Don’t Let Delivery Companies Take Advantage of Your Restaurant
Running a restaurant is tough. It requires long hours and margins are thin, but you do it because you love it. You do it because you have a special experience to offer your customers, and unique flavors to share with the community. But with minimum wage going up every year, the continuing rise in the cost of goods, and the fight for traction with customers, it’s easy to feel like you’re grasping at anything to help fill those seats and get more orders out the door. So it’s understandable that you turn to third-party restaurant delivery marketplaces companies like Grubhub, Postmates and Uber Eats to try and add a little pad to the bottom line.
But when you look at the numbers, what seems like a solution may actually be what’s killing many small restaurants.
Doing the Math on Third-Party Restaurant Delivery
Take Postmates for instance. By the end of 2018, many restaurants reported paying a 30% commission on every Postmates delivery. In Los Angeles, Uber Eats charged 40% for the same service. For a $10 item, that’s $3 to $4 right off the top.
The Restaurant Report says food and labor should cost restaurants between 50-75%. Let’s imagine your restaurant is running lean and mean at 50%, that’s $5 in food and labor costs. So far, you’ve made $2 and spent $8.
Remember, you haven’t taken into account expenses such as utilities, rent and spoilage. When all is said and done, you’re lucky if you make a penny or two. More likely than not, you’ve just paid someone to eat your food!
The story isn’t much better for the delivery app Grubhub, which will charge restaurants a base fee of 15% of every order plus tack on a credit card processing fee, order processing fee, and a delivery commission of an additional 10%.
These third-party restaurant delivery companies charge restaurants exorbitant commissions for every customer order, when the only real the value they bring is helping new customers find your restaurant for the first time. When a customer orders again and again, it’s because your staff was friendly, the food was delicious, and they had a great experience. Why should you pay Grubhub a 30% commission every time a customer orders? If the phone company took 15%, 20%, or 30% every time you took an order over the phone, you would have stopped taking phone orders a long time ago.
No matter which third-party marketplace you’re on, the math is the same, and it doesn’t bode well for your restaurant.
Download our case study to see how a restaurateur fought back against third-party marketplaces and saved over $100,000 in marketplace fees by switching to ChowNow.
But what about marketing?
The argument can be made that these companies aren’t just delivering food for you, but they’re also promoting your brand to new customers. Marketing is a common selling point of these restaurant delivery companies, but requires a closer look to see how it actually impacts your business. Sure, you might be featured on the delivery site, and sometimes you’re part of an email blast — there’s some marketing value to that.
However, Restaurant Resource Group reports restaurants should only spend between 3 to 6 percent of their sales on marketing. That’s far less than what third-party marketplaces are charging. If the marketing exposure is what you’re after, there are less expensive options.
Furthermore, third-party marketplaces like Grubhub and Postmates don’t give restaurants access to their own customers’ email addresses, which makes marketing directly to your own customers virtually impossible. There’s so much value in owning your own customer’s information, so that you can encourage them to order directly from you and not pay marketplace fees time and time again for the same customer.
Get the full story about how third-party delivery apps are deceiving independent restaurants, stealing their customers, and eroding their profits by reading our new ebook: 4 Myths About Third-Party Restaurant Delivery—Busted.
There’s a world beyond third-party restaurant delivery.
It’s easy to think that companies like GrubHub and Postmates are the only options out there. Their sales and marketing teams have done a great job of making you think that’s the case. But there are other options: Companies are finding ways to help you reach new customers, without spending all your money on middlemen. Companies exist that offer affordable alternatives. If you’re already a ChowNow client, you know the deal.
ChowNow, for example, takes a fresh approach to online ordering. We build you your very own online ordering system that lets you take unlimited, commission-free orders through your website and custom mobile apps for iPhone and Android for a flat monthly rate. And if you’re interested in getting even more new customers, ChowNow will list you on its mobile app and website, charging you only a one-time finder’s fee for the new customers it sends you — all repeat customer orders are commission-free.
And there are companies that care about their restaurant partners.
The good news doesn’t stop there. ChowNow gives you access to all your customers’ email addresses and will help you build loyalty and drive re-orders through print and digital marketing campaigns that encourage those customers to order again and again. In fact, ChowNow’s email marketing gurus have an automated email program for their restaurant partners, which has an 8:1 return on investment.
In other words, ChowNow does many of the things restaurant delivery apps fall short of doing, and it will do it for the most restaurant-friendly rates in the industry. Delivery is not always included in the ChowNow offering, but the separation gives you the autonomy to hire or replace, when necessary, drivers in-house or through local courier services to maintain the integrity of your food in transit. If you do the math, you’re coming out ahead. $15/hour for an evening delivery driver or 30% off every order you process. ChowNow partners with local courier services all over the country to help you process orders for delivery.
The point is there are other options. Don’t feel tied down. Don’t feel like you need to use expensive third-party restaurant delivery apps because everyone else is. It’s time to change how you do business. It’s time to stop paying companies to sell back your loyal customers to you at a 30% markup every time. It’s time to take back control of your business and your profits.
If you’re looking for a more cost-effective option, now’s a great time to get started with ChowNow. Get a free ChowNow demo from one of our experts to get started today! If you’re a ChowNow restaurant client and want some ideas about how to convert your customers off these expensive third-party delivery apps, schedule a call — we’re happy to help.