Before you even consider partnering up and becoming a restaurant partner for a delivery app like UberEats or Foodora, you need to understand why you’d like to do that, and the benefits that it brings to your restaurant.
You need to be super clear in this.
This is because there is a lot of negative talk among the food industry about joining these delivery platforms. Like how many restaurant owners feel like they are forced to join or how it is a black hole that sucks all your remaining margins.
These claims may be true for certain individuals in certain situations and if you don’t utilize them properly. But these platforms are beneficial and can help certain restaurant owners expand their brand immensely.
It depends on the context and the mindset you go into the partnership – which is why you need to clear on your intentions first.
Now let’s get into it!
1.) Get More Exposure To Your Restaurant or F&B Shop
The first reason why you’d want to become a partner with a delivery app is because it brings you a lot more eyeballs and exposure to your brand.
These delivery apps have raised millions of dollars, and they spend a ton in marketing budget to get people to use their platform. The more people who use their service, the more money they make. So for them, they are much more incentivized to spend a whack load of advertising money to get people to use their apps.
If your restaurant is on their app, you would get exposed to people who may never heard of you before. So leveraging off their database is very important and one of the main key features of why you’d want to partner up with these delivery apps.
2.) Avoid Headache Of Hiring & Staffing
The food industry is notorious for high turnover rates.
For many restaurant owners, dealing with their own in-house staffing is already such a big headache.
So why would you want to deal with having your own delivery team when you can have someone else take care of that for you?
Yes. there’s going to be a fee involved using these delivery apps, but you don’t need to worry about employee benefits or insurance. You don’t even need to worry about their wellbeing, the culture – none of that. That’s for UberEats or Foodora to take care of.
You just need to make sure you give them their fee and they’ll take care of all the delivery. That saves you a lot of time and headache of dealing with your own driver.
3.) Offset Your Sunk Cost
Regardless of how busy your shop is, you’re already paying for rent and your staff to be there. This means the slow times as well.
So why wouldn’t you want to utilize these apps and fulfill orders during those periods?
Although you might not be profiting as much or make as much margins from your dining customers, it’s still a good way to offset your sunk cost.
Imagine this: A customer that never heard of you before and found you on the delivery app, while frantically looking for a restaurant to serve their late afternoon meeting. The meeting was a success and everyone enjoyed their meal. Attendees ask where the food came from so they can order from you again.
This means that you not only got to cover a bit of your sunk cost by fulfilling a late afternoon order, but you may also get new customers to either order from you again through a delivery app or to dine in.
It is when you think of how UberEats or Foodora can be part of your bigger overarching business strategy, it is when you see where these delivery apps have a place for your restaurant.
Yes, they have their pros and cons (like most things). But if you are aware of their advantages and disadvantages – of each delivery app – you can intentionally strategize how you can benefit from them and maximize your restaurant’s potential.
What Do These Delivery Apps Charge?
They charge a percentage of your order, so anywhere from 15% to 35%, depending on the structure and the relationship that you have with these apps.
For example, UberEats charge around 30%. A lot of times you can actually negotiate down a few percentage points depending on the location that you’re at.
For other delivery apps, they go down as low as around 15%. Some of those services they just drive you the customers, not necessarily deliver for you.
So anywhere from 25% and to 35% is a very common percentage that I see a lot of restaurants being charged.
What Does That Mean?
That means that if a delivery app brings in around $10,000 in revenue for you, they’re going to pocket around $2,000 – $2,500 as their fee.
Now, in my previous video, I did talk about the margins that restaurant owners typically have. That floats around 5% – 10%. If you’re good at managing your cost and everything, it goes up to 15% – 20%, but that’s really rare. You’ve got to be like a super operator and super good with your numbers.
So what does that mean? You should not view these delivery app services as a strategy to increase your profits.
Instead, you should look at these delivery apps as a means to bring you new customers and get exposure. You calculate this as part of your marketing cost.
When you have these eyeballs and these customers, it’s your job and your duty to convert them into regulars that will come consume at your café or restaurant.
