How do Delivery Apps Hurt Restaurants: Key Takeaways
- High commission fees charged by third-party ordering services can significantly cut into restaurant profits.
- Restaurants may lose brand identity and control over customer experience when using third-party platforms.
- Valuable customer data may not be accessible to restaurants when orders are placed through third-party services.
- Reliance on external platforms can leave restaurants vulnerable to changes in commission structures or platform priorities.
- Using a platform like UpMenu allows you to build your own delivery service and avoid third-party delivery fees. It’s the best way to maintain control, preserve brand identity, and build stronger customer relationships for a more sustainable business model.
- Build your own restaurant website and ordering system to save thousands of dollars on commissions.
The rise of food delivery apps has significantly changed the way we order food. While these services offer convenience to customers, they also have a dark side.
Many restaurateurs are asking, “Do delivery apps hurt restaurants?” and “Why do delivery apps hurt local restaurants?”
In this blog post, we will discuss how third party ordering services like UberEats, GrubHub, and DoorDash can negatively impact restaurants and why opting for an alternative, like UpMenu, can be a better choice for your business.
How Third Party Ordering Services Hurt Restaurants
1. High Commission Fees
One of the primary disadvantages of third-party ordering services is the high commission fees they charge. How much does uber eats charge restaurants for commission fees?
Uber eats commission rate can range from 15% to 30% of the order value, significantly cutting into a restaurant’s profits.
With already thin profit margins in the foodservice industry, these fees can make it difficult for restaurant owners to keep their businesses afloat.
2. Loss of Brand Identity
When customers order through third-party platforms, they interact with the platform’s brand, not the restaurant’s.
This can lead to a loss of brand identity, as customers associate their food delivery experience with the third-party service rather than the restaurant itself.
This is why restaurants should consider third-party delivery services as supplementary rather than their primary online sales channel.
By utilizing services like UpMenu to create their own online ordering system and restaurant website, they can regain control over their brand identity.
3. Less Control Over Customer Experience
Third-party services control the entire ordering and delivery process, leaving restaurants with little say in how their food is presented or delivered.
This can lead to subpar customer experiences, as the third-party service may not prioritize the quality of the food or the presentation.
4. Data Ownership Issues
When customers place orders through third-party platforms, restaurants often don’t have access to valuable customer data from a restaurant CDP.
This data is crucial for understanding customer preferences, improving menu offerings, and creating targeted marketing campaigns.
By using a platform like UpMenu, restaurants can collect and analyze customer data to make more informed business decisions and better serve their guests.
5. Reduced Customer Loyalty
With a plethora of restaurants available on third-party platforms, customers may be less likely to develop loyalty to any single establishment.
The convenience of these platforms can lead to customers ordering from different restaurants every time, making it difficult for individual businesses to build a loyal customer base.
Offering online ordering through a restaurant’s own website can encourage customers to return and order directly from their favorite establishments.
What’s more you can run your own restaurant loyalty program.
6. Reliance on External Platforms
By relying on third-party services, restaurants risk becoming too dependent on these platforms for their success.
If a platform decides to change its commission structure, prioritize other restaurants, or shut down entirely, restaurants could find themselves in a precarious position.
10 tips how to reduce negative impact of third party delivery services
1. Establish a Strong Online Presence
Having a strong online presence is crucial for restaurants aiming to decrease their reliance on third-party ordering services.
This involves creating an engaging, user-friendly restaurant website with its own online ordering system.
A well-designed website using a platform like UpMenu enables restaurateurs to provide online ordering directly to their customers, helping to maintain brand identity and boost customer loyalty.
Nowadays, you can build website for restaurant yourself using a restaurant website builder.
2. Offer Exclusive Deals and Promotions
Restaurants can incentivize customers to order directly from their websites by offering exclusive deals and promotions not available through third-party platforms.
This may include special discounts for first online order, free delivery, or loyalty programs that reward returning customers.
By providing these incentives, restaurants can encourage customers to bypass third-party services and order directly from their preferred establishments.
3. Focus on Customer Experience
To build a loyal customer base, it’s crucial for restaurateurs to focus on providing exceptional customer experiences.
This includes ensuring that food quality, packaging, and delivery meet or exceed customer expectations.
By prioritizing the customer experience and continually seeking feedback, restaurants can improve their offerings and encourage customers to return for future orders.
4. Optimize Delivery Operations
Restaurants can reduce their dependence on third-party ordering services by optimizing their own delivery operations.
