, after all, represents another great way to drive incremental revenue per square foot. And with the rise of third-party delivery services like Postmates, Caviar, and now Uber’s “UberEats” service, it means an opportunity to easily add a new revenue stream without having to hire one’s own delivery fleet.
For the past 12 years, I’ve lived in New York City, where delivery is inescapable as the streets swarm with takeout bag carrying cyclists every night from 5 to 9 p.m. NYC is a market with remarkable population density, boasting 27,000 people per square mile. The national average is a mere 35. Yes, you read that right: there are 771x more people per square mile in NYC than in the United States as a whole. By and large, takeout-oriented restaurant in NYC do their own delivery, with their own delivery fleet on bikes. But what about brands with stores outside of such densely populated markets?
Do you need an RDS?
Third-party delivery or restaurant delivery services (RDS) companies enable additional secondary and tertiary markets to offer delivery service with a less costly model. Instead of the restaurant hiring (and insuring) its own delivery fleet, a centralized service — the RDS — manages the delivery process. This typically works through guests placing orders by phone or online from a directory listing of restaurants. The RDS submits the order to the restaurant and the RDS delivery driver leaves their hub to collect the order at the restaurant and then leaves the restaurant to deliver the order to the guest who ordered delivery. That’s two trips, instead of one when the restaurant is doing its own deliveries. This two-trip delivery compounds issues with food freshness and can degrade food quality, potentially damaging the customer’s perception of the brand.
When I was a freshly minted driver at the tender age of 16, I went “pro” and scored a job as a pizza delivery guy at Pizzaman in Newton Center, Massachusetts. True story. I learned about “batching” deliveries, so that I could earn more tips per trip and help Pizzaman meet the demand of hungry local customers. Pizzaman trained me to wait for several delivery orders to pile up before leaving on a trip, guaranteeing more tips per trip (good) but an even more degraded product for the customers (bad). Again, this common batching practice compounds food freshness problems and degraders food quality.
Determining whether the restaurant can afford to do delivery on its own, whether it needs an RDS to provide delivery or if delivery is non-viable comes down to a key metric of delivery cost: Dollars per delivery mile. In areas of high-population density, the dollars per delivery mile is inexpensive enough that a restaurant can do delivery on its own and do so profitably. In areas of medium-population density, third-party RDS companies can do delivery with the restaurant and/or the customer paying a service fee to make the economics work. In areas of low-population density, delivery is a no-go.
Over the past year, the investment community has fallen back in love with “last-mile-delivery”/”on-demand” companies like Postmates, Caviar, DoorDash and many more. These companies employ drivers, who will gladly act as the customer surrogate, waiting in line to order, waiting for the order to be prepared and bringing food from the restaurant to the customer's front door, all for a fee. While this represents more business for participating restaurants — tapping into the community of hungry customers too tied up to visit one of your restaurants in person — it also opens up the potential for negative brand perceptions for last-mile-delivery guests and for guests in the store who suddenly have more people to wait behind.
Going digital
Restaurant brands that are interested in unlocking latent delivery demand should use a digital ordering platform as the starting point and foundation. This provides guests who are within a defined delivery range to place delivery orders from the brand’s own website, mobile app and/or call center. Next, the brand should review potential third-party delivery services — in the traditional RDS or new-fangled on-demand variety — and select one with the best ability to reliably service the markets that the brands determine to be key delivery trade areas. The best ordering systems will notify the appropriate delivery service and synchronize the kitchen wrapping up food prep (with point-of-sale and kitchen system integration) with the arrival of the delivery driver at the restaurant. Finally, the platform should allow brands to easily conduct guest delivery feedback surveys to ensure quality of the end-to-end delivery experience.
This approach has many benefits; it maintains the brand’s sovereign relationship with the guest, reduces the two-trip delivery impact on food quality by synchronizing order readiness with driver arrival and eliminates the brand damaging practice of batching. It also enables the brand to fulfill more order volume — that of in-store guests and delivery guests — without interrupting the line of guests in the store by rerouting delivery drivers to a special pickup area. That’s how restaurant brands can do delivery right.
