This article is part of a series called “Getting Off-Premises”, which examines how to build an off-premises business.
By Jim Rand, catering practice leader
In our age of delivery (“anytime, anywhere”), many people expect to get meals delivered to the doorstep or boardroom meeting. For some, it’s hard to imagine going back to the days of pulling into a drive-through and lugging back takeout. In the catering segment, where restaurants must compete zealously to differentiate their business, delivery may seem necessary and smart. But when you examine the costs, you may find that delivery corrodes profit margins. You might even deem delivery unnecessary as not all customers want the service. Ultimately, the choice to deliver boils down to finding the best option for your operational model: self-delivery; third-party delivery; a hybrid model; or no delivery. Let’s examine the options.
Restaurants may advertise “free delivery,” but there’s nothing free about it; it’s costly to operators. From pouring money into vehicles to insuring drivers, you’ve got to control and recoup those costs for delivery to make sense. If you manage food delivery yourself, what is called “self-delivery,” it’s especially tricky since you absorb most or all of those costs.
Here are some recommendations for those considering self-delivery:
- If you’re just starting out, have employees use personal vehicles for delivery.
- Research your market for driver compensation rates. It’s usually a blend of an hourly rate, plus mileage reimbursement and tips.
- Price out hired and non-owned auto insurance ahead of time. It’s costly, and the risks placed on the life of a delivery driver are higher than many know.
- Decide on the ideal delivery radius and minimum order amount for delivery. Providing delivery to neighborhoods too far away adds costs. Not going far enough away could hurt sales. Find the balance.
Hiring a third-party service to handle delivery eliminates the headaches of staffing and car inspections, plus the costs of driver pay and insurance. But it’s expensive when third-party firms add an average 25 percent fee to the total ticket—a potential margin crusher for many operators.
You also sacrifice a lot of control of the delivery experience: how drivers and their vehicles represent your brand; how well they engage your customers; and exactly when they arrive at their destination. Most third-party vendors and drivers intend to do a good job, but that doesn’t always happen. Never forget that you’re at the mercy of that service’s hiring choices and operational model. When choosing a third-party partner, ask these questions beforehand:
- How are disputes resolved? If delivery orders are inaccurate or arrive late, which party compensates the disappointed customer? For example, if the order is late or cold, it’s likely the third-party provider’s fault. Inaccurate orders are generally the restaurant’s fault.
- Can you meet their deadlines? Does the third-party delivery provider put an order completion deadline on the catering restaurant? For example, one provider I partnered with set a deadline that was realistic for off-peak hours, but impossible during peak hours. Don’t be cornered by such unattainable restrictions.
- Who gets the customer data? If catering orders are delivered through a third party, do you get access to that customer data? That info is super valuable for future marketing, and you’ll want it.
- Is your brand protected? Protect your brand’s logo from unauthorized use by a third-party delivery service. I’ve read numerous stories about these services advertising delivery from restaurants that don’t do off-premises orders.
The Hybrid Delivery
This is a combination of self-delivery and third-party delivery, and it can be really useful. Self-delivery allows you to choose which catering orders you manage best: smaller ones or larger ones. Larger orders likely will get the most TLC from your own delivery staff. Smaller transactions, especially those delivered during peak hours, might best be managed by a third-party. Since staffing and insuring delivery drivers is costly, using third-party services some of the time could lower your costs. Being flexible allows you to operate using both models to your best advantage at the times you need them.
Order Pick-Up Only
Let’s say that, at present, not delivering catering orders is the best option for your restaurant business. Research shows some customers are fine not having delivery, while others want it. Some interesting findings in Technomic’s 2018 Catering Insights Program:
- Catering customers not using third-party delivery services are more likely to order for pickup.
- By contrast, catering customers who order regularly throughout the year say the availability of third-party portals and delivery services is “leading them to order delivery more” and from a wider variety of restaurants.
So, you see that the choice is yours, and that choice should always center on doing nothing to harm your restaurant’s on-premises operation.
Learn about more ways to optimize your catering business.