There is no denying the popularity of meal delivery, especially in New York City. Over $1 billion was invested in the food and grocery delivery sector in 2014 and Grubhub alone had earnings that were 51% higher at the end of Q1 in 2015 than their revenue at this same time in 2014. With such great success, it’s no surprise that more companies are joining the food delivery fray. These companies are capitalizing on a demand for artisan, gourmet meals and therefore are able to charge a greater fee to both customer and restaurant. The question remains, how does this affect brick and mortar restaurants? While these companies provide visibility and expanded reach to their partnered restaurants, their commission fees tamper these benefits.
Since 2011, Postmates has cornered the market on artisan foods from places that normally don’t offer delivery. Through their Merchant program, Postmates partners with restaurants and takes a 10-20% cut on food sales while reducing delivery fees. As a business owner, if you decide the commission is too high and the increase in demand doesn’t offset these additional costs, you’re not necessarily out of the woods. There is the potential for exploitation, as Postmates is one of many companies that has taken advantage of restaurants by listing them on their websites without explicit permission.
Uber’s not just for transportation anymore: the company recently launched their in-app food delivery service that prides itself on a rapid delivery time. Its limited menu, curated daily form within the company, rotates regularly through partnering local restaurants. The major downside of this service for restaurant owners, however, is the hefty service fee: 30% of the food check. Sure, your business could benefit from reaching a new audience and being associated with a household name like Uber, but it is important to consider other, cheaper options before turning to this extreme. The major benefit of Uber: delivery drivers are included in the service, which can save your business time and operational frustrations.
Since being acquired by Sqaure in 2014, Caviar is differentiating itself from the gourmet food delivery pack by focusing more on the restaurant than any other similar platform. Though they charge a 20% commission, the company takes extra care to market the restaurant on their app. For example, once a restaurant partnership is established, Caviar sends in a professional photographer to photograph each menu item to go onto their app. From there, the restaurant maintains a high level of control over their pricing and menu. If your restaurant can afford the fees, Caviar also offers access to a customer base that is willing to spend more for their food.
These gourmet food delivery services offer an opportunity for your restaurant to expand its customer base, increase visibility, and drive revenue. They also, however, have higher costs attached to their partnerships. The access they grant to a loyal clientele willing to spend more for their food may outweigh these costs once you consider the factors important to the future of a business: loyal customers and profits. With this in mind, consider making room in the budget to use delivery services. These services are not just a tool for bringing your product to the customer, but reflect the impact that technology is having on the restaurant industry in an age when online food ordering is becoming the norm.