Now that we know why you’d want to partner up with these delivery apps and what are the percentages that they charge, here are five common pitfalls that you should avoid during your partnership
Pitfalls of Partnering With Delivery Apps
1.) Having Poor Logistics
So many businesses that I work with, their staff completely hates working with these delivery services because it just seems like adding a wrench in their whole system, in their engine.
They’re already busy as hell and all of a sudden they need to care about this online order and they don’t want to be able to prioritize them. But, the driver’s already here to pick up the order.
This is a nightmare for the staff.
So it is crucial to have proper logistics and proper training to implement the online orders into your system. Iron out your operations, so your staff has less headache and actually wants to serve these online orders.
When you do sign up for a delivery app, you need to have the proper systems and processes in place to really take advantage of the service.
Failing to do so will only put extra strain on your staff and affect your brand.
2.) Neglecting What The Fees
When you sign up for a delivery app, there is 0 or very little upfront cost. The charge is in each order. So if you fail to understand the fees involved, your numbers won’t work out and may be in the reds.
What that means is, every order that you receive, you’re going to end up losing money if you do not understand how do to manage them properly.
It is crucial for you to have a separate exclusive menu just for delivery.
You need to work out menu items that are high in margin and easy to produce. That gives you the flexibility and the room to play with, and for you to be able to bring in new customers.
For example, if you’re a dessert place, you’d possibly want to sell brownies that would cost you $0.40 to make and sell them at $5 a pop. That is super easy, you just need to grab, pack it, boom. It’s good to go, and the margins are there for you.
3.) Choosing The Cheapest Service
The third common pitfall is that people choose the app that gives them the lowest percentage. Understand that these apps are a big representation for your brand. If these apps don’t have a good customer service or a poor interface, that is a reflection on your brand.
At the end of the day, if the customer enjoys using the app and has a great experience – and you deliver on amazing delicious food – they will order from you again and may even come to your restaurant. This give you the potential for you to gain a loyal customer.
So choose an app that has a good interface, that has good customer feedback and good customer support.
It is worth a slightly higher percentage fee.
4.) Not Caring About Food Quality
So many restaurant owners have this oversight.
They just think, “Hey, you just want something with high margins, something that is quick to make.” It’s a good start to have a specific menu for delivery apps, but a lot of times they need to also really study, “Is this item good for delivery? Is it going to be good by the time that it goes onto my customer’s hands?”
For example, if I’m selling french fries, it’s probably not a really great idea to have this as part of the menu because by the time it arrives in your customer’s hands, it’s going to be soggy it’s going to be gross, it’s going to be stale, and your customer’s not going to have a good experience at all.
It becomes a lose-lose situation.
You’re gonna be losing in terms of margins, and your customers are not going to come back for you (who likes soggy fries?).
You just lost completely because of this oversight.
So make sure whatever item that you decide to put on the menu, put yourself in the customer’s shoes and think whether it is good and it would retain its quality after delivery.
5.) Treating Them Like Regular Customers
Pitfall number five is treating your delivery app clients, the customers, like your regular customers. You do not want to do that.
Earlier, we talked about the importance of utilizing this strategy to pull in long-term customers. You’re not treating the delivery app customers like any other customers. You need to pull them and convert them into your loyal base. because if you don’t that, you’re going to lose on your margins.
Partnering with delivery apps long-term is not really a feasible strategy. You have no margins at all if they stick with a ~30% fee.
So it’s super important for you to understand that you don’t treat these customers like any other customers. You need to treat them like, “Hey, this is a new set of eyes. How can I convert them? How can I bring them into the store?”
For example, when you’re working with these customers, you’d want to maybe slip them a coupon for every delivery. Possibly a coupon for a free drink when you dine in. That acts as a really good motivation for these people that try your product and gives them a reason to come to your restaurant.
It also becomes a win-win situation.
You’ve just gained a long-term customer.
Be creative. Focus on converting them from being a delivery app customer to a long-term loyal fan.
Using delivery apps like UberEats, Foodora, Deliveroo is an amazing strategy and tool for you to bring in new customers to your store.
But you have it needs to be done right.
If you do not utilize this tool properly, for every order that you sell, you’re going to be losing money, and it’s going to run you to bankruptcy. So it is super important for you to be aware of the 5 pitfalls and do your best to leverage these tools for your benefit.