AM I MISSING SOMETHING?

HOW CAN THE CURRENT DELIVERY MODEL WORK FOR RESTAURANTS?

‘Everyone’ almost without exception thinks that having a restaurant quality meal/pizza/curry/ delivered to your home is a terrific idea. The game was well and truly elevated when Michelin starred restaurants began to get in on the act and fans raved about the results.  It really caught on throughout ‘lockdown’ and as the new way of doing business dawns on the industry, there are plenty of voices lauding the merits of the delivery model. The general public, the delivery companies, the companies who manufacture all those delivery cartons, the media all think it’s a great idea. Are there not times though when it is useful to step back and really examine what it entails, and the real costs for a restaurant owner.

The pandemic has thrown into sharp relief the fact that the business model is built on sand. How can a business, which is built on charging restaurants (where profit margins teeter on a knife edge continuously) whopping fees survive?  At a time when the industry is reeling from the catastrophic effects of Covid19, is there not a better way to support and sustain the industry?

I have yet to speak with a restaurant owner who makes any money from delivering restaurant quality food through a third party. It is a bit like ‘everyone’ trying to push publicans into serving food as it ‘is the only way to keep afloat’. This is simply not true as is witnessed by the thousands of pubs which continue to remain in business without serving food (covid19 restrictions notwithstanding), and make a virtue of not doing so. Just because ‘everyone’ thinks it is a good idea does not necessarily make it so.

There are a number of factors to consider: the restaurant, customer demand, the changing face of the industry with COVID19 protocols, training and restrictions; the innovations in every area of the industry and the viability of your business in this entire mix.

ADVANTAGES FOR THE CUSTOMER are as follows

• Convenience
• Restaurant Quality Food at Home – candles lit, table set, wine poured and never leave the house.
• Dining in has become the new ‘safe’ option for anyone who is nervous about venturing out.
• You can set your own agenda, time frame, decor, ambiance.
• No one is going to be asking you to leave after 90 minutes.
• You can sing, laugh, even shout and you won’t cause panic all round.
• You have an almost unlimited number of places to choose from.

DISADVANTAGES FOR THE CUSTOMER

• Expectations and reality often far apart.
• Cold food ( when it is supposed to be hot)
• Lukewarm food ( when it is supposed to be cold)
• More expensive than buying it straight from the restaurant (fees).
•  Presentation of food can be less than appetising.
• Time frames can be loose and spoil a carefully planned evening.
• You may be unwittingly adding to the demise of your favourite eatery by supporting the delivery model.

The Advantages for the delivery company are as follows.

• It’s a major trend in the industry- someone is pushing it!
• Lots of new customers who appear to remain loyal once committed.
• You get to charge hefty fees.
• You get to ‘sort of’ employ people.
• There seems to be no end of investment available.
• The emergence and growth of ‘ghost kitchens’ may provide an easier customer base than the traditional restaurant model.

Disadvantages for the Delivery Company are as follows

• The industry appears to be waking up to the fact that they cannot make their margins when a delivery company is their agent of delivery.
• Charging commissions of between 15% and 60% is an impossible business model in an industry where margins are fractional at the best of times.
• The ‘staff’ of the companies appears to be wising up to the fact that there are better opportunities out there.

The Advantages for the Restaurant are as follows.

• Broader customer reach.
• It boosts online visibility.
• More efficient management of peak delivery periods.
• Maximises use of kitchen facilities.
• Less costs associated with onsite prepping for delivery.
• Less associated front of house costs.

The Disadvantages to the Restaurant are as follows. 

• The fees charged by the delivery company may make it a loss making exercise.
• Once the food leaves your premises, you have lost control of what happens next.
• You are one step removed from your customers.
• The stress involved in having to get into delivery can completely distract from onsite operations.
• The rush to become involved (because everyone is doing it) can blind the business to the economics.
• The rush to become involved can blind the business to other possible opportunities.
• It may not be in any way a viable option, when the real maths are carried out on it.

Are there any other options for the Restaurant Sector?

What are the alternatives when the public appetite for home food delivery seems to be growing exponentially?  How can a restaurant grow its business without shedding vital margin to a third party?

1. Public debate needed regarding the true cost of delivery for consumers so that they are fully informed of the impact on their favourite eatery, the staff who work for the delivery company and the wider industry.
2.  Questions- Each restaurant business needs to ask itself the following questions before it commits to a third party delivery contract
   1. Why are we doing this?
   1. What are the true costs to our business?
   1. What margins will we make if any?
   1. Can we be guaranteed that the food which leaves our premises will arrive at the customer’s home in the same condition?
   1. If we are not going to make money by doing it, are there other long term benefits to the business which might make it a sensible course of action in the short term?
   1. What alternatives are there? – see below.

• Option Analysis

1. Ideally the entire team would be involved in the discussion regarding all options for the business.
   1. Is it possible to team up with a few local businesses and set up a local delivery service between the businesses?
   1. Are your customers going to be prepared to pay the extra charges so that your margins are protected?
   1.  Is there a possibility of adding a Take Out Hatch to the premises to facilitate safe collection by customers?
   1. Is it possible to develop a package to incentivise customers to pick up rather than expect delivery?
   1. Can you remove every single obstacle to picking up from the premises?
   1. If the business is losing money, are there other internal operational reasons?
   1. Are there other revenue generating ideas such as At Home Pizza, Burger, Salad, Dessert, Cake,  Kits which can be picked up by the customer?
   1. Save the money that would have been spent on the delivery company and spend some of it on beautiful packaging even where this is for take out. It does make a difference.
   1. If you are attempting to ‘green’ your business by using sustainable/ recyclable packaging, let your customers know.
   1. Can you reduce your current menu by examining which items are low input with high return?

In short, there are many options to consider before embracing a union where one party gets the lions share of the spoils.