Over the years, more and more people have increased their food budget on dining out or dining in, instead of making meals themselves. According to Forbes, millennials spend 44% of their food dollars – or $2,921 annually – on eating out. In contrast, baby boomers in 2014 spent only 40% of their food dollars on eating out, or $2,629 annually. One big reason these numbers are so high is due to many restaurants using third-party online delivery services. Although customers may be required to meet order minimums and pay delivery surcharges, they are willing to meet these requirements and shell out the extra cash to conveniently eat from the comforts of their own home. In 2018, diners are more likely to open a delivery app on their phone than sort through a stack of delivery menus to order food.
Pay to Play
Your restaurant’s location may not be as valuable as you think if you’re using a third-party service that throws your restaurant in the mix with others. Customers can choose to sort where they’d like to order from based on distance of the restaurant, how much delivery might be, and what the delivery minimum is. These filters can create a challenge for restaurants to receive business based on their location. If your restaurant – despite potentially being one of the best restaurants in the area – isn’t located, maybe within 3 miles of a customer’s location, you could potentially lose customers. Many customers are more interested in a restaurant that is able to delivery food to them within 30 minutes, because they are hungry NOW. Furthermore, some restaurants are paying to be seen more often despite not being the best fit for a particular customer. Some third-party services that include delivery can be a major expense for restaurants, taking commissions of 30% or more. A customer might be shown a restaurant located further away because that restaurant is paying a premium for a better ranking in the results, which means it may take longer for their meal to arrive.
Road Less Traveled
With restaurants being busy in-house, customers like to bypass that experience entirely and enjoy their food in the comfort of their own homes. According to Mintel, 87% of Americans who use third-party food delivery services agree that it makes their lives easier, and nearly 31% say they use these services at least twice a week. Although, only 12% of Americans say they have used a third-party portal in the past three months. For those who currently aren’t using third-party portals, 3 out of 10 would prefer ordering directly from the restaurant to specifically to save money. The costs of using third-party services are encouraging restaurant owners to get creative with how they market to customers. Some restaurants create incentives and special discounts for customers that encourage customers to order directly from their own website, rather than a third-party service.
Knock Knock – Who’s There?
Not all restaurants can use third-party delivery services. In order to bring on these applications, your restaurant must be located in a city where a delivery portal is doing business. If you’re not in one of these areas, it may not be all that bad though, because it gives you the opportunity to use a service that can directly integrate with your own website. Your restaurant also won’t have to compete against 40+ other restaurants for a customer’s order if they know they want your food from the start. According to the same Mintel study, around 23% of non-users say they live in an area where these services don’t operate. Americans who have not used a third-party restaurant delivery service say fast delivery (31%), restaurant selection (28%), low order minimums (27%) and first-use coupons (26%) would motivate them to try it.
Many restaurants are dumping delivery services in an effort to bring on software that better aligns with their interests and budget. According to recent studies, 76% of consumers revealed they prefer to order directly from the restaurant of their choice, rather than through third-party services. As a restaurant owner, creating and managing your own delivery team can also be 46%-50% cheaper than employing the services of third-parties, assuming your restaurant has the demand.