This may involve hiring dedicated delivery staff, using technology to streamline the delivery process, or partnering with local courier services.
By providing reliable and efficient delivery, restaurants can encourage customers to order directly from their website, reducing the need for third-party platforms. See these 5 tips on how to increase food delivery sales to make the best out of your online deliveries.
5. Leverage Local Marketing
Focusing on local marketing efforts can help restaurants reach their target audience and create a sense of community.
Participating in local events, partnering with nearby businesses, and utilizing local media outlets can all help to increase awareness of a restaurant’s brand and offerings.
By building strong connections within the community, restaurateurs can encourage customers to support their business by ordering directly from their website or visiting the establishment in person.
6. Communicate the Benefits of Direct Ordering
Educating customers on the benefits of ordering directly from a restaurant is essential for reducing the negative impact of third-party services.
Restaurateurs should communicate the advantages of direct ordering, such as better pricing, faster delivery times, and the ability to support local businesses.
By highlighting these benefits, restaurants can persuade customers to choose direct ordering over third-party platforms.
You should also promote your own ordering system by using QR code menu in-store.
7. Monitor Third-Party Platform Performance
While it’s essential to focus on strategies for reducing reliance on third-party ordering services, it’s also important for restaurateurs to keep an eye on their performance on these platforms. Monitoring customer reviews and ratings can provide valuable insights into areas that may need improvement. By addressing these concerns, restaurants can ensure they maintain a positive reputation on third-party platforms, even as they work to reduce their dependence on them.
Frequently Asked Questions (FAQ)
How does online ordering affect restaurants?
Online ordering has transformed the way restaurant owners operate. By implementing food delivery options, many local restaurants can reach new customers who prefer the convenience of ordering from home rather than dining in their physical restaurant. This has increased consumer demand, but it also introduces new challenges, such as managing delivery platforms and optimizing the delivery process. Additionally, restaurants may need to account for delivery fees and service fees, which can cut into their profits. However, the restaurant business is evolving to adapt to these changes, making online ordering a crucial part of the restaurant industry.
How does online ordering affect restaurants?
The rise of online ordering has allowed many restaurants to scale their operations by tapping into the growing food delivery market. This method benefits restaurant owners by providing an additional revenue stream, but it can also lead to increased operational complexity. The delivery business adds costs, such as delivery fees and the need to manage third-party delivery services. As a result, some restaurant owners are choosing to develop their own delivery service to maintain control over their delivery costs and avoid the high commissions charged by third-party services.
How does Uber Eats affect restaurants?
Uber Eats has a significant impact on the restaurant industry, especially for local restaurants that might not have the infrastructure to create their own delivery service. By partnering with Uber Eats, restaurants gain access to a vast customer base without having to manage their own delivery process. However, the high service fees and delivery fees associated with third-party delivery platforms like Uber Eats can reduce the restaurant’s profit margins. For restaurant owners, balancing the benefits of reaching new customers against the costs imposed by these delivery platforms is a constant challenge.
What are the disadvantages of food delivery services?
While food delivery services offer convenience, there are several disadvantages for both restaurant owners and customers. For restaurants, relying on third-party delivery services means losing control over the delivery process and incurring high service fees. Additionally, many restaurant owners feel that delivery costs and delivery fees erode their profits. The competitive nature of the food delivery market also puts pressure on pricing, making it difficult for smaller, local restaurants to compete with larger chains. Lastly, customers might experience poor delivery experiences due to issues with the delivery platforms, which can negatively impact the restaurant’s reputation.
How do food delivery services work?
Food delivery services operate by connecting restaurants with customers who prefer to order food remotely. The process starts when a customer places an order through a food delivery app or delivery platform, like Uber Eats or a restaurant’s online ordering system. The restaurant then prepares the food, and either a third-party delivery service or the restaurant’s own delivery team handles the transportation. Restaurants using third-party delivery services benefit from the platform’s extensive network but must pay service fees and manage any issues with the delivery app. Alternatively, some restaurants choose to build their own delivery service to avoid these fees and control the delivery process.
What are some other food delivery services (apart form Uber Eats and GrubHub)
Aside from Uber Eats and GrubHub, several other food delivery services operate in the market. Platforms like UpMenu allow restaurants to create their own delivery apps and manage online ordering directly, giving restaurant owners more control over the delivery process. This option can reduce reliance on third-party services and lower delivery fees. Other services include DoorDash, Postmates, and Deliveroo, which provide similar food delivery solutions but often come with high service fees.
