Delivery / Take-Out: 3rd Party or In-House?
In a day and age where convenience is a deciding factor for many, the question that remains for many restaurants is “is it worth it to implement our own delivery / take-out system, or use a 3rd party platform?” In order to determine this, you need to undertake a critical analysis of your needs and capabilities, looking at everything from food costing, to pricing, and even inventory management to gauge the viability of using such a service. By doing this, you’ll have a much greater understanding of how delivery and take-out will affect your operations, and ultimately your bottom line. We’re going to take a deep dive into what needs to be considered before adopting either solution, or none at all.
3rd Party Platforms
We’ll begin by looking at what is associated with adopting a 3rd party platform such as UberEats or SkipTheDishes. These differ from traditional delivery / take-out systems in that their presence is almost entirely digital, the ordering process is largely out of the restaurant’s hands, and customer service is handled through the platform provider instead of on a one-to-one basis. Let’s start by looking at what these platforms bring to the table that will benefit you as a restaurant operator.
At their core, these services provide an additional revenue stream to your restaurant if you do not currently have a delivery and/or take-out program in place. For those of you currently operating your own system, it may prove to be more beneficial to use a 3rd party platform depending on your restaurant’s operations. Why? We attribute this in part to the cost constraints of hiring staff on an hourly basis to run deliveries, and maintain the delivery / take-out system, as well as the cost of implementing the system itself.
In many cases, the platform provider will provide the hardware in order to run the system. This generally comes in the form of a table to manage orders. As many people are familiar with tablets, the training in the operation of such systems can be adopted at a much faster rate than learning something like a new POS system. This then leads to a faster turnaround on implementing the system and using it to its fullest capacity.
One of the largest yet ultimately unsung benefits of using a 3rd party platform is the built-in advertising. By being listed on their marketplace of restaurants, you’re provided with what essentially free advertising to tens, if not hundreds, of thousands of potential customers, all of which are looking for your product. While this benefit can be difficult to track on an ROI basis, the increase in sales that cannot be directly attributed to the service could be partially attributed to this brand awareness.
On the other side of this coin, there are potential downsides to operating delivery / take-out by using a 3rd party platform The primary issues are fee structures, inventory management issues due to variable demand, and technology glitches.
The fee structures for many 3rd party platforms, these can be quite substantial, reach heights of 30-40% of sales. For many restaurants, this additional cost can drive them into the red on every order, and is simply unsustainable. In this case, you have 3 potential courses of action. The first is to simply abandon the platform and either not offer delivery / take-out options, or offer them in-house. The second is to take a closer look at your inventory management and food costing processes to see if the cost of dishes can be further honed to create larger margins. The final option, which can be a difficult pill to swallow for many restaurants, is to increase your prices. The reasoning behind this being the final option, and somewhat of a last resort, is that it has the greatest direct impact on your customer base, and can generated the largest negative impact via word of mouth.
The second issue is inventory management. Managing your restaurant’s inventory levels can be a difficult process as it stands. by adding in delivery and take-out from a 3rd party platform, it becomes even more difficult to gauge the demand and order properly. Ultimately, you may be left with too much inventory that eventually goes to waste, or too little and not being able to meet demand. Using restaurant inventory management software like Optimum Control can help to combat some of this variable demand, making your processes and operations run smoother, with less hiccups along the way.
The final issue that presents with 3rd party platforms is that of technology, and its potential to fail at times. As these platforms are exclusively web-based, if there is an issue with system updates, hardware failures, or internet connections, then these systems will fail to operate and sit dormant. This leads to not only a loss in orders, but also customer discontent, as they will be frustrated by not being able to order from you. In this sense, being technologically advanced can be the downfall for some restaurants.
In-House Take-Out / Delivery
In looking at in-house take-out and delivery options, there are a wide variety of options available, ranging from custom built ordering websites and online ordering software, to simple phone orders with paper slips. Each of these systems have their benefits and drawbacks that make them as unique as the restaurants that use them.
In-house delivery systems, much like their 3rd party counterparts, offer an additional revenue stream that may not have been previously available due to either a lack of capital to implement, or the capacity in which to operate such a system. If your restaurant has the capacity in its operations, but not in its seating, this is when implementing a delivery / take-out system may be advantageous, and when indoor seating is unavailable, necessary to remain open.
The second advantage to going in-house is the ability to either implement or craft a system that works specifically for your needs. By using a 3rd party system, your operations have to confirm to their specifications. This may not be ideal, or even possible, for many operations based on staffing levels or restaurant layout. By being able to pick and choose what you need for your restaurant specifically, you’ll be able to design a system that works within your existing operations, and abilities.
Operating your own in-house delivery / take-out system does have its potential shortcomings, especially if you’re not prepared to deal with them on your own.
The first of these issues begins in how you develop your system. 3rd party systems provide you with a roadmap of implementation, and while creating and implementing your own system provides you with flexibility, it does present a unique set of challenges. The first of which is forcing you to take a critical look at how both your front and back of house operate, and create a plan that works both in, and with, your existing systems. The reason this is a challenge, is because it may expose weak points within your operations that need addressing before the system can be built out.
No In-House Take-Out / Delivery
While this may limit your possibilities for adding a potential revenue stream, not all restaurants may be able to handle having a delivery / take-out component to them. Perhaps your operation can’t handle the additional orders coming in, or you don’t have the ability to make such an offering profitable due to scheduling or hiring the appropriate number of stuff to handle the delivery and management aspects. You can only optimize your food costing to a certain degree before other aspects must be focused on to ensure profitability in such an undertaking.
The key to operating in-house delivery and take-out is that no matter how large or small that aspect of your operation, and how important you may see it becoming, it must be profitable in order to make sense. Whether that be creating your own system, or implementing a 3rd party system, you’ll need to take the path that provides you with the greatest earning ability.