Right across the world, food delivery apps have become a trusted and reliable one-stop-shop for hungry but indecisive customers. The ease and convenience – and huge commercial success of food delivery apps – means they are here to stay, but at what cost to the restaurants themselves?
Restaurant owners often fear powerless that these apps are not controlled by them, yet they are being charged almost 20-30% of their profits. Unfortunately for restaurant owners (but fortunately for delivery apps) there is no way back because millions of customers have already switched to ordering online, through third-party apps. .
FOOD DELIVERY PLATFORMS
In simple terms, there are four types of food delivery platform:
- Users have access to multiple restaurants
- Users can compare menus, prices and reviews
- Aggregators collect a fixed margin of the order
- Restaurant handles the delivery
- No additional cost to consumer
- New delivery
- Users have access to multiple restaurants (even ones which don’t deliver)
- Users can compare menus, prices and reviews
- New delivery collects a fixed margin and charges a delivery fee to the customer(making the meal more expensive)
- New delivery service provider handles the delivery
- Restaurant controlled
- Users have access to one restaurant and its menu (works for delivery only restaurants and physical restaurants)
- No cost for restaurant other than delivery resources – and no additional cost for customer except for maybe delivery fee
- Cloud/satellite kitchens
- Allows food makers to start, test and launch a delivery-only restaurant concept in a short period of time with minimal financial commitment
- Now being rolled out by Deliveroo, UberEats, and Zomato
In the United States companies such as GrubHub and Postmates are charging restaurants roughly 12% to 24% of the final cheque – but newcomers such as UberEats and Amazon Restaurants are stepping it up. Amazon charges 27.5% and it is rumoured that UberEats is soon to ramp the prices up to 30%. And of course, better late than never, Facebook is also now in the game with its 2016 acquisition of Delivery.com and Slice.
Some of these companies simply collect a fixed margin of the order, whilst others (‘new delivery’) also charge a delivery fee, making it even more expensive for the customer.
This leaves restaurant owners faced with the dilemma of either creating their own app to avoid the fee and save their profits, which means possibly losing market share; or biting the bullet by signing up and paying whatever charges delivery apps chose to apply.
WILL DELIVERY PROFITS DISAPPEAR?
With WonderEight being a hybrid agency with clients across the Middle East, we are being increasingly commissioned by new and established companies to create different online delivery platforms covering all their distinct types.
The impact of high commission rates on a restaurants profits can at first seem terrifying. Which is why, as is the case with travel apps, businesses need to start thinking about the app experience as an opportunity to market directly to consumers and to think creatively to save money.
It’s a change of attitude – restaurant owners need to use the platforms they basically pay to use to increase market share – and mitigate the dent on profits. Restaurants are free to sell through multiple app service providers, unleashing the potential for thousands of new customers. And, with a powerful visual brand, restaurants can transform their identity and appeal to a wider range of consumers.
Only a decade ago, local restaurants didn’t see the importance of owning their own website, however this has become a business necessity these days which is why it has to be better than just good. Whether we like it or not, if we want to maintain and grow market share, restaurants need to build a fantastic, engaging online presence that customers love. And, if it can get that right, they stand a chance of increasing market share and gaining customer loyalty – and the commission fee will start to pay dividends.
Restaurant owners that view delivery apps in a positive way and embrace them as an opportunity to market their brand to thousands of new customers have a whole new opportunity to drive ever-greater sales. By harnessing design, creativity and technology, branding, design and advertising agencies can build effective, measurable online marketing solutions, search engine optimization tools and create impactful brands. As a hybrid agency that provides these solutions, WonderEight has served some of the Middle East’s best-loved brands, like Classic Burger Joint, Logma, and Onlivery which is an online delivery mobile application that we worked on and partnered with. We are also working on several online delivery solutions – be it for physical or hybrid restaurants. And now, with so much experience in the F&B sector, we are developing a new fully-fledged concept and a 360 solution for a new ‘satellite kitchen’ in Dubai!
COOKING IN THE CLOUD
The satellite kitchen project we are working on is essentially a ‘virtual’ restaurant. Without the need for a location customers can visit, satellite kitchens allow food makers to start, test and launch a delivery-only F&B concept in a short timeframe with minimal financial commitment. The concept is already being rolled out by Deliveroo, UberEats and Zomato. Food makers, chefs or entrepreneurs can enter the market and keep costs low by leasing existing infrastructure, without fixed costs.
Deliveroo UK and Ireland Managing Director Dan Warne believes that, “Bespoke delivery-only kitchens are the perfect example of innovation – it lets our restaurant partners scale to new sites at low-risk, whilst creating amazing new choices for customers.”
To capitalize on these rapidly evolving platforms and business models, restaurants need to move quickly and unfortunately many restaurants fail to adapt. Huge corporations like Facebook and Amazon will continue to innovate and in doing so challenge restaurants to get on board or be left behind. Creative agencies like WonderEight can help restaurants make that transition, handling everything from a slick new website, modern brand identity and SEO tools that help them get to the top of search engine results in such a competitive environment so that people can find what we want them to land on at the top of their search results.. And of course, we shouldn’t underestimate the most important secret ingredient for success in the brave new world of delivery apps – great food!