What are some of the Major Issues Restaurants are facing with 3rd Party Delivery Apps?
COVID-19 induced lockdown has demonstrated to the world a lot more than just taking care of your hygiene and overall health. The advent of the pandemic quickly displaced various industries and with restaurants and bars forced to shut under the lockdown rules, many restaurants had to rapidly adapt to survive. This increased their dependency on food delivery apps for survival. Now, as the world is shifting towards a new normal post COVID-19, the food industry is constantly looking to tech innovators to allow them to prosper in this dynamic landscape.
Initially, when third party food delivery apps like Zomato, UberEats, Grubhub, Doordash etc were introduced in the market, they looked like a blessing to the food industry. For a small fee, restaurants and food establishments would be able to garner and fulfill online orders from customers throughout a city which can be an additional revenue stream for the business. It was better that they did not need to pay for their individual ordering system and invest in the delivery system.
In the last couple of years, this blessing is taking a U-turn for many restaurants and small businesses. For many restaurants, collaborating with a third party delivery service may not make any sense. In this blog, we will cover the evolution of food delivery apps, why restaurants are being impacted through delivery apps and what are the possible solutions.
How Food Delivery Apps have evolved in recent years?
In the last five years, food delivery services have evolved in popularity where most restaurants are generally listed on at least one platform. But, as the pandemic continues to impact the world and conventional food establishments are forced to shut down, the number of restaurants, cafes and even supermarkets are signing up to food delivery services.
Though the dependency of online food delivery apps has been magnified by COVID-19, these apps will definitely play a major role in the resurgence of the food industry even after the pandemic subsides. The track record of many restaurants going digital have now redefined the idea of a ‘restaurant’. A normal restaurant can now work in a way similar to a food truck or a takeout restaurant.
In the post-Covid life, restaurants will need to upgrade their infrastructure to continue their operations successfully. That is because the frequency of someone ordering a takeout meal will increase in comparison to dine-in orders. This will pave the way for cloud kitchens or take away restaurant concepts where they do not need to invest heavily in the decor of the restaurant.
It is highly unlikely that restaurants will move to a complete virtual setup because people will eventually go out and have a pleasant dining experience with their friends and family. It is just that the frequency of online ordering is quite common and will continue to rise. Due to that we feel that the food delivery apps will go through a major transition year after year.
Why Do Restaurants Feel Trapped with the Food Delivery Apps?
A variety of problems can surface when restaurants are dependent on third party food delivery apps.
1. Online Order Handling
Multiple third party food delivery apps have their own ways of sending in orders. Some are handled by email and some are done by custom tablets. This is a challenge for the person in charge of the front-end and relay it to the kitchen. Hence, even the best restaurants can sometimes miss an order or completely mess up the content of an order and in return get a one star rating.
This is not only a delivery issue. Employees in multiple areas of the business need to be trained to take orders in the front-end and efficiently store, manage and pack food in the kitchen so that it is received hot by the customer. It is easy to manage when you are solely responsible for the delivery but when it is handled by a third party that manages thousands of orders at a given time, there is no assurance that your food will be delivered first. For some restaurants, they may also need to rethink their packaging so that the customer receives their food in optimal condition.
2. High Transaction Fees
The most visible issue for restaurants is the heavy cost that comes with online orders. Third party delivery apps charge restaurants fees of about 25-30 percent for each order. It may be feasible for chain restaurants but it is a nightmare for small restaurants with slim margins. It would not be an issue if orders included high margin items like alcohols or cocktails/mocktails but these items are rarely ordered online and hence they do not get a chance to make a profit.
Now, as these websites become popular, the number of dine-in customers may reduce significantly. Why would they bother to go to a restaurant if they can simply order online? It is going to get worse. According to Morgan Stanley Analysts, deliveries could make up around 40 percent of restaurant revenue by 2022. The online platforms themselves are not making money either so the restaurants can be affected significantly if the platform abruptly shuts down.
