Chances are, if you own a restaurant, the on-demand economy has been changing your business in more ways than one. As long as consumers keep demanding more convenient order and delivery, restaurants will be the one footing the bill.
We want to present our take on the three biggest delivery apps – GrubHub, UberEats, and DoorDash – to show how these services are changing the game.
GrubHub, UberEats, and DoorDash are three of the biggest food delivery platforms. All three connect customers with local restaurants.
The most recent data shows that GrubHub processes about 220k orders daily and serves 15.1 million active diners. Close competitor UberEats had almost 8.7 million active mobile app users as of Q1 of 2017, despite being one of the youngest delivery apps.
GrubHub has the greatest overall market share. It's also the most popular takeout delivery platform in nine major cities, according to August 2017 data for the 22 most populous cities in the US.
In these cities, even though DoorDash has around 245k overall active mobile app users, it has the second largest market share. UberEats is third. DoorDash specializes in partnerships with nationwide chain restaurants, and this allows for more volume with fewer partners.
GrubHub has three sources of revenue, and they’re not exactly straightforward.
1. Your restaurant’s location and the number of restaurants in the area both impact the amount of commission GrubHub collects per order . It's commission ranges from 5% to 15% but according to an article on qz.com, GrubHub charges an average commission of 13.5%.
2. If your restaurant doesn’t have its own delivery team, GrubHub will take care of it, but at a cost. They ask for an additional 10% cut per order, bringing the total rev-share to 23.5% on average. You can be on their app and have orders processed through it without paying for delivery. So, restaurants with their own delivery personnel don’t have to shell out the extra 10%.
3. GrubHub also offers marketing and advertising for restaurants at extra cost. In other words, they’ll list your restaurant at the top of their app’s search results for a limited time.
This listing also depends on the commission structure though. In other words, to list your restaurant on top, you’ll have to give GrubHub a higher percentage cut on your orders. In a neighborhood of NYC densely populated with restaurants, the lowest commission for a sponsored listing could be 20%, not including delivery services.
To summarize, GrubHub makes money on three fronts; they collect a portion of your order delivery earnings, they offer delivery service, and they can handle basic marketing. You’ll definitely need to reach out to a GrubHub sales rep to find out what the exact commission rates are in your area.
The UberEats business model is similar; it charges restaurant partners on two fronts. The first is an optional marketing fee for the restaurant to come up as preferred in user searches (a promoted listing on their app).
The second is a recurring revenue share, namely a 30% cut on each order placed through their app. UberEats factors in the cost of their delivery service, as they have access to their courier partners over at Uber.
On the flip side, DoorDash has no specific set-up fees. The only costs for partner restaurants is a rev-share varying from 10-25% based on the restaurant.
The company has a ‘Y structure’ business model. This means that it focuses on all three sides of the food delivery business model: coordination between restaurants, drivers and customers. It has contracts with drivers and is thus able to take control over the entire delivery process. Both restaurants and customers can track the driver’s location to predict the time of dispatch and delivery, respectively.
If you already have a delivery method, GrubHub could be the way to go. You’ll benefit from the sheer number of eyes on the app that can find your restaurant.
If you need a delivery partner, think about the location of your business and whether you want to pay for marketing services. GrubHub and DoorDash most likely take a smaller rev-share than UberEats, although UberEats has more overall active users on their app than DoorDash.
A large expense for the food delivery middle men is marketing. Not necessarily marketing your business directly, but rather their own marketing. UberEats and GrubHub spend millions online and TV advertising to get consumers to download their application. They also need to manage the cost of their applications and contracts with drivers. All of these costs are passed onto you, the merchant.
Other food middle men, namely POS Integration systems like Chowly charge for making your order data digestible. More often than not, restaurant owners using multiple food delivery platforms have to buy and manage multiple tablets. Then, you have to manually transpose the order information from all those tablets, as well as email, web, and phone, into a centralized location. The POS integration middle men do that work for you, but at a cost.
The biggest thing to think about is whether the food delivery service is actually generating demand for you. Being on these platforms can be helpful, if it helps you reach new audiences and actually turn them into customers. But if customers who previously would have ordered directly through you now turn to the apps because they’re convenient, you will be taking a big hit. A lot of restaurant owners are either unaware of this or believe that their marketing dollars are well-spent on these services.
The only way to figure out if these companies are a good move for your business is to do the math. On its website, GrubHub claims a "thirty percent increase in average monthly orders after a year on GrubHub." They also claim that “restaurants who join GrubHub see six times growth in revenue annually versus restaurants without.” It’s likely these numbers are very optimistic, so taking a more conservative approach is advisable when crunching the numbers.
Every online order where the transaction fee is higher than your margin, loses you money. Since the options are 1) continue using online delivery apps or 2) turn them off and miss out on reaching a broader audience, you’re stuck between a rock and a hard place. Either lose a large percentage of your revenue immediately or over time.
A lot of restaurants are trying to push for customers ordering directly through their site or over the phone. They include incentives for people who directly order – they lower prices on their website, raise prices on apps. They also waive delivery fees and offer customer loyalty programs.
The small consolation is that the food delivery companies don’t have a moat. There is no strong customer loyalty for DoorDash, UberEATS, Caviar, GrubHub or any other food delivery app. The whole space has lots of buzz with many startups and new companies. But ultimately, there is no way for companies to protect themselves from competitors.
Working solely with the delivery apps that have the highest quality of delivery service and easiest user interface can be important, especially for smaller businesses, as having that positive association with your food can be the key to recurring customers.
In taking over control of order transactions, the GrubHub’s, UberEats’, and DoorDash’s of the industry are also taking ownership over valuable customer information – email addresses, demographics, order frequency, and more. They collect this data and are therefore free to do whatever they want with it.
Loyal customers are 53-76% of a restaurant’s delivery business. This means that more than half of your delivery customers ordered before and will likely order again.
But when a potentially loyal customer clicks a button on an app to purchase your food, that information is going the delivery service, and that information becomes that much harder for you access.
Why is that information important for you? Because that information would allow you to engage with your customers, aka running promotions for orders placed by your customers, setting up loyalty programs, and taking control of your own marketing (goodbye GrubHub marketing commission).
Bikky allows you to do just that. With delivery-focused restaurant marketing for business owners, Bikky consolidates delivery data from all your restaurant’s food delivery platforms, and sets up restaurant campaigns that automatically send personal, targeted messages to your customers. As the hub for your delivery operations, you get a centralized view of your busiest order channels, repeat customers, and sales.
As it stands, GrubHub, UberEats, and DoorDash may be necessary evils of the restaurant business. Doing without these food delivery apps means coaxing customers to give up convenience. Try convincing a New Yorker to give up the efficiency of their virtual food court though. You won’t get too far — not without an equally attractive alternative, at least.
The good thing is that restaurant owners are all in the same boat. There have been attempts to mitigate the effects of third-party delivery businesses through ideas like ghost restaurants. The whole premise is “Can restaurants survive if they’re delivery only?”
Ghost restaurants typically just consist of a kitchen without a dining room, takeout window, or often even a storefront. Maple, Ando, and Sprig are just three examples of businesses that tried taking over the whole process—meal production through delivery— on their own, to little avail. Scaling delivery was the issue, something GrubHub, UberEats, and DoorDash have certainly been able to finesse.
The important thing to do when navigating the on-demand ordering space is to continue doing your research. The less you need to rely on food delivery services and the more options you know you have for marketing that saves you time, the better your chance of keeping your business thriving.