The last time you ordered chicken katsu for delivery, chances are it was from Uber Eats or Menulog. There’s an increasingly slim chance it was from the restaurant directly, as today third party apps dominate the space through sheer convenience.
Even so, these third party delivery services can charge a hefty fee for both customers and business owners alike – so you have to wonder whether it’s worth paying that price over doing it all in-house. Yes, there are some expenses that you can avoid by opting for third party delivery services. For instance, you won’t have to manage your own delivery staff or pay for the registration or insurance of a designated delivery vehicle for your business. But do these savings balance the cost benefits of using third party delivery services?
To help you answer that question we’ve compiled the pros and cons of organising your own customer delivery system versus using third party services.
What Are In-House Delivery Services?
To begin, let’s outline some basic definitions, starting with in-house delivery services. Any restaurant or cafe owner who employs their own delivery drivers and maintains their own delivery vehicles effectively offer an in-house and thus, fully controlled delivery service.
In-house delivery services are generally accompanied by some basic operational expenses, including salaries for delivery staff, as well as fuel and insurance costs for delivery vehicles. You can keep costs low by scheduling deliveries accordingly, claiming fuel costs as a business operational expense, and opting for third party car insurance for delivery vehicles rather than comprehensive car insurance.
Generally speaking, however, business owners who are looking to reduce their overhead costs, may find that their in-house delivery service could be swapped out for a third-party service provider for immediate savings. But how do these savings stack up in the long term?
What Are Third Party Delivery Services?
Even if you’ve used Grubhub for a late night snack, you’re probably unfamiliar with how it looks on the back end as a seller. They handle the ordering, pickup, and delivery for a fee (~30% fee). All you have to do is set up your menu on the app and fulfil the orders for pickup.
Alternatively, you can also list your restaurant on their marketplace for pickup and a smaller fee (~6%), or use your own delivery team through the app too (~16%). Because of this, you’ll likely want to have your restaurant listed on third party delivery services just for the promotion and larger viewer base alone.
Pros and Cons of Third Party Delivery Services
There are a lot of advantages to using third party apps, hence their popularity. Using them you no longer have to hire or manage delivery staff and equipment. Your business becomes sleeker, not to mention you’re being advertised on some of the biggest food platforms with extended reach. Now people can order your food from across the city and you don’t have to think about the logistics of any of it. Some third party delivery service providers also maintain driver insurance that aids in reducing financial risks to both their driver partners as well as business owners like you. And on top of all that, there are built in promotion functions that allow you to set and forget your marketing budget.
But of course, you’re getting what you pay for, and you pay a lot. 30% is a hefty cut even with the price raise they add to your items. So if you’re making peanuts off each sale, you’re going to find your head underwater. This is why so many businesses increase their item costs in third party apps rather than advertising the same prices in-store and online via third party delivery service providers.
Besides that, the competition on food delivery apps is fierce, with the added delivery range pitting you against restaurants far and away from your usual zone. And one of the biggest cons can be the delivery drivers themselves, who you have no control over and can mess up an order or cause issues that’ll be reflected back at you via reviews.
Popular Delivery Apps: Fees and Features
Not all delivery services are equal, yet the rule tends to be the more the better. That’s because each app tends to have different buyers, so by using them all you’re exposing your food franchise to the most potential customers. Here are the main apps in Australia:
Uber Eats is the largest, with a 30% delivery fee, 16% for self-delivery, and 6% for pickup. They also offer paid promotion tools and various discounts you can apply.
Menulog offers the same fees, but also allows restaurants to manage their own delivery staff or use Menulog’s delivery network.
DoorDash is quickly growing in Australia, and offers the same fees and features as Uber Eats, with various options for marketing support.
Getting Your Restaurant on Delivery Apps
If you’re already set up or familiar with delivery food for your restaurant, setting up an account on these apps is simple. You type in your details, set up your menu, and set your prices. It may take some experimenting, and you’ll want to know which foods travel well, but it’s far less complex than hiring your own delivery team. Also, you’ll need a device to announce and manage orders on, which usually means an iPad (or even a special Uber Eats tablet) that you put at the counter for your team.
Creating In-House Delivery
If you decide that in-house is for you, you’re probably ready to fork up some more time and money to set it up. The first part is calculating the cost of everything. That’ll be the price of any cars and bags, the new employee wages, the costs of developing your ordering system, and the cost of any advertising. After that you can work on the online ordering tech – a phone line doesn’t cut it these days – and that means a website and an app.
Next you’ll need to expand your team to cover these new demands. The obvious hires are the delivery drivers, but you may also need more chefs to handle the added orders. Once you have your team and tech in place, you need to promote it. Use your social media, walls, and employees to spread the word.
Consider Franchise Rules for Delivery Services
There’s naturally one final consideration that franchisees have to make when determining whether third party or in-house delivery services are the best fit for their business: what does their franchise agreement allow?
It’s common for some franchise contracts to stipulate how franchisees must organise their store delivery system. For example, Domino’s only allows in-house delivery systems. So, before you jump into the following considerations, check your contract and see whether you’ve already agreed to a certain method beforehand. If you have, then the choice has been made for you, and it’s your responsibility to uphold the standards set by your franchisor.
Third Party vs. In-House: What’s the Best Option for your Franchise?
The easy answer is in most cases: third party services. It’s been developed and tested and refined to be perfectly simple. Chances are, you’re already using them. In that case, you know half of what it takes to do it yourself, so if you think you’re up to that challenge, go ahead and make the jump to in-house if you end up preferring it down the line. After all, you still have the option to use in-house staff for Uber Eats deliveries anyway.