3. No Direct Engagement With Customers
This is not the first problem that restaurant management will bring up, though it is a major one. As customers order from food delivery apps, they are the customer of the food delivery app first and not the restaurant. They are paying the app, the app informs them about their delivery and a driver from the app delivers their food. The only interaction they have directly with the restaurant is when they consume their food.
In this model, the customer is usually missing out on a complete restaurant experience. They miss the opportunity to interact with the restaurant itself and they will not see the restaurant’s branding efforts apart from the food packaging. In the trend where customers order through online food delivery apps, it is not possible for restaurants to offer an enriched customer experience.
It is also not possible for restaurants to directly market the customers because they do not have the customer database, it is also collected and managed by the food delivery app. This is significantly overwhelming for small business owners who are struggling due to lack of resources and cannot spend a lot on marketing.
4. Reputation Management
Due to the above points, restaurants suffer in terms of branding and they also get negative publicity in terms of customer experience. If anything goes wrong with the order in terms of food quality or delivery, the restaurant gets blamed. According to a research on Off-Premise Insight, their catering, takeout and delivery 2018 report, more than 80 percent of customers blame the restaurant and not the delivery service.
Local restaurants then have to handle these complaints, they also face the flak on social channels too. The overall reviews including the word delivery have a rating of less than two stars. This is also true when the reviews are outright positive. For a small establishment, a couple of negative reviews can make or break their bottom line. Eventually, it can take a few months of positive feedback to manage their reputation.
Solutions for Restaurants to Overcome this Issue
Let us look at some of the possible solutions that restaurants can take to overcome this issue.
Develop Your Own Delivery App
For most small businesses, the high cost of collaborating with third party delivery apps is not worth it. But they don’t have an option sometimes. Customers are happy to just place an order online, pay online and get it delivered to their doorstep in a quick time without actually having to talk to anyone in the whole process. However, they want to order from local establishments. More than seventy percent of customers would actually prefer to order directly from the restaurant as they want their money to go to the small business. The ideal solution is to develop your own food delivery app so that you do not have to share your profits with a third party. Doing so you are actually:
- Making it easier to order for the customers. There is no going back and forth on tablets or emails and all your orders will come directly to you in a standard manner.
- It decreases the risk of error. As there will be a standard format that is liked by kitchen staff, there will not be any confusion leading to a mistake.
- Enhance customer loyalty. This is because you can track a customer’s previous orders and suggest recommendations based on that data.
- Enhance your marketing. As customers order through your app, you get their contact information and can re-market them as and when required.
- Better customer experience. When you are in charge of everything then you can set expectations and show the customers that you care and make sure that they are satisfied.
- Your website should be mobile responsive. There is a possibility that customers can place an order from their smartphone or a laptop so it is important that you offer a good user experience either way.
Persuade Customers to Switch
If you develop a food ordering platform, there is no assurance that customers will readily switch from third party delivery apps to your platform. You will need to offer an incentive for them to make a switch. For some people, you will simply need to advertise the fact that you have your own online ordering system. As we have seen above, most customers are happy to give their money to the restaurant directly.
If you really want to make a switch from third party apps to your own platform, you will need to spend time and money to promote your own restaurant. Third party apps are easy to remember and are available everywhere with huge discounts offering a wide range of food. So, some customers will need a little more convincing to make a switch to your website or app. Here you can make good use of discounts and incentives.
Discounts are also beneficial to enhance customer loyalty and overall customer experience. Everyone loves to be rewarded and discounts on food are always a hit. It doesn’t have to be a permanent thing too, you can start and stop discounts as and when you need the push on your platform.
Though many small restaurants and cafes are struggling with the dynamic shift caused by COVID and it is clear that the future depends on amalgamation of technology and innovation. Even technology is changing every day and new businesses are coming to the market with innovation leading to a brighter future. Having said that, there is no need to give away a third of your profits to third party delivery companies. Contact Nimblechapps, a restaurant app development company to develop your own digital ordering platform today and get a free quote for your restaurant or cafe app or website.
Rajiv Patil is the founder & Managing Director of Nimblechapps, an innovative iPhone app development company. He takes a keen interest in topics related to mobile app development and mobile game development and often like to share his knowledge through informative posts on leading blogging